-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FHFj2yLbbE/v1ntIxrWALJefnN1t9bpKePFuFIdRfEhsH0Sf91MTdPLoESZiEk/G 5h4odojkrgn4GBRT3NkQUA== 0000950123-97-010579.txt : 19971224 0000950123-97-010579.hdr.sgml : 19971224 ACCESSION NUMBER: 0000950123-97-010579 CONFORMED SUBMISSION TYPE: F-4 PUBLIC DOCUMENT COUNT: 54 FILED AS OF DATE: 19971223 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPARKLING SPRING WATER GROUP LTD CENTRAL INDEX KEY: 0001050760 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: A6 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061 FILM NUMBER: 97743229 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQUARE CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQUARE CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATURAL WATER LTD CENTRAL INDEX KEY: 0001051936 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-01 FILM NUMBER: 97743230 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUAPORTE LTD UK CENTRAL INDEX KEY: 0001051937 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-02 FILM NUMBER: 97743231 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARLBOROUGH EMPLOYMENT LTD CENTRAL INDEX KEY: 0001051938 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-03 FILM NUMBER: 97743232 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATER AT WORK LTD CENTRAL INDEX KEY: 0001051939 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-04 FILM NUMBER: 97743233 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANADIAN SPRINGS WATER CO LTD CENTRAL INDEX KEY: 0001051940 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-05 FILM NUMBER: 97743234 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPARKLING SPRING WATER LTD UK CENTRAL INDEX KEY: 0001051941 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-06 FILM NUMBER: 97743235 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPARKLING SPRING WATER LTD / CENTRAL INDEX KEY: 0001051942 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-07 FILM NUMBER: 97743236 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPRING WATER INC CENTRAL INDEX KEY: 0001051944 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-08 FILM NUMBER: 97743237 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CULLYSPRING WATER CO INC CENTRAL INDEX KEY: 0001051945 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-09 FILM NUMBER: 97743238 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRYSTAL SPRING ACQUISITION INC CENTRAL INDEX KEY: 0001051946 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-10 FILM NUMBER: 97743239 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MOUNTAIN FRESH ACQUISITION CORP CENTRAL INDEX KEY: 0001051947 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-11 FILM NUMBER: 97743240 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WATER JUG ENTERPRISES LTD CENTRAL INDEX KEY: 0001051948 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-12 FILM NUMBER: 97743241 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WITHEYS WATER SOFTENING & PURIFICATION LTD CENTRAL INDEX KEY: 0001051949 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-13 FILM NUMBER: 97743242 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AQUA CARE WATER SOFTENING & PURIFICATION INC CENTRAL INDEX KEY: 0001051950 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-14 FILM NUMBER: 97743243 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGH VALLEY WATER LTD CENTRAL INDEX KEY: 0001051951 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-15 FILM NUMBER: 97743244 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3003969 NOVA SCOTIA LTD CENTRAL INDEX KEY: 0001051952 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: SEC FILE NUMBER: 333-43061-16 FILM NUMBER: 97743245 BUSINESS ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033250077 MAIL ADDRESS: STREET 1: ONE LANDMARK SQU CITY: STAMFORD STATE: CT ZIP: 06901 F-4 1 FORM F-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1997 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM F-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ SPARKLING SPRING WATER GROUP LIMITED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ NOVA SCOTIA, CANADA 5149 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------ FOR INFORMATION REGARDING ADDITIONAL REGISTRANTS, SEE "TABLE OF ADDITIONAL REGISTRANTS." ------------------------ ONE LANDMARK SQUARE STEPHEN L. LARSON STAMFORD, CT 06901 VICE CHAIRMAN AND CHIEF FINANCIAL OFFICER (203) 325-0077 SPARKLING SPRING WATER GROUP LIMITED (ADDRESS, INCLUDING ZIP CODE, TELEPHONE ONE LANDMARK SQUARE NUMBER, INCLUDING AREA CODE, OR REGISTRANT'S STAMFORD, CT 06901 PRINCIPAL EXECUTIVE OFFICES) (203) 325-0077 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------ COPIES OF COMMUNICATIONS TO: RICHARD A. KRANTZ, ESQ. ROBINSON & COLE LLP FINANCIAL CENTRE P.O. BOX 10305 STAMFORD, CT 06904-2305 (203) 462-7500 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ------------------------ CALCULATION OF REGISTRATION FEE
========================================================================================================== PROPOSED PROPOSED TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF TO BE REGISTERED REGISTERED PRICE PER SECURITY OFFERING PRICE(1) REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------- 11 1/2% Senior Subordinated Notes due 2007........................ $100,000,000 100% $100,000,000 $29,500 - ---------------------------------------------------------------------------------------------------------- Guarantees of 11 1/2% Senior Subordinated Notes due 2007..... -- -- -- (2) ==========================================================================================================
(1) Estimated pursuant to Rule 457(f) solely for the purpose of calculating the registration fee. (2) Pursuant to Rule 457(n), no additional registration fee is payable with respect to the Guarantees of the Additional Registrants. THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 TABLE OF ADDITIONAL REGISTRANTS ================================================================================ STATE OR OTHER PRIMARY STANDARD JURISDICTION OF INDUSTRIAL EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS INCORPORATION OF CLASSIFICATION CHARTER ORGANIZATION CODE NUMBER - ---------------------------------------------------------------------------------------------- Sparkling Spring Water Limited.................... Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- Spring Water, Inc................................. Delaware 5149 - ---------------------------------------------------------------------------------------------- Cullyspring Water Co., Inc. ...................... Washington 5149 - ---------------------------------------------------------------------------------------------- Crystal Spring Acquisition, Inc. ................. Delaware 5149 - ---------------------------------------------------------------------------------------------- Mountain Fresh Acquisition Corp. ................. Delaware 5149 - ---------------------------------------------------------------------------------------------- Water Jug Enterprises Limited..................... Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- Withey's Water Softening & Purification Ltd. ..... Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- Aqua Care Water Softening & Purification Inc. .... Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- High Valley Water Limited......................... Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- 3003969 Nova Scotia Limited....................... Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- Canadian Springs Water Company Limited............ Nova Scotia 5149 - ---------------------------------------------------------------------------------------------- Sparkling Spring Water (UK) Limited............... UK 5149 - ---------------------------------------------------------------------------------------------- Aquaporte (UK) Limited............................ UK 5149 - ---------------------------------------------------------------------------------------------- Marlborough Employment Limited.................... Scotland 5149 - ---------------------------------------------------------------------------------------------- Water at Work Limited............................. Scotland 5149 - ---------------------------------------------------------------------------------------------- Natural Water Limited............................. Scotland 5149 ==============================================================================================
The address, including zip code, and telephone number, including area code, of the principal executive offices of, the name, address, including zip code, and telephone number, including area code, of agent for service for, each of Additional Registrants is the same as for Sparkling Spring Water Group Limited, as set forth on the facing page of Registration Statement. Copies of communications to any Additional Registrant should be sent to Richard A. Krantz, Esq., Robinson & Cole LLP, Financial Center, P.O. Box 10305, 695 East Main Street, Stamford, CT 06904-2305 (telephone number (203)462-7505). 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED DECEMBER 23, 1997 PRELIMINARY PROSPECTUS SPARKLING SPRING WATER GROUP LIMITED OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007, OF WHICH $100,000,000 PRINCIPAL AMOUNT IS OUTSTANDING [SPARKLING SPRINGS LOGO] ------------------------ Sparkling Spring Water Group Limited, a corporation organized under the laws of the Province of Nova Scotia, Canada ("Sparkling Spring" and, together with its subsidiaries, the "Company") is hereby offering (the "Exchange Offer"), upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its registered 11 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes"), for each $1,000 principal amount of its outstanding unregistered 11 1/2% Senior Subordinated Notes due 2007 (the "Private Notes"), of which $100,000,000 in aggregate principal amount was issued on November 19, 1997 and is outstanding as of the date hereof. The form and the terms of the Exchange Notes are identical in all material respects to those of the Private Notes, except for certain transfer restrictions and registration rights relating to the Private Notes and except for certain interest provisions relating to such registration rights. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace) and will be issued pursuant to, and entitled to the benefits of, an Indenture, dated as of November 19, 1997 governing the Private Notes and the Exchange Notes (the "Indenture"). The Private Notes and the Exchange Notes are sometimes referred to herein, collectively, as the "Notes". See "The Exchange Offer" and "Description of Notes". Interest on the Notes will be payable semi-annually on May 15 and November 15 of each year, commencing May 15, 1998, at the rate of 11 1/2% per annum. The Notes will be redeemable, in whole or in part, at the option of Sparkling Spring on or after November 15, 2002 at the redemption prices set forth herein plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time on or prior to November 15, 2000, Sparkling Spring, at its option, may redeem up to $30.0 million aggregate principal amount of the Notes originally issued with the net cash proceeds of one or more Public Equity Offerings (as defined) at a redemption price equal to 111.50% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, provided that at least $70.0 million in aggregate principal amount of the Notes originally issued remains outstanding immediately following such redemption. Upon a Change of Control (as defined), each holder of the Notes will have the right to require Sparkling Spring to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase. In addition, Sparkling Spring will be obligated to offer to repurchase Notes at 100% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase in the event of certain Asset Sales (as defined). See "Description of the Notes." The Notes are general unsecured obligations of Sparkling Spring and are subordinated in right of payment to all existing and future Senior Indebtedness (as defined). The Notes will rank pari passu in right of payment with any future senior subordinated indebtedness of Sparkling Spring and will rank senior in right of payment to all other subordinated obligations of Sparkling Spring. The Notes are unconditionally guaranteed (the "Guarantees") on a senior subordinated basis by Sparkling Spring's existing subsidiaries and will be so guaranteed by those formed or acquired in the future (the "Subsidiary Guarantors"). The Guarantees are general unsecured obligations of the Subsidiary Guarantors and are subordinated in right of payment to all existing and future Guarantor Senior Indebtedness (as defined). The Guarantees will rank pari passu with any future senior subordinated indebtedness of the Subsidiary Guarantors and will rank senior in right of payment to all other subordinated obligations of the Subsidiary Guarantors. As of September 30, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom as described herein, Sparkling Spring would have had no Senior Indebtedness outstanding and the Subsidiary Guarantors would have had approximately $1.5 million of Guarantor Senior Indebtedness outstanding. See "Use of Proceeds," "Unaudited Pro Forma Consolidated Financial Data" and "Description of the Credit Agreement." The Notes are eligible for trading in the Private Offering, Resales and Trading through Automated Linkages ("PORTAL") Market of the National Association of Securities Dealers, Inc. SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The date of this Prospectus is , 1997. 4 The Private Notes were sold in an aggregate principal amount of $100.0 million by Sparking Spring on November 19, 1997 to BT Alex. Brown Incorporated and Natwest Capital Markets Limited (the "Initial Purchasers") in a transaction not registered under the Securities Act in reliance upon the private offering exemption under Section 4(2) of the Securities Act. The Initial Purchasers subsequently placed the Private Notes with qualified institutional buyers ("QIBS") in reliance upon Rule 144A under the Securities Act and with a limited number of accredited investors (as defined in Rule 501 (A)(1), (2), (3) or (7) under the Securities Act). Accordingly, the Private Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The Exchange Notes are being offered hereunder in order to satisfy certain obligations of Sparkling Spring and the Subsidiary Guarantors contained in the Registration Rights Agreement, dated as of November 19, 1997 (the "Registration Rights Agreement"), among Sparkling Spring, the Subsidiary Guarantors, and the Initial Purchasers. Based upon interpretations by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties unrelated to Sparkling Spring, Sparkling Spring believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Private Notes may be offered for sale, sold and otherwise transferred by a holder thereof (other than (i) any person who is an "affiliate" of Sparkling Spring within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a broker-dealer who purchases Notes from Sparkling Spring to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that such holder is acquiring the Exchange Notes in the ordinary course of its business and such holder is not engaging, and has no intention to engage, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Private Notes wishing to accept the Exchange Offer must represent to Sparkling Spring that such conditions have been met. Each broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes must acknowledge that it will deliver a Prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by such a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities. Sparkling Spring has agreed to make this Prospectus, as it may be amended or supplemented from time to time, available to any such broker-dealer that requests copies of such Prospectus in the Letter of Transmittal for use in connection with any such resale for a period of up to 90 days after the Expiration Date (as defined herein). See "The Exchange Offer" and "Plan of Distribution." Sparkling Spring will not receive any proceeds from, and has agreed to bear the expenses of, the Exchange Offer. No underwriter is being used in connection with the Exchange Offer. The Exchange Offer will expire at 5:00 p.m. New York City time, on , 1997 unless the Exchange Offer is extended by Sparkling Spring in its sole discretion. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Private Notes being tendered for exchange. The National Association of Securities Dealers, Inc. ("NASD") has designated the Private Notes as securities eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") market of the NASD, and Sparkling Spring has been advised that the Initial Purchasers or their affiliates have heretofore acted as market makers for the Private Notes. Holders of the Private Notes whose Private Notes were not tendered and accepted in the Exchange Offer will continue to hold such Private Notes and will be entitled to all the rights and preferences and will be i 5 subject to the limitations applicable thereto under the Indenture. Following consummation of the Exchange Offer, the holders of Private Notes will continue to be subject to the existing restrictions upon transfer thereof and Sparkling Spring, subject to limited exceptions, will have no further obligation to such holders to provide for the registration under the Securities Act of the Private Notes held by them. To the extent that any Private Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Private Notes could be adversely affected. No assurances can be given as to the liquidity of the trading market for the Private Notes. See "Risk Factors -- Consequences of Failure to Exchange Private Notes." Prior to the Exchange Offer, there has been no public market for the Exchange Notes. There can be no assurance as to the liquidity of any market that may develop for the Exchange Notes, the ability of holders to sell the Exchange Notes, or the price at which holders would be able to sell the Exchange Notes. The Initial Purchasers have advised Sparkling Spring that they or their affiliates currently intend to make a market in the Exchange Notes. The Initial Purchasers are not obligated to do so, however, and any market-making activities with respect to the Exchange Notes may be discontinued at any time without notice. Future trading prices of the Exchange Notes will depend upon many factors, including among other things, prevailing interest rates, Sparkling Spring's and the Subsidiary Guarantors' operating results and the market for similar securities. Historically, the market for securities similar to the Exchange Notes, including non-investment grade debt, has been subject to disruptions that have caused substantial volatility in the prices of such securities. There can be no assurance that any market for the Exchange Notes, if such a market develops, will not be subject to similar disruptions. See "Risk Factors -- Lack of Public Market for the Notes." THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL SPARKLING SPRING ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL IN CONNECTION WITH THE EXCHANGE OFFER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SPARKLING SPRING OR ANY OF THE SUBSIDIARY GUARANTORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE EXCHANGE PROPOSED TO BE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SPARKLING SPRING OR ANY OF THE SUBSIDIARY GUARANTORS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS THIS OFFERING MEMORANDUM INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS OFFERING MEMORANDUM, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE COMPANY'S FUTURE FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, PROJECTED COSTS AND PLANS AND OBJECTIVE OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS GENER- ii 6 ALLY CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY", "WILL", "EXPECT", "INTEND", "ESTIMATE", "ANTICIPATE", "BELIEVE", OR "CONTINUE" OR THE NEGATIVE THEREOF OR VARIATIONS THEREON OR SIMILAR TERMINOLOGY. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED UNDER "RISK FACTORS" AND ELSEWHERE IN THIS OFFERING MEMORANDUM, INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS OFFERING MEMORANDUM. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY, OR PERSONS ACTING ON ITS BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. ENFORCEABILITY OF CERTAIN CIVIL LIABILITIES Sparkling Spring is incorporated under the laws of the Province of Nova Scotia, Canada. The majority of its directors and officers, and certain experts named herein, are residents of Canada, and all or a portion of the assets of such persons and of the Company are located outside of the United States. In addition, certain of the Subsidiary Guarantors are incorporated in jurisdictions outside the United States. Although each of Sparkling Spring and the Subsidiary Guarantors has agreed, in accordance with the terms of the indenture pursuant to which the Notes will be issued (the "Indenture"), to accept service in the United States by its agent designated for such purpose, it may be difficult or impossible for holders of the Notes to effect service upon certain of the directors and officers of Sparkling Spring and the Subsidiary Guarantors and certain experts named herein and to realize in the United States upon judgments of courts of the United States predicated upon the civil liability of such persons under the United States federal securities laws. There is doubt as to the enforceability in Canada and in other foreign jurisdictions against any of these persons, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated solely on the United States federal securities laws. ------------------------ EXCHANGE RATE DATA The Company publishes its consolidated financial statements in U.S. dollars. All dollar amounts set forth in this Offering Memorandum are expressed in U.S. dollars unless otherwise specifically indicated. The following table sets forth for both Canadian dollars and British pounds sterling for the periods indicated, the high and low exchange rates (i.e., the highest and lowest exchange rate at which each currency was sold), the average exchange rate (i.e., the average of each exchange rate on the last business day of each month during the applicable period) and the period end exchange rate of each currency in exchange for the U.S. dollar, as calculated from the inverse of the exchange rates reported by the Federal Reserve Bank of New York for cable transfers payable in Canadian dollars and British pounds sterling for customs purposes.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------ ---------------- 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------ ------ ------ ------ ------- CANADIAN DOLLAR High for period.................... 0.877 0.807 0.764 0.753 0.753 0.740 0.748 Low for period..................... 0.773 0.742 0.710 0.710 0.721 0.721 0.715 End of period...................... 0.787 0.757 0.713 0.733 0.730 0.735 0.725 Average for period................. 0.828 0.775 0.732 0.728 0.733 0.735 0.726 BRITISH POUND STERLING High for period.................... 2.004 1.593 1.643 1.641 1.711 1.567 1.711 Low for period..................... 1.502 1.418 1.460 1.527 1.497 1.407 1.578 End of period...................... 1.513 1.480 1.564 1.552 1.705 1.563 1.616 Average for period................. 1.755 1.501 1.531 1.578 1.560 1.537 1.650
iii 7 SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Unless the context otherwise requires, the information contained in this Prospectus gives effect to the Reorganization (as defined) and all references to the Company refer collectively to Sparkling Spring Water Group Limited and its direct and indirect subsidiaries. All references in this Offering Memorandum to "EBITDA" mean operating profit plus depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered as an alternative to net income as a measure of operating results or to cash flow from operations as a measure of liquidity in accordance with generally accepted accounting principles. All references in this Prospectus to "CAGR" mean compound annual growth rate. Unless otherwise indicated, all statistical data and information contained in this Prospectus is as of September 30, 1997. Pro forma information contained in this Offering Memorandum gives effect to the Pro Forma Transactions (as defined). THE COMPANY The Company is one of the world's largest providers of bottled water delivered directly to the residential and commercial markets. Presently, the Company has the leading market share position in British Columbia and the Maritime Provinces of Canada, England and Scotland in the United Kingdom, and the State of Oregon in the United States. In addition, the Company has the second largest market share in the State of Washington. The Company's strategy has been to achieve strong market positions in a number of attractive markets and thereby realize the operating leverage that can be obtained once a distribution system is established. The Company's primary focus is on the bottling and delivery of high quality drinking water in five-gallon and six-gallon bottles to homes and offices, and the rental of water coolers. The Company has grown through both strong internal growth and the execution of a proven acquisition strategy. The Company's revenue and EBITDA have increased from $3.8 million and $0.5 million, respectively, in 1992, to $27.3 million and $6.9 million, respectively, in 1996, representing a CAGR of 63.6% and 88.6%, respectively. On a pro forma basis, revenue and EBITDA for the nine months ended September 30, 1997 of $37.3 million and $11.0 million, respectively, increased by 9.3% and 16.7% compared to the prior year period, reflecting the significant internal growth of the Company's operations. The Company has been a leader in the consolidation of the highly fragmented bottled water industry by executing a disciplined acquisition strategy. In addition, the Company has significantly improved the operations and profitability of each company it has acquired. For the four acquired companies for which the Company has comparable full-year pre-acquisition and post-acquisition data, revenue and EBITDA increased, on average, by 18.5% and 64.0%, respectively, in the first year after the acquisition. Management believes that it has realized similar improved performance in its other acquisitions for which sufficient post-acquisition information is available. Since January 1, 1997, the Company has completed seven acquisitions through which it entered the attractive U.S. bottled water market and expanded its leadership positions in Canada and the United Kingdom. BUSINESS STRATEGY Bottled water continues to be the fastest growing segment of the beverage industry, growing at a CAGR of 10.5% since 1980 according to Beverage Marketing Corporation. Management believes this growth stems primarily from two sources: (i) consumer dissatisfaction with tap water and (ii) increased consumer health consciousness resulting in the substitution of water for other less-healthy beverages. The Company expects to benefit from the growing demand for quality drinking 1 8 water by increasing its installed base of water coolers, increasing the water and related products offered through its established distribution system, and continuing to be a leader in the consolidation of the highly fragmented bottled water industry. In particular, the Company expects to continue to pursue the following business strategies: Focus on the Water Cooler Segment Within the Growing "Alternative to Tap Water" Market. Management believes that the overall growth of the bottled water industry and the relatively low level of water cooler penetration in Canada and the U.K., in particular, provide the Company with significant growth opportunities. The Company believes that health concerns and problems with the taste and odor of tap water have generated consumer demand for an "alternative to tap water," driving consumers to increasingly rely on bottled water and filtration systems in order to satisfy their drinking water needs. The Company intends to take advantage of this growth in demand by offering a premium product through multiple channels (i.e., direct delivery, retail and filtration systems), with a specific focus on the "direct delivery" water cooler segment. The water cooler business enjoys higher margins, less competition and greater operating leverage than either the retail bottled water or the water filter businesses. Sales in this segment are generally less price sensitive than retail sales of bottled water because the customer is generally more concerned with service and convenience. In addition, there are incremental cost and inconvenience factors associated with switching suppliers. Furthermore, water cooler companies generally have lower advertising costs than companies pursuing retail sales of bottled water because consumers generally do not select a water cooler provider on the basis of brand name. The water cooler business is also generally less competitive than other segments of the bottled water industry due to the relative capital intensity of the operations. Finally, the significant growth potential in the water cooler market and the low levels of water cooler penetration allow industry participants to focus on attracting new customers rather than on capturing market share from competitors. Leverage Existing Infrastructure. Due to the significantly fixed distribution system associated with the direct delivery of bottled water in a geographic area, additional operating leverage can be achieved by increasing route density through incremental market penetration. In addition to increasing the overall customer base, the Company expects to continue to benefit as per capita consumption continues to climb with each existing customer consuming more water. Finally, the Company utilizes its route systems to offer products which are complementary to bottled water, including cups, cooler sanitation services, coffee and related products. In addition to benefiting from internal growth in its markets, the Company leverages its infrastructure with each acquisition in adjacent or overlapping territories. Specific operating initiatives employed by the Company typically include: (i) maximizing distribution route efficiencies, (ii) consolidating bottling facilities, (iii) eliminating duplicative administrative costs and (iv) utilizing favorable purchasing opportunities. The Company's existing infrastructure and scale of operations provide an attractive opportunity to continue to add incremental customers at a higher marginal profitability rate. The Company has achieved significant cost savings in its existing operations as reflected in the increase in its EBITDA margin from 14.3% in 1992 to 25.2% in 1996 and 28.7% in the nine months ended September 30, 1997. Pursue Strategic Acquisitions. The Company has successfully pursued a disciplined acquisition strategy to create value by taking advantage of the consolidation of the highly fragmented bottled water industry. The Company has developed and successfully implemented a "hub and spoke" approach to acquiring companies in new markets by identifying one of the largest bottled water companies as a platform acquisition, and complementing it with smaller fill-in acquisitions in neighboring or overlapping geographic territories. The Company is generally unwilling to enter a market through an acquisition unless the company being acquired is both one of the market share leaders and provides the critical mass and local management talent necessary to act as a platform in that market. While the purchase price paid for a platform company is typically higher than that for a fill-in acquisition, the Company is able to reduce its average acquisition multiple by opportunisti- 2 9 cally acquiring "spoke" distribution routes at more attractive prices due to the limited strategic options available to these smaller operators. In addition to buying companies at relatively low multiples of EBITDA, management has been able to create value by improving the operations of acquired entities and by realizing operating synergies. The Company's recent acquisition of Cullyspring Water Co., Inc. ("Cullyspring") demonstrates its plan to continue to expand in the U.S. Cullyspring is the second largest water cooler provider in Washington, and management believes it has the opportunity to enhance its market position through fill-in acquisitions. Provide Outstanding Customer Service. The Company believes quality of service and reliability of delivery are the primary competitive factors in the water cooler business. The quality of service is measured by the Company's ability to: (i) reliably deliver bottled water on schedule, (ii) meet customer shortages with the quick delivery of refills, (iii) provide regular maintenance and sanitation of water coolers and (iv) effectively address any other needs of a customer. Management monitors on a monthly basis the Company's customer "churn" rate (its non-renewal rate with respect to its water cooler rental agreements) in an effort to continually enhance customer service. The Company's churn rate was approximately 2.0% per month in 1996 and 1.6% per month for the nine months ended September 30, 1997, which management believes is significantly lower than the industry average churn rate. INVESTMENT HIGHLIGHTS Attractive Industry Fundamentals. The Company believes that the "alternative to tap water" market represents an attractive industry opportunity due to the strong growth in demand for bottled water in the Company's primary markets and the ability to enhance profit margins as revenue grows. In the U.S., bottled water continues to be the fastest growing segment of the beverage industry, according to a study prepared by Beverage Marketing Corporation. Total bottled water consumption in the U.S. increased from 2.8 gallons per capita in 1980 to 11.7 gallons per capita in 1996. According to Zenith International Ltd., in the U. K., total bottled water consumption increased at a CAGR of 11.2% from 1990 to 1996, with annual consumption increasing from 1.9 gallons per capita in 1990 to 3.6 gallons per capita in 1996. Management believes the strong industry growth will continue to be driven by: (i) concerns related to the quality of tap water, (ii) trends in consumer selection of healthy products, (iii) taste preferences over tap water and other refreshment beverages and (iv) favorable demographics. Leading Market Share. The Company holds leading market share positions in the water cooler markets which it serves. Based upon its own internal estimates, the Company believes it has approximately 45% market share in British Columbia, 70% in the Maritime Provinces, 22% in the United Kingdom, 40% in Oregon and 20% in Washington. The Company believes it is the market share leader in each of these markets, except in Washington where it believes it is the second largest provider. By virtue of its leadership position in its markets, the Company benefits from several competitive advantages over smaller operators, including more efficient distribution operations, purchasing synergies, superior customer service and well-established infrastructure. Management believes the Company's leadership in each of its served markets creates a significant barrier to entry for prospective competitors. Significant Installed Cooler Base. The Company delivers bottled water to a significant installed base of approximately 115,000 water coolers in its served markets. Customers typically sign a one-year contract, providing the Company with a dual stream of relatively stable and recurring revenue from both a monthly cooler rental charge and the sale of bottled water. The Company believes that direct delivery water cooler companies enjoy several advantages over retailers of bottled water. Customers suffer both incremental cost and inconvenience if they choose to switch from one water cooler company to another. In addition, direct delivery water cooler operators such as the Company have made significant capital investments in inventories of water coolers and bottles, a truck fleet 3 10 and bottling facilities. Management believes the capital intensity of the water cooler business provides a second significant barrier to entry. Proven Beverage Industry Consolidation Track Record. The Company has a successful record of completing and integrating acquisitions, having made 12 acquisitions since 1993. These acquisitions have enabled the Company to rapidly expand into attractive markets and increase production capacity. In addition to completing the acquisitions of fast-growing bottled water companies at attractive purchase price multiples, management has dramatically improved the operations and profitability of each acquired company. For the four acquired companies for which the Company has comparable full-year pre-acquisition and post-acquisition data, revenue and EBITDA increased, on average, by 18.5% and 64.0%, respectively, in the first year after the acquisition. Management believes its reputation as a proven and well-capitalized industry consolidator facilitates its access to additional acquisition candidates and generates unsolicited offers from prospective sellers. Experienced Management Team with Significant Equity Ownership. The Company is led by an experienced senior management team whose members average more than 13 years in the beverage industry. A trust for the benefit of G. John Krediet, the Chairman of Sparkling Spring, and his children owns 50.9% of the common stock ("Common Stock") of Sparkling Spring (after giving effect to the Reorganization). Mr. Krediet successfully executed a consolidation of Canadian Pepsi-Cola bottlers and, together with Stephen L. Larson, identified the bottled water consolidation opportunity. Stephen L. Larson, Vice Chairman of Sparkling Spring, has led the Company's successful acquisition strategy. In addition to identifying new acquisition targets, Mr. Larson has been responsible for the negotiation, financing, consummation and integration of each of the Company's acquisitions. Stewart E. Allen, President of Sparkling Spring, has managed the operations of the business focusing on profitably increasing the penetration levels in each of its markets. The senior management team is strongly motivated through its equity ownership of 63.9% of the Common Stock of Sparkling Spring (including shares beneficially owned by a trust for the benefit of the family of one senior manager), after giving effect to the Reorganization. Management has successfully consolidated both water cooler companies and Pepsi-Cola bottlers, and has consistently demonstrated an ability to achieve strong internal growth and to identify, acquire, integrate and improve the performance of acquired companies. Strong Financial Performance. The success of the Company's operating strategy is evidenced by its growth in revenue and EBITDA over the past five years. Revenue increased at a CAGR of 63.6% from $3.8 million in 1992 to $27.3 million in 1996. Over the same period, EBITDA increased at a CAGR of 88.6% from $0.5 million to $6.9 million, with EBITDA margins increasing from 14.3% to 25.2%. In addition to expansion through acquisitions, the Company's operations exhibit significant internal growth. On a pro forma basis, revenue and EBITDA of $37.3 million and $11.0 million, respectively, increased 9.3% and 16.7%, respectively, in the nine months ended September 30, 1997 over the comparable period in the prior year. The principal executive offices of Sparkling Spring are located at 19 Fielding Avenue, Dartmouth, Nova Scotia, Canada B3B-1C9, and its telephone number at that address is (902) 468-8430. The Company also maintains executive offices in the U.S. at One Landmark Square, Stamford, CT 06901, and its telephone number at that address is (203) 325-0077. HISTORY Sparkling Spring Water Limited ("SSWL"), a wholly-owned subsidiary of Sparkling Spring, was founded in 1971 in Halifax, Nova Scotia to operate in the bottled water industry. In 1988, a controlling interest in the Company was acquired by Maritime Beverages Limited ("MBL"), a Pepsi-Cola bottler, which was managed by G. John Krediet and Stephen L. Larson, principals of C.F. Capital Corporation, an investment and management company ("CFCC"). When MBL sold its soft drink bottling holdings to Pepsi-Cola Canada Limited in 1992, Messrs. Krediet and Larson retained their ownership of SSWL. Recognizing the growth opportunities in the bottled water industry, 4 11 Messrs. Krediet and Larson identified SSWL as their platform for consolidation and recruited Stewart E. Allen from the MBL operation. Messrs. Krediet, Larson and Allen have managed the Company since late 1992, when they began to grow the water cooler business in Nova Scotia and New Brunswick. Since 1993, the Company has successfully completed 12 acquisitions. These acquisitions have enabled the Company to rapidly expand into attractive markets and increase production capacity. Additionally, the management team has been responsible for introducing new investors to the Company, including Clairvest Group Inc. ("Clairvest"), a merchant bank listed on the Toronto Stock Exchange, and certain members of the MacMillan family. RECENT DEVELOPMENTS On October 23, 1997, the Company acquired all of the issued and outstanding shares of capital stock of Cullyspring for approximately $7.6 million, including transaction costs. Cullyspring is a Seattle-based bottled water company focusing on the direct delivery of five-gallon containers to homes and offices and the rental of water coolers. The acquisition represents a continuation of the Company's consolidation activities in the Pacific Northwest market. In this market, the Company now services territories from Eugene, Oregon through British Columbia, with primary markets in Portland, Oregon; Seattle, Washington; and Vancouver, British Columbia. THE OFFERING Pursuant to a Purchase Agreement dated as of November 14 1997 (the "Purchase Agreement"), Sparkling Spring sold Private Notes in an aggregate principal amount of $100.0 million to the Initial Purchasers on November 19, 1997. The Initial Purchasers subsequently resold the Private Notes purchased from Sparkling Spring to QIBs pursuant to Rule 144A under the Securities Act and to certain accredited investors (as defined in Rule 501(A)(1) (2) or (4) under the Securities Act). The net proceeds to Sparkling Spring from the Offering, after deduction of discounts and offering expenses, was approximately $96.5 million. Sparkling Spring used $56.5 million of the net proceeds to repay the entire principal amount and accrued interest owing under the Existing Credit Facility, approximately $13.9 million was used in connection with the Reorganization and, approximately $3.6 million will be used to repay amounts outstanding under certain capitalized leases. The remaining proceeds of the Offering, approximately $22.5 million, will be used for general corporate purposes, including potential acquisitions. THE EXCHANGE OFFER The Exchange Offer......... Sparkling Spring is hereby offering to exchange $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Private Notes that are properly tendered and accepted. Sparkling Spring will issue Exchange Notes on or as promptly as practicable after the Expiration Date. As of the date hereof, there is $100,000,000 aggregate principal amount of Private Notes outstanding. See "The Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Private Notes being tendered for exchange. Based upon interpretations of the staff of the Commission set forth in no-action letters issued to third parties unrelated to Sparkling Spring, Sparkling Spring believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for Private Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (i) any person who is an "affiliate" of Sparkling Spring within the meaning of Rule 405 under the Securities Act or (ii) a broker-dealer who purchases Notes from Sparkling Spring to resell 5 12 pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that such holder is acquiring the Exchange Notes in the ordinary course of its business and such holder is not engaging and has no intention to engage, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. Holders of Private Notes wishing to accept the Exchange Offer must represent to Sparkling Spring that such conditions have been met. Each broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by such a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes acquired by such broker-dealer as a result of market-making or other trading activities. See "The Exchange Offer -- Resale of the Exchange Notes" and "Plan of Distribution". In addition, to comply with the securities laws in certain jurisdictions, if applicable, the Exchange Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and complied with. Sparkling Spring and the Subsidiary Guarantors have agreed, pursuant to the Registration Rights Agreement (subject to certain specified limitations set forth therein), to use their reasonable best efforts to register or qualify the Exchange Notes for offer or sale under the Securities or Blue Sky laws of such jurisdictions as any holder to the Notes reasonably requests in writing. Registration Rights Agreement................ The Private Notes and the related Guarantees were sold by Sparkling Spring and the Subsidiary Guarantors to the Initial Purchasers in a transaction exempt from the registration requirements of the Securities Act on November 19, 1997 pursuant to a Purchase Agreement, dated November 14, 1997, by and among Sparkling Spring, the Guarantors and the Initial Purchasers. Pursuant to the Purchase Agreement, Sparkling Spring, the Subsidiary Guarantors and the Initial Purchasers entered into a Registration Rights Agreement, dated November 19, 1997, which grants the holders of the Private Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such rights, which terminate upon consummation of the Exchange Offer. The holders of Exchange Notes will not be entitled to any exchange or registration rights with respect to the Exchange Notes. See "The Exchange Offer -- Termination of Certain Rights." Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New York City Time, on , 1997, unless the Exchange Offer is extended by Sparkling Spring in its sole discretion, in which case the term 6 13 "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. See "The Exchange Offer -- Expiration Date; Extensions; Termination." Conditions to the Exchange Offer.................... The Exchange Offer is subject to certain customary conditions, certain of which may be waived by Sparkling Spring. See "The Exchange Offer -- Expiration Date; Extensions; Termination." Sparkling Spring reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration date upon the occurrence of any such conditions. Procedures for Tendering Private Notes............ Each holder of Private Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Private Notes and any other required documentation to Bankers Trust Company, as exchange agent (the "Exchange Agent"), at the address set forth herein. Private Notes may be physically delivered, but physical delivery is not required if a confirmation of a book-entry transfer of such Private Notes to the Exchange Agent's account at The Depository Trust Company ("DTC" or the "Depository") is delivered in a timely fashion. By executing the Letter of Transmittal, each holder of Private Notes will represent to and agree with Sparkling Spring that, among other things, (i) the Exchange Notes to be acquire pursuant to the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, (ii) that neither the holder nor any such other person is engaged in, or intends to engage in, or has any arrangement or understanding with any person to participate in, the distribution of the Exchange Notes, and (iii) that neither the holder nor any such other person is an "affiliate" of Sparkling Spring within the meaning of Rule 405 under the Securities Act (or, if such holder or other person is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable). Each broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution." Untendered Private Notes... Following the consummation of the Exchange Offer, holders of Private Notes eligible to participate but who do not tender their Private Notes will not have any further exchange rights and such Private Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Private Notes could be adversely affected. 7 14 Consequences of Failure to Exchange.............. The Private Notes that are not exchanged pursuant to the Exchange Offer will remain restricted securities. Accordingly such Private Notes may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a non-U.S. person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer-Consequences of Failure to Exchange." Special Procedures for Beneficial Owner......... Any beneficial owner whose Private Notes are held through a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Private Notes in the Exchange Offer should contact such intermediary promptly and instruct such intermediary to tender on such beneficial owner's behalf. See "The Exchange Offer -- Procedures for Tendering. Guaranteed Delivery Procedures............... Holders of Private Notes who wish to tender their Private Notes and whose Private Notes are not immediately available or who cannot deliver their Private Notes, the Letter of Transmittal or any other documentation required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date, must tender their Private Notes according to the guaranteed delivery procedures set forth under "The Exchange Offer -- Guaranteed Delivery Procedures." Acceptance of the Private Notes and Delivery of the Exchange Notes........... Subject to the satisfaction or waiver of the conditions to the Exchange Offer, Sparkling Spring will accept for exchange any and all Private Notes that are properly tendered in the Exchange Offer prior to the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered on the earliest practicable date following the Expiration Date. See "The Exchange Offer -- Terms of the Exchange Offer." Withdrawal Rights.......... Tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer -- Withdrawal of Tenders." Certain Federal Income Tax Considerations........... For a discussion of certain federal income tax considerations relating to the exchange of the Private Notes for the Exchange Notes, see "Certain Federal Income Tax considerations -- Tax Consequences of the Exchange Offer." Exchange Agent............. Bankers Trust Company is serving as the Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer -- Exchange Agent." 8 15 THE NOTES The Exchange Offer applies to $100,000,000 aggregate principal amount of the Private Notes. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the Private Notes except that the Exchange Notes will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and holders of the Exchange Notes will not be entitled to any of the registration rights of holders of the Private Notes under the Registration Rights Agreement (or related rights to certain interest payments upon the failure of Sparkling Spring to fulfill certain conditions set forth in the Registration Rights Agreement), which rights will terminate upon consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace), and will be issued under, and be entitled to the benefits of, the Indenture. The Private Notes and the Exchange Notes will be considered collectively to be a single class for all purposes under the Indenture. See "Description of Notes." Notes Offered.............. $100,000,000 aggregate principal amount of 11 1/2% Senior Subordinated Notes due 2007. Maturity Date.............. November 15, 2007. Interest Payment Dates..... Interest on the Notes will accrue from the date of original issuance (the "Issue Date") and will be payable semi-annually on each May 15 and November 15, commencing on May 15, 1998. Optional Redemption........ The Notes will be redeemable at Sparkling Spring's option, in whole or in part, on and after November 15, 2002 at the redemption prices set forth herein, plus accrued and unpaid interest to the date of redemption. In addition, at any time on or prior to November 15, 2000, Sparkling Spring, at its option, may redeem up to $30.0 million of the aggregate principal amount of the Notes originally issued with the net cash proceeds of one or more Public Equity Offerings, at a redemption price equal to 111.50% of the principal amount thereof, plus accrued and unpaid interest to the date of redemption, provided that at least $70.0 million of the aggregate principal amount of the Notes originally issued remains outstanding immediately following any such redemption. See "Description of the Notes -- Redemption." Change of Control.......... Upon a Change of Control, each holder of the Notes will have the right to require Sparkling Spring to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. Redemption for Tax Reasons.................... In the event the Company is obligated to pay Additional Amounts (as defined) in respect of the Notes and otherwise satisfies certain conditions, the Company may redeem the Notes, in whole but not in part, upon giving not less than 30 or more than 60 days notice, at 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption. See "Description of the Notes -- Redemption -- Optional Redemption upon the Occurrence of Certain Tax Events" and "-- Taxation; Redemption for Taxation Reasons." Ranking.................... The Notes are general unsecured obligations of Sparkling Spring and are subordinated in right of payment to all existing and future Senior Indebtedness. The Notes will rank pari passu in right of payment with any future senior subordinated indebtedness of 9 16 Sparkling Spring and will rank senior in right of payment to all other subordinated obligations of Sparkling Spring. As of September 30, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom as described herein, Sparkling Spring would have had no Senior Indebtedness outstanding. However, under the Indenture, Sparkling Spring will have the ability to incur Indebtedness in the future, including Indebtedness under the Credit Agreement, which constitutes Senior Indebtedness. See "Use of Proceeds," "Unaudited Pro Forma Consolidated Financial Data" and "Description of the Credit Agreement." Guarantees................. The Notes are unconditionally guaranteed on a senior subordinated basis by the Subsidiary Guarantors. The Guarantees are general unsecured obligations of the Subsidiary Guarantors and are subordinated in right of payment to all existing and future Guarantor Senior Indebtedness. The Guarantees will rank pari passu with any future senior subordinated indebtedness of the Subsidiary Guarantors and will rank senior in right of payment to any other subordinated obligations of the Subsidiary Guarantors. As of September 30, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom as described herein, the Subsidiary Guarantors collectively would have had approximately $1.5 million of Guarantor Senior Indebtedness outstanding. Certain Covenants.......... The Indenture contains certain covenants with respect to Sparkling Spring and its subsidiaries that restrict, among other things, (a) the incurrence of additional indebtedness, (b) the payment of dividends and other restricted payments, (c) the creation of liens, (d) the sale or other transfer of assets and subsidiary stock, (e) the existence of limitations on distributions from subsidiaries, (f) transactions with affiliates and (g) the issuance of preferred stock by subsidiaries. The Indenture also restricts the ability of Sparkling Spring and the Subsidiary Guarantors to consolidate or merge with or into, or to transfer all or substantially all of its assets to, another person. In addition, under certain circumstances, Sparkling Spring will be required to offer to purchase Notes, in whole or in part, at a purchase price equal to 100% of the principal amount thereof plus accrued interest to the date of repurchase, with the proceeds of certain Asset Sales. These restrictions and requirements are subject to a number of important qualifications and exceptions. See "Description of the Notes -- Certain Covenants." USE OF PROCEEDS Sparkling Spring will not receive any proceeds from, and has agreed to bear the expenses of, the Exchange Offer. RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered in evaluating an investment in the Notes. 10 17 SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The following table sets forth certain summary historical and unaudited pro forma consolidated financial data of the Company. The historical data as of December 31, 1994, 1995 and 1996 has been derived from the consolidated financial statements of the Company. The pro forma data has been derived from the Unaudited Pro Forma Consolidated Financial Data of the Company included elsewhere in this Prospectus. The Unaudited Pro Forma Consolidated Financial Data does not purport to represent what the Company's results of operations actually would have been if the transactions referred to therein had been consummated on the date or for the periods indicated, or what such results will be for any future date or for any future period. The information below should be read in conjunction with the consolidated financial statements of the Company and the other historical financial statements, including the notes thereto, included elsewhere in the Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
NINE MONTHS ENDED SEPTEMBER 30, ----------------------- YEAR ENDED DECEMBER 31, --------------------------------------------- PRO FORMA (dollars in thousands) 1994 1995 1996 1996 1997 ------- ------- ------- --------- --------- PRO FORMA 1996 --------- INCOME STATEMENT DATA: Revenue............................ $8,725 $15,349 $27,326 $44,515 $34,098 $37,271 Cost of sales...................... 1,755 2,863 4,676 9,786 7,207 7,945 Operating expenses................. 5,356 9,041 15,756 22,311 17,493 18,356 Depreciation and amortization...... 1,095 1,465 3,842 5,869 4,245 4,305 Interest expense................... 625 1,294 2,481 11,850 8,888 8,888 Net income (loss) before extraordinary items.............. (94) 411 166 (3,043) (2,109) (1,161) Net (loss) income.................. (238) 19 (653) (3,858) (2,924) (1,161) OTHER DATA: EBITDA............................. $1,614 $3,445 $6,894 $12,418 $9,398 $10,970 EBITDA margin...................... 18.5% 22.4% 25.2% 27.9% 27.6 % 29.4 % Net capital expenditures........... 1,257 2,287 6,736 7,427 5,993 5,918 Installed cooler base.............. 23,838 30,344 74,160 102,500 99,500 115,000 Ratio of EBITDA to net cash interest expense................. 2.58x 2.66x 2.78x 1.20x 1.21 x 1.41 x Net debt(1)........................ -- -- -- -- -- $77,224 Ratio of net debt to LTM EBITDA(2)........................ -- -- -- -- -- 5.5 x BALANCE SHEET DATA: Cash and cash equivalents.......... $67 $860 $2,231 $-- $-- $23,427 Total assets....................... 13,835 18,521 44,409 -- -- 103,206 Long-term debt (3)................. 7,623 11,309 30,474 -- -- 101,500 Common shareholders' equity (deficit)........................ 2,331 2,207 7,002 -- -- (6,533)
- --------------- (1) Net debt is defined as total debt less cash and cash equivalents. (2) LTM EBITDA represents EBITDA calculated for the twelve months ended September 30, 1997, which is $14.0 million. (3) Includes amounts due under capital lease obligations, seller note and current maturities. 11 18 RISK FACTORS The risk factors set forth below, as well as the other information set forth in this Prospectus should be carefully considered before deciding to surrender the Private Notes in exchange for Exchange Notes pursuant to the Exchange Offer. SUBSTANTIAL LEVERAGE; DEBT SERVICE OBLIGATIONS The Company is highly leveraged. At September 30, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom as contemplated in "Use of Proceeds," the Company would have had an aggregate of approximately $101.5 million of outstanding indebtedness and a shareholders' deficit of $6.5 million. In addition, the Indenture permits Sparkling Spring and the Subsidiary Guarantors to incur substantial additional indebtedness, including Senior Indebtedness and Guarantor Senior Indebtedness, respectively, subject to certain limitations. See "Capitalization" and "Description of the Notes -- Certain Covenants." The Company's high degree of leverage could have important consequences to the holders of the Notes, including the following: (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes may be impaired in the future; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to service its indebtedness, thereby reducing the funds available to the Company for other purposes; (iii) certain of the Company's borrowings are expected to be at variable rates of interest (including borrowings under the Credit Agreement), which will expose the Company to the risk of increased interest rates; (iv) the Company is substantially more leveraged than certain of its competitors, which may place the Company at a competitive disadvantage; and (v) the Company's substantial degree of leverage may limit its flexibility to adjust to changing market conditions, reduce its ability to withstand competitive pressures and make it more vulnerable to a downturn in general economic conditions or in its business. See "Description of the Credit Agreement" and "Description of the Notes." The Company's ability to make scheduled payments or to refinance its obligations with respect to indebtedness (including the Notes) will depend on its financial and operating performance, which, in turn, is subject to general economic and market conditions and to financial, competitive, business and other factors, including factors beyond the Company's control. If the Company's cash flow and capital resources are insufficient to fund its debt service obligations, the Company may be forced to reduce or delay planned expansion and capital expenditures, sell assets, obtain additional equity capital or restructure its debt. There can be no assurance that the Company's operating results, cash flow and capital resources will be sufficient for payment of its indebtedness in the future. In the absence of such operating results and resources, the Company could face substantial liquidity problems and might be required to dispose of material assets or operations to meet its debt service and other obligations, and there can be no assurance as to the timing of such sales or the proceeds that the Company could realize therefrom. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." HOLDING COMPANY STRUCTURE; DEPENDENCE ON SUBSIDIARY CASH FLOW Sparkling Spring is a holding company with no independent operations. Sparkling Spring relies entirely on its direct and indirect subsidiaries for funds to meet its debt service obligations and for payments in respect of other corporate expenses. Sparkling Spring's cash flow and, consequently, its ability to service debt, including the Notes, is dependent upon the cash flow of its subsidiaries and the payment of funds by those subsidiaries to Sparkling Spring in the form of loans, dividends or otherwise. The Indenture limits the ability of Sparkling Spring to create or permit restrictions on dividends and other payments by its subsidiaries to Sparkling Spring or any other subsidiaries of Sparkling Spring. However, there can be no assurance that Sparkling Spring's subsidiaries will generate sufficient cash flow to loan, dividend or otherwise advance funds to Sparkling Spring in an amount sufficient for Sparkling Spring to make required payments of principal of and interest on the Notes. Should Sparkling Spring fail to satisfy any payment obligation under the Notes, the holders 12 19 thereof would have a direct claim therefor against the Subsidiary Guarantors pursuant to the Guarantees. However, the Guarantees are subordinated in right of payment to all Guarantor Senior Indebtedness and effectively subordinated to all secured indebtedness of the Subsidiary Guarantors. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Description of the Notes -- Certain Covenants -- Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries." RANKING OF NOTES AND GUARANTEES; SUBORDINATION OF NOTES AND GUARANTEES The Notes are subordinated in right of payment to all existing and future Senior Indebtedness of Sparkling Spring, including Indebtedness under the Credit Agreement, and the Guarantees are subordinated to all existing and future Guarantor Senior Indebtedness of the Subsidiary Guarantors. In addition, the Notes and the Guarantees are effectively subordinated to all existing and future secured indebtedness of Sparkling Spring and the Subsidiary Guarantors, respectively. Under the terms of the Indenture, the Company and the Subsidiary Guarantors are restricted, but not prohibited, from incurring additional Indebtedness, including Senior Indebtedness, Guarantor Senior Indebtedness and additional secured indebtedness. See "Description of the Credit Agreement," and "Description of the Notes -- Subordination" and "-- Certain Covenants." As of September 30, 1997, on a pro forma basis, after giving effect to the Offering and the application of the net proceeds therefrom, Sparkling Spring would have had no Senior Indebtedness outstanding and the Subsidiary Guarantors would have had approximately $1.5 million of Guarantor Senior Indebtedness outstanding. Management expects that, subject to the restrictions contained in the Company's debt agreements, Sparkling Spring and the Subsidiary Guarantors will incur additional Senior Indebtedness and Guarantor Senior Indebtedness, respectively, including indebtedness under the Credit Agreement, in connection with the implementation of the Company's business strategy. By reason of the subordination described in the preceding paragraph, in the event of the insolvency, liquidation, reorganization, dissolution or other winding up of Sparkling Spring, creditors of Sparkling Spring who are not holders of Senior Indebtedness, including holders of the Notes, may recover less, ratably, than holders of Senior Indebtedness. Similarly, the creditors of a Subsidiary Guarantor who are not holders of Guarantor Senior Indebtedness, including holders of the Notes, may also recover less, ratably, than holders of Guarantor Senior Indebtedness. In addition, the holders of any secured indebtedness of the Company will be entitled to a claim on the assets securing such indebtedness which is prior to any claim of the holders of the Notes or the Guarantees, as the case may be. If Sparkling Spring or a Subsidiary Guarantor incurs additional pari passu unsecured indebtedness, the holders of such debt would be entitled to share ratably with the holders of the Notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of the Company. This may have the effect of reducing the amount of proceeds paid to holders of the Notes. In addition, no payments may be made with respect to the principal of or interest on the Notes if a payment default exists with respect to Designated Senior Indebtedness (as defined) and, under certain circumstances, no payments may be made with respect to the principal of or interest on the Notes for certain periods of time if a non-payment default exists with respect to Designated Senior Indebtedness. See "Description of the Notes -- Subordination." RESTRICTIONS IMPOSED BY DEBT AGREEMENTS The Indenture restricts, among other things, the ability of Sparkling Spring and its subsidiaries to: incur additional indebtedness; create liens; pay dividends or make certain other restricted payments; sell or otherwise transfer assets; create restrictions on distributions from subsidiaries; enter into certain transactions with affiliates; incur indebtedness that is subordinate in right of payment to any Senior Indebtedness or Guarantor Senior Indebtedness and senior in right of payment to the Notes or the Guarantees, as the case may be; or consolidate or merge with or into, or transfer all or substantially all of its assets to, another person. The Indenture also prohibits subsidiaries of Sparkling Spring from issuing preferred stock other than to Sparkling Spring or its 13 20 wholly-owned subsidiaries. See "Description of the Notes -- Certain Covenants." If the Company fails to comply with these covenants, it would be in default under the Indenture and the principal and accrued interest on the Notes may become due and payable. In addition, the Credit Agreement will contain restrictive covenants and require the Company to maintain specified financial ratios and satisfy certain financial tests. See "Description of the Credit Agreement." The Company's ability to meet such financial ratios and tests may be affected by events beyond its control, and there can be no assurance that the Company will satisfy such tests. A breach of any of these covenants could result in an event of default under the Credit Agreement. If an event of default under the Credit Agreement were to occur, the lenders thereunder could elect to declare all amounts borrowed, together with accrued interest, to be immediately due and payable and the lenders under the Credit Agreement could terminate all commitments thereunder. If any such indebtedness were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full such indebtedness and the other indebtedness of the Company, including the Notes. In addition, a default under the Credit Agreement or the instruments governing the Company's other indebtedness could constitute a cross-default under the Indenture and any instruments governing the Company's other indebtedness, and a default under the Indenture could constitute a cross-default under the Credit Agreement and instruments governing the Company's other indebtedness. See "Description of the Notes -- Certain Covenants" and "Description of the Credit Agreement." FRAUDULENT CONVEYANCE RISKS In the event of a bankruptcy proceeding or a lawsuit by or on behalf of creditors of Sparkling Spring, the incurrence by Sparkling Spring of the indebtedness evidenced by the Notes would be subject to review under relevant United States federal and state fraudulent conveyance statutes and similar laws of certain other jurisdictions ("Fraudulent Conveyance Statutes"). Generally, under these statutes, if at the time the Notes were issued and the proceeds applied, (i) Sparkling Spring issued the Notes and applied the proceeds with the intent of hindering, delaying or defrauding creditors or (ii) Sparkling Spring received less than a reasonably equivalent value or fair consideration for issuing the Notes and, after so applying the proceeds, Sparkling Spring (a) was insolvent or rendered insolvent by reason of such transactions, (b) was engaged in a business or transaction for which its assets constituted unreasonably small capital or (c) intended to incur, or believed that it would incur, debts beyond its ability to pay as they matured (as the foregoing terms are defined in or interpreted under Fraudulent Conveyance Statutes), such court could subordinate all or a part of the Notes to existing and future indebtedness of the Company, recover any payments made on the Notes or take other action detrimental to the holders of the Notes, including, under certain circumstances, invalidating the Notes. In the event that under relevant state or federal law a Subsidiary Guarantor is determined, at the time it executed its Guarantee, to have come within clauses (i) and (ii) of the first paragraph of this subsection, the Guarantee by such Subsidiary Guarantor may be voidable (in whole or in part) or the claim of the holders of the Notes in respect of such Guarantee may be subordinated (in whole or in part) to other obligations and liabilities of such Subsidiary Guarantor, in each case based on the theory that such Guarantee constituted a fraudulent conveyance under applicable Fraudulent Conveyance Statutes. In the event that such claims are asserted after any payments are made by a Subsidiary Guarantor under its Guarantee, there is a risk that persons who received such payments will be ordered by a court to return to such Subsidiary Guarantor's creditors or its trustee in bankruptcy all or a portion of such payments. Under Canadian provincial fraudulent conveyance laws, a court could set aside the Notes or the Guarantees, on the application of or on behalf of the creditors or by the trustee in bankruptcy of Sparkling Spring or a Subsidiary Guarantor, as the case may be, if it were found that the Notes had been issued or the proceeds of the Notes applied by Sparkling Spring, or the indebtedness represented by the obligations under the Guarantee incurred by such Subsidiary Guarantor, with the intent to defeat, hinder, delay or defraud their respective creditors. In making any such determination, the court would consider factors such as whether (i) after the transactions Sparkling Spring was 14 21 insolvent or rendered insolvent by reason of the transactions and (ii) Sparkling Spring received less than a reasonably equivalent value or fair consideration in determining whether the Notes were issued with a fraudulent intent. Similarly, factors such as whether (i) a Guarantor was insolvent or rendered insolvent as a result of giving its Guarantee or (ii) if Sparkling Spring received less than a reasonably equivalent value or fair consideration for the Notes would be taken into account in determining whether the Guarantees were issued with a fraudulent intent. Under the Canadian Federal Bankruptcy and Insolvency Act, Notes issued to purchasers who do not deal at arms' length with Sparkling Spring for less than fair market value may be reviewable by the trustee in bankruptcy and may be set aside. The measure of insolvency for the foregoing purposes will vary depending upon the law of the jurisdiction being applied. Generally, a company will be considered insolvent for the foregoing purposes if it is unable to pay its debts as they become due in the usual course of its business or the sum of its debts is greater than all the company's property at a fair valuation or if the present fair saleable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and mature. Based upon the financial and other information currently available to it, the Company believes that the indebtedness and obligations evidenced by the Notes and the Guarantees will be incurred and proceeds of the Notes will be used for proper purposes and in good faith. The Company believes that at the time of, and after giving effect to, the incurrence of the indebtedness and obligations evidenced by the Notes and the Guarantees, it will be solvent and will have sufficient capital to carry on its business and pay its debt obligations as they mature. No assurance can be given, however, that a court would concur with such beliefs and positions. CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of the Notes will have the right to require Sparkling Spring to repurchase such holder's Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest to the date of repurchase. See "Description of the Notes -- Change of Control." If a Change of Control were to occur and any holders were to exercise their right to require Sparkling Spring to repurchase such holders' Notes, there can be no assurance that Sparkling Spring would have sufficient financial resources, or would be able to arrange financing, to pay the repurchase price for all Notes tendered by the holders thereof. Further, the provisions of the Indenture may not afford holders of Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders of Notes, if such transaction does not result in a Change of Control. In addition, the terms of the Credit Agreement are expected to limit Sparkling Spring's ability to purchase any Notes and are also expected to identify certain events that would constitute a change of control, as well as certain other events with respect to Sparkling Spring or its subsidiaries, that would constitute an event of default under the Credit Agreement. See "Description of the Credit Agreement." Any future credit agreements or other agreements relating to other indebtedness to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when Sparkling Spring is prohibited from purchasing Notes, Sparkling Spring could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If Sparkling Spring does not obtain such consent or repay such borrowing, Sparkling Spring would remain prohibited from purchasing Notes. In such case, Sparkling Spring's failure to purchase validly tendered Notes would constitute an Event of Default under the Indenture, which would, in turn, constitute a further default under certain of the Company's other agreements and may constitute a default under the terms of other debt agreements that the Company may enter into from time to time. See "Description of the Notes -- Change of Control." 15 22 DEPENDENCE ON FINANCING FOR EXPANSION; ACQUISITION STRATEGY A key element of the Company's business strategy has been, and will continue to be, growth through the acquisition of similar and complementary businesses. See "The Company -- Acquisition Strategy." The Company's ability to expand through acquisitions is dependent upon, and may be limited by, the availability of suitable acquisition candidates, the availability of financing therefor on suitable terms, and by restrictions contained in the Indenture, the Credit Agreement and the Company's other existing and future financing arrangements. Management believes that the market for attractive acquisitions in the bottled water industry is becoming increasingly competitive, which could make the Company's acquisition strategy more difficult to achieve. Certain of the Company's competitors for attractive acquisition candidates may have greater financial resources than the Company. Further, growth through acquisitions involves risks that could adversely affect the Company's operating results, including difficulties in integrating the operations and personnel of acquired companies and the potential loss of key employees of acquired companies. In addition, implementation of the Company's proposed expansion strategy will be substantially dependent upon, among other things, the Company's ability to hire and retain skilled management, financial, marketing and other personnel, and successfully manage growth (including monitoring operations, controlling costs and maintaining effective quality and inventory controls). The Company's growth strategy and plans may be affected by a number of factors, including delays in the Company's marketing efforts, changes in economic or market conditions, its ability to make capital expenditures, competition and other factors, some of which are beyond management's control. There can be no assurance that the Company will be able to successfully implement its acquisition strategy or otherwise expand its operations. The Company anticipates, based on currently proposed plans and assumptions relating to its operations (including the costs associated with its proposed expansion), that the net proceeds of the Offering and cash generated from operations will be sufficient to satisfy its anticipated cash requirements for the foreseeable future. In the event that the Company's plans change, its assumptions change or prove to be inaccurate or the proceeds of the Offering prove to be insufficient to fund the Company's operations (due to unanticipated expenses, delays, difficulties or more acquisition opportunities than presently expected or otherwise), the Company would be required to seek additional financing sooner than anticipated. The Company may determine, depending upon the opportunities available to it, to seek additional debt or equity financing to fund the cost of further expansion. To the extent that the Company incurs additional indebtedness, the Company will be subject to risks associated with incurring substantial indebtedness, including the risks that interest rates may fluctuate and cash flow may be insufficient to pay principal and interest on any such indebtedness. The Company has no current arrangements with respect to, or sources of, additional financing, other than the Credit Agreement. There can be no assurance that additional financing will be available to the Company on commercially reasonable terms or at all. The inability to obtain additional financing on commercially reasonable terms, or at all, could have a material adverse effect on the Company's plan for expansion. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." RISKS OF FOREIGN OPERATIONS For the nine months ended September 30, 1997, after giving effect to the Pro Forma Transactions, 42.6% of the Company's revenue would have been generated in Canada in Canadian dollars, 35.8% of the Company's revenue would have been generated in the U.K. in pounds sterling and 21.6% of the Company's revenue would have been generated in the U.S. in U.S. dollars. In addition, a substantial portion of the expenses incurred by the Company during that period was denominated in currencies other than U.S. dollars. Foreign operations are subject to a number of special risks, including, but not limited to, risks with respect to fluctuations in currency exchange rates, regional and national economic conditions, economic and political destabilization, other disruptions of markets, restrictive actions by foreign governments (such as restrictions on transfer of funds and 16 23 unexpected changes in regulatory environments), changes in foreign laws regarding trade and investment and foreign tax laws. There can be no assurance that one or a combination of these factors will not have a material adverse effect on the Company's financial position or results of operations. In addition, the Trustee under the Indenture and the holders of the Notes may be limited in their ability to enforce judgments against Sparkling Spring and the Subsidiary Guarantors outside the United States. See "Description of the Notes -- Enforceability of Judgments." GOVERNMENT REGULATION The Company's operations are subject to the jurisdiction of various governmental and regulatory agencies which regulate the quality of drinking water and other products, including the United States Federal Food and Drug Administration (the "FDA") and the Canadian Federal Department of Health and Welfare. In the United Kingdom, bottled water is governed by the European Union's Mineral Water Directive and Drinking Water in Containers Regulations. The Company believes that it is in substantial compliance with all applicable laws and regulations and has all required permits and licenses to conduct its business. However, any failure by the Company to comply with existing and future laws and regulations could subject it to significant penalties. In addition, there can be no assurance that such laws or regulations will not be modified in a manner that imposes additional costs on the Company or otherwise has a material adverse effect on the Company's financial position or results of operations. See "The Company -- Regulation." INTERRUPTION OF WATER SOURCES The Company obtains its water from municipal sources and local natural springs. Any interruption in the availability of water to the Company from these sources could have a material adverse effect on the Company's operations until a suitable replacement source is located. No assurances can be given that any such interruption would not have a material adverse effect on the Company's financial position or results of operations. See "The Company -- The Bottling Process." COMPETITION The beverage industry in general, and the bottled water market in particular, are competitive. The Company competes with other national and regional bottled water companies as well as other beverage companies. Certain of the Company's competitors possess substantially greater financial, personnel, marketing and other resources, and are less leveraged, than the Company and may be better able to withstand market conditions within the beverage industry. There can be no assurance that the Company will not encounter increased competition in the future, which could have a material adverse effect on the Company's business. In addition, the future success of the Company is highly dependent on consumer tastes and preferences. There can be no assurance that a change in consumer preferences from bottled water to other forms of purified water or other beverages will not have a material adverse effect on the Company's financial position or results of operations. See "The Company -- Competition." DEPENDENCE ON KEY PERSONNEL The Company is dependent on the continued services of certain members of its senior management team, which consists of G. John Krediet, Stephen L. Larson and Stewart E. Allen. The loss of, and inability to attract replacements for, any of such key personnel could have a material adverse effect on the Company's financial position or results of operations. See "Management." CONTROL BY PRINCIPAL SHAREHOLDERS Messrs. Larson and Allen and a trust for the benefit of Mr. Krediet and his children beneficially own 63.9% of the outstanding Common Stock of Sparkling Spring on a pro forma basis after giving effect to the Reorganization and an additional investment to be made by Mr. Larson in Sparkling Spring in connection with the Offering, and collectively control the affairs and policies of the Company. See "Use of Proceeds," "Certain Relationships and Related Transactions -- Reorganization" and "Security Ownership of Certain Beneficial Owners and Management." Circumstances may occur in which the interests of these shareholders could conflict with the interests of the holders of 17 24 the Notes. In addition, these shareholders may have an interest in pursuing acquisitions, divestitures or other transactions that, in their judgment, could enhance their equity investment, even though such transactions might involve risks to the holders of the Notes. Pursuant to the Shareholder Agreement (as defined), Clairvest, a holder of 30.4% of the outstanding Common Stock of Sparkling Spring on a pro forma basis after giving effect to the Reorganization, has the right to appoint two of Sparkling Spring's seven directors. In addition, certain actions by the Company require the approval of at least one of the Clairvest nominees. These actions include, among other things, any acquisition by Sparkling Spring involving consideration in excess of Cdn. $5.0 million, the making of certain capital expenditures, the issuance by Sparkling Spring of debt or equity securities, the disposition by the Company of a material part of its business, any changes in management compensation, the declaration of dividends by Sparkling Spring and the approval of Sparkling Spring's annual budget. In addition, under the Shareholder Agreement, if no liquid public market (as defined in the Shareholder Agreement) then exists, Clairvest may, any time after March 31, 2003, offer all of its shares of Common Stock of Sparkling Spring for sale to Sparkling Spring. If Sparkling Spring does not then repurchase those shares, Clairvest may, under certain circumstances, require the other parties to the Shareholder Agreement to join with Clairvest in selling to a third party all of their shares of Common Stock of Sparkling Spring. See "Certain Relationships and Related Transactions -- Shareholder Agreement." POTENTIAL LIABILITY; INSURANCE The Company is engaged in a business which could expose it to possible liability claims from others, including personal injury claims. The Company maintains third party insurance coverage that it believes is typical for companies in its industry. There can be no assurance, however, that the Company's insurance will be sufficient to cover potential claims or that an adequate level of coverage will be available in the future on acceptable terms. A partially insured or completely uninsured successful claim against the Company could have a material adverse effect on the Company's financial position and results of operations. LACK OF PUBLIC MARKET FOR THE NOTES The Exchange Notes are a new issue of securities for which there is currently no market. There can be no assurance regarding the future development of a market for the Exchange Notes, or the ability of holders of the Exchange Notes to sell their Exchange Notes or the price at which such holders may be able to sell their Exchange Notes. If such a market were to develop, the Exchange Notes could trade at prices that may be higher or lower than their principal amount depending on many factors, including prevailing interest rates, Sparkling Spring's and the Subsidiary Guarantors' operating results and the market for similar securities. The Initial Purchasers have advised Sparkling Spring that they or their affiliates currently intend to make a market in the Exchange Notes. The Initial Purchasers are not obligated to do so, however, and any market-making activities with respect to the Exchange Notes may be discontinued at any time without notice. Therefore, there is no assurance as to the liquidity of any trading market for the Exchange Notes or that an active public market for the Exchange Notes will develop. Sparkling Spring does not intend to apply for listing or quotation of the Exchange Notes on any securities exchange or stock market. Historically, the market for noninvestment grade debt has been subject to disruptions that have caused substantial volatility in the prices of such securities. There is no assurance that the market for the Exchange Notes will not be subject to similar disruptions. Any such disruption may have an adverse effect on holders of the Exchange Notes. PROCEDURES FOR TENDER OF PRIVATE NOTES The Exchange Notes will be issued in exchange for the Private Notes only after timely receipt by the Exchange Agent of such Private Notes, a properly completed and duly executed Letter of Transmittal and all other required documentation. Therefore, holders of Private Notes desiring to tender such Private Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. Neither the Exchange Agent nor Sparkling Spring is under any duty to give 18 25 notification of defects or irregularities with respect to tenders of Private Notes for exchange. Private Notes that are not tendered or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. In addition, any holder of Private Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer" and "Plan of Distribution." CONSEQUENCES OF FAILURE TO EXCHANGE PRIVATE NOTES The Private Notes have not been registered under the Securities Act and are subject to substantial restrictions on transfer. Private Notes that are not tendered in exchange for Exchange Notes or are tendered but not accepted will, following consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof. Sparkling Spring does not currently anticipate that it will register the Private Notes under the Securities Act. To the extent that Private Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Private Notes could be adversely affected due to the limited amount, or "float," of the Private Notes that are expected to remain outstanding following the Exchange Offer. Generally, a lower "float" of a security could result in less demand to purchase such security and could, therefore, result in lower prices for such security. For the same reason, to the extent that a large amount of Private Notes are not tendered or are tendered and not accepted in the Exchange Offer, the trading market for the Exchange Notes could be adversely affected. See "Plan of Distribution" and "The Exchange Offer." 19 26 USE OF PROCEEDS This Exchange Offer is intended to satisfy certain obligations of Sparkling Spring and the Subsidiary Guarantors under the Registration Rights Agreement. Sparkling Spring will not receive any cash proceeds from, and has agreed to bear the expenses of, the Exchange Offer. In consideration for issuing the Exchange Notes as contemplated in this Prospectus, Sparkling Spring will receive, in exchange, Private Notes in like principal amount. The Private Notes surrendered in exchange for the Exchange Notes will be retired and canceled. Accordingly, issuance of the Exchange Notes will not result in any increase in the outstanding indebtedness of Sparkling Spring and the Subsidiary Guarantors. THE OFFERING On November 19, 1997, Sparkling Spring and the Subsidiary Guarantors consummated the Offering in a transaction exempt from the registration requirements of the Securities Act. The price to investors and the principal amount of the Private Notes was $100.0 million in the aggregate. The net proceeds to Sparkling Spring from the Offering, after deduction of discounts and offering expenses, were approximately $96.5 million. Sparkling Spring used $56.5 million of the net proceeds to repay and retire all of its outstanding indebtedness under the Existing Credit Facility. The indebtedness of Sparkling Spring under the Existing Credit Facility which was repaid matured on December 31, 2002 and accrued interest at fluctuating rates (an average blended weighted rate of 8.5% per year at September 30, 1997). Sparkling Spring also used $13.9 million in connection with the Reorganization and approximately $3.6 million will be used to repay amounts outstanding under certain capitalized leases. The remaining proceeds of the Offering, approximately $22.5 million, will be used for general corporate purposes, including potential acquisitions. 20 27 CAPITALIZATION The following table sets forth the consolidated cash position and capitalization of the Company as of September 30, 1997, as adjusted to give effect to the acquisition of Cullyspring for a purchase price of $7.6 million, the Offering and the Reorganization. The table should be read in conjunction with "The Offering," "Selected Historical Consolidated Financial Data," "Unaudited Pro Forma Consolidated Financial Data" and the consolidated financial statements of the Company and the related notes thereto included elsewhere in this Prospectus.
AS AT SEPTEMBER 30, 1997 ------------- PRO FORMA ------------- (UNAUDITED) Cash and cash equivalents.................................................... $23,427 ======== Long-term debt (including current maturities): Capitalized lease obligations.............................................. $-- Existing Credit Facility................................................... -- Seller note................................................................ 1,500 The Notes.................................................................. 100,000 -------- Total long-term debt.................................................... 101,500 Shareholders' equity (deficit)(1)............................................ (6,533) -------- Total capitalization......................................................... $94,967 ========
- --------------- (1) Shareholders' equity incorporates (a) the net acquisition of $13.9 million of Common Stock in connection with the Reorganization and (b) an increase in the deficit of $0.8 million representing the after-tax impact of the write-off of deferred financing fees. See "Notes to Unaudited Pro Forma Consolidated Financial Statements." 21 28 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The following unaudited pro forma consolidated financial data of the Company present the Company's unaudited pro forma consolidated statements of operations for the year ended December 31, 1996 and the nine months ended September 30, 1996 and 1997 and the unaudited pro forma consolidated balance sheet of the Company as of September 30, 1997. These pro forma consolidated financial statements give effect to the Pro Forma Transactions (as defined in Note 1 of the "Notes to Unaudited Pro Forma Consolidated Financial Statements") as if they had occurred on January 1, 1996 with respect to the unaudited pro forma consolidated statements of operations and as of September 30, 1997 with respect to the unaudited pro forma consolidated balance sheet. The unaudited pro forma consolidated statements of operations and the unaudited pro forma consolidated balance sheet (and the notes thereto) are based, in part, upon the Company's consolidated financial statements and the other historical financial statements, and the notes thereto, appearing elsewhere in this Prospectus and should be read in conjunction therewith. The unaudited pro forma consolidated financial information appearing herein does not purport to represent what the Company's results of operations or financial position would have been had such transactions in fact occurred on the dates indicated or to project the financial position or results of operations of the Company for the present year or for any future period. 22 29 SPARKLING SPRING WATER GROUP LIMITED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 ----------------------------------------------------------------------------------------------- PRO FORMA ADJUSTMENTS (dollars in thousands) -------------------------------------------------------------- SPARKLING SPRING ACQUIRED ACQUISITION TOTAL FINANCING WATER GROUP LIMITED(1) COMPANIES(1) ADJUSTMENTS(2) PRE-FINANCING ADJUSTMENTS(3)(4)(5) PRO FORMA ---------------------- ------------ -------------- ------------- -------------------- --------- INCOME STATEMENT DATA: Revenue: Water................. $16,810 $10,395 $-- $27,205 $-- $27,205 Rental................ 7,347 3,594 -- 10,941 -- 10,941 Other................. 3,169 3,279 (79)(A) 6,369 -- 6,369 ------- ------- ------- ------- ------- ------- Total revenue..... 27,326 17,268 (79) 44,515 -- 44,515 Cost of sales......... 4,675 5,760 (649)(B) 9,786 -- 9,786 ------- ------- ------- ------- ------- ------- Gross profit.......... 22,651 11,508 570 34,729 -- 34,729 Expenses: Operating expenses.... 15,756 8,805 (2,250)(C) 22,311 -- 22,311 Depreciation and amortization........ 3,842 1,119 908 (D 5,869 -- 5,869 ------- ------- ------- ------- ------- ------- Operating profit...... 3,053 1,584 1,912 6,549 -- 6,549 Interest expense...... 2,481 320 1,815 (E 4,616 7,234 (A 11,850 ------- ------- ------- ------- ------- ------- Income before the following........... 572 1,264 97 1,933 (7,234) (5,301) Provision for (recovery of) income taxes............... 399 101 490 (F 990 (3,255)(B) (2,265) ------- ------- ------- ------- ------- ------- Net income (loss) before non- controlling interest and extraordinary item................ 173 1,163 (393) 943 (3,979) (3,036) Non-controlling interest............ (7) -- -- (7) -- (7) ------- ------- ------- ------- ------- ------- Net income (loss) before extraordinary item................ $166 $1,163 $(393) $936 $(3,979) $(3,043) ======= ======= ======= ======= ======= ======= OTHER DATA: EBITDA................ $12,418 EBITDA margin......... 27.9% Ratio of EBITDA to cash interest expense............. 1.08x *Ratio of EBITDA to net cash interest expense............. 1.20x
- --------------- * The ratio of EBITDA to net cash interest expense includes interest income earned on surplus cash of $22.5 million assuming an investment rate of return of 5% per annum. See accompanying notes 23 30 SPARKLING SPRING WATER GROUP LIMITED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 ---------------------------------------------------------------------------------------------------- PRO FORMA ADJUSTMENTS (dollars in thousands) ----------------------------------------------------------------- SPARKLING SPRING ACQUIRED ACQUISITION TOTAL FINANCING WATER GROUP LIMITED(1) COMPANIES(1) ADJUSTMENTS(2) PRE-FINANCING ADJUSTMENTS(3)(4)(5) PRO FORMA ---------------------- ------------ -------------- ------------- -------------------- --------- INCOME STATEMENT DATA: Revenue: Water....................... $13,392 $8,004 $-- $21,396 $-- $21,396 Rental...................... 5,604 2,660 -- 8,264 -- 8,264 Other....................... 2,068 2,431 (61)(A) 4,438 -- 4,438 ------- ------- ------- ------- ------- ------- Total revenue........... 21,064 13,095 (61) 34,098 -- 34,098 Cost of sales............... 3,403 4,087 (283)(B) 7,207 -- 7,207 ------- ------- ------- ------- ------- ------- Gross profit................ 17,661 9,008 222 26,891 -- 26,891 Expenses: Operating expenses.......... 12,636 6,301 (1,444)(C) 17,493 -- 17,493 Depreciation and amortization.............. 2,752 822 671(D) 4,245 -- 4,245 ------- ------- ------- ------- ------- ------- Operating profit............ 2,273 1,885 995 5,153 -- 5,153 Interest expense............ 1,703 242 1,343(E) 3,288 5,600(A) 8,888 ------- ------- ------- ------- ------- ------- Income before the following................. 570 1,643 (348) 1,865 (5,600) (3,735) Provision for (recovery of) income taxes.............. 348 (8) 547(F) 887 (2,520)(B) (1,633) ------- ------- ------- ------- ------- ------- Net income (loss) before non-controlling interest and extraordinary item.... 222 1,651 (895) 978 (3,080) (2,102) Non-controlling interest.... (7) -- -- (7) -- (7) ------- ------- ------- ------- ------- ------- Net income (loss) before extraordinary item........ $215 $1,651 $(895) $971 $(3,080) $(2,109) ======= ======= ======= ======= ======= ======= OTHER DATA: EBITDA...................... $9,398 EBITDA margin............... 27.6% Ratio of EBITDA to cash interest expense.......... 1.09x *Ratio of EBITDA to net cash interest expense.......... 1.21x
- --------------- * The ratio of EBITDA to net cash interest expense includes interest income earned on surplus cash of $22.5 million assuming an investment rate of return of 5% per annum. See accompanying notes 24 31 SPARKLING SPRING WATER GROUP LIMITED UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 --------------------------------------------------------------------------------------------------------- PRO FORMA ADJUSTMENTS (dollars in thousands) -------------------------------------------------------------------- SPARKLING SPRING ACQUIRED ACQUISITION TOTAL FINANCING INCOME STATEMENT DATA: WATER GROUP LIMITED(1) COMPANIES(1) ADJUSTMENTS(2) PRE-FINANCING ADJUSTMENTS(3)(4)(5) PRO FORMA ---------------------- ------------ -------------- ------------- -------------------- --------- Revenue: Water.................. $ 19,537 $4,007 $ -- $23,544 $ -- $23,544 Rental................. 7,777 997 -- 8,774 -- 8,774 Other.................. 4,484 527 (58)(A) 4,953 -- 4,953 ---------- ---------- --------- - ---------- ---------- Total revenue........ 31,798 5,531 (58) 37,271 -- 37,271 Cost of sales.......... 5,864 2,119 (38)(B) 7,945 -- 7,945 ---------- ---------- --------- - ---------- ---------- Gross profit........... 25,934 3,412 (20) 29,326 -- 29,326 Expenses: Operating expenses..... 16,818 2,109 (571)(C) 18,356 -- 18,356 Depreciation and amortization......... 3,918 215 172(D) 4,305 -- 4,305 ---------- ---------- --------- - ---------- ---------- Operating profit....... 5,198 1,088 379 6,665 -- 6,665 Interest expense....... 2,901 8 494(E) 3,403 5,485(A) 8,888 ---------- ---------- --------- - ---------- ---------- Income before the following............ 2,297 1,080 (115) 3,262 (5,485) (2,223) Provision for (recovery of) income taxes..... 1,063 -- 343(F) 1,406 (2,468)(B) (1,062) ---------- ---------- --------- - ---------- ---------- Net income (loss) before non-controlling interest and extraordinary item... $ 1,234 $1,080 $ (458) $ 1,856 $ (3,017) $(1,161) ========== ========== ========== ========== ========== OTHER DATA: EBITDA................. $10,970 EBITDA margin.......... 29.4% Ratio of EBITDA to cash interest expense..... 1.27x *Ratio of EBITDA to net cash interest expense.............. 1.41x
- --------------- * The ratio of EBITDA to net cash interest expense includes interest income earned on surplus cash of $22.5 million assuming an investment rate of return of 5% per annum. See accompanying notes 25 32 SPARKLING SPRING WATER GROUP LIMITED UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997 ------------------------------------------------------------------------ PRO FORMA ADJUSTMENTS SPARKLING ----------------------------------------------------- SPRING WATER CULLYSPRING (dollars in thousands) GROUP LIMITED(1) WATER CO., INC.(1) FINANCING(3) PRO FORMA(1) ----------------- ------------------- --------------- ------------ ASSETS Cash and cash equivalents............. $898 $ -- $22,529(C) $23,427 Accounts receivable................... 9,170....... 359 -- 9,529 Inventories........................... 1,409....... 90 -- 1,499 Prepaid expenses...................... 1,511 -- -- 1,511 - ---------- --------- ----------- Total current assets.......... 12,988...... 449 22,529 35,966 Deferred taxes........................ 232 -- 615(D) 847 Fixed assets.......................... 21,524 1,087 -- 22,611 Goodwill and deferred charges......... 35,338 6,311 2,133(D)(E) 43,782 - ---------- --------- ----------- Total assets.................. $70,082 $ 7,847 $ 25,277 $103,206 = ========== ========= =========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Accounts payable and accrued liabilities......................... $4,875...... $32 $ (1,681)(F) $3,226 Income tax payable.................... 988......... 34 -- 1,022 Unearned revenue...................... 327 -- -- 327 Debt due within one year.............. 958 -- (958)(F) -- - ---------- --------- ----------- Total current liabilities..... 7,148 66 (2,639) 4,575 - ---------- --------- ----------- Customer deposits..................... 3,483....... 181 -- 3,664 Capitalized lease obligations......... 2,580 -- (2,580)(F) -- Existing Credit Facility.............. 47,246...... 7,600 (54,846)(F) -- Seller note........................... 1,500 -- -- 1,500 The Notes............................. -- -- 100,000(E) 100,000 - ---------- --------- ----------- Total long-term liabilities... 54,809 7,781 42,574 105,164 - ---------- --------- ----------- Shareholders' equity (deficit) Capital stock......................... 8,601 -- (1,455)(G) 7,146 Deficit............................... (42) -- (13,203)(D)(G) (13,245) Cumulative translation adjustment..... (434) -- -- (434) - ---------- --------- ----------- Total shareholders' equity (deficit)................... 8,125 -- (14,658) (6,533) - ---------- --------- ----------- Total liabilities and shareholders' equity (deficit)................... 70,08$2...... $ 7,847 $25,277 $103,206 = ========== ========= ===========
See accompanying notes 26 33 SPARKLING SPRING WATER GROUP LIMITED NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The unaudited pro forma consolidated financial statements have been prepared by management from the historical financial statements of the respective companies included elsewhere in this document as appropriate. In the opinion of Sparkling Spring Water Group Limited's management, these unaudited pro forma consolidated financial statements contain all adjustments required for fair presentation. The unaudited pro forma consolidated statements of operations reflect the Reorganization discussed elsewhere in this Prospectus. In addition, the unaudited pro forma consolidated statements of operations reflect the acquisitions, as if they occurred on January 1, 1996, of D&D and Company, Inc.(operating as Mountain Fresh Bottled Water), High Valley Water Limited, Withey's Water Softening & Purification Limited, Marlborough Employment Limited (operating as Water At Work Limited), Crystal Springs Bottled Water Co., Inc., Soja Enterprises Inc. and Cullyspring Water Co., Inc. discussed in note 21 to the consolidated financial statements of Sparkling Spring Water Group Limited included elsewhere in this Prospectus (the "Consolidated Financial Statements"). They also reflect the acquisition of Canadian Springs Water Company Ltd. and Water Jug Enterprises Limited as described in note 4 to the Consolidated Financial Statements, as if they occurred on January 1, 1996. The acquisition transactions described in the preceding paragraph, the Reorganization, the Offering and the application of the net proceeds to the Company therefrom as described in "The Offering" are collectively hereinafter referred to as the "Pro Forma Transactions." The unaudited pro forma consolidated balance sheet of the Company as of September 30, 1997 reflects the historical consolidated balance sheet of Sparkling Spring Water Group Limited as of September 30, 1997, after giving effect to the Pro Forma Transactions as if they had occurred on September 30, 1997. References to dollar amounts in the "Notes to Unaudited Pro Forma Consolidated Financial Statements" are to actual dollars. 2. ACQUISITION ADJUSTMENTS The following adjustments reflect the effects of the acquisitions included in the Pro Forma Transactions on the unaudited pro forma consolidated statements of operations: (A) Decrease in revenue of $79,000 for the year ended December 31, 1996, $61,000 for the nine months ended September 30, 1996 and $58,000 for the nine months ended September 30, 1997, reflecting the elimination of non-recurring gains on sale of assets. (B) Decrease in cost of sales of $649,000 for the year ended December 31, 1996, $283,000 for the nine months ended September 30, 1996 and $38,000 for the nine months ended September 30, 1997, reflecting the rationalization of certain production processes upon acquisition by the Company, including the closure of production facilities. (C) Decrease in operating expenses of $2,250,000 for the year ended December 31, 1996, $1,444,000 for the nine months ended September 30, 1996 and $571,000 for the nine months ended September 30, 1997, reflecting previous owner compensation in excess of post-acquisition compensation amounts and decreases in operating expenses obtained through streamlining the delivery and administrative processes upon acquisition. 27 34 SPARKLING SPRING WATER GROUP LIMITED NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED (D) Increase in depreciation and amortization of $908,000 for the year ended December 31, 1996, $671,000 for the nine months ended September 30, 1996 and $172,000 for the nine months ended September 30, 1997 for amortization of goodwill on acquired businesses. (E) Increase in interest expense of $1,815,000 for the year ended December 31, 1996, $1,343,000 for the nine months ended September 30, 1996 and $494,000 for the nine months ended September 30, 1997, reflecting additional borrowings required to fund the acquisitions included in the Pro Forma Transactions. (F) Increase in the provision for income taxes of $490,000 for the year ended December 31, 1996, $547,000 for the nine months ended September 30, 1996 and $343,000 for the nine months ended September 30, 1997, reflecting the following: (i) the tax effect of the pro forma statement of operations adjustments related to the acquisitions included in the Pro Forma Transactions, excluding non-deductible amortization of goodwill, using the basic statutory income tax rate applicable to the jurisdiction where the adjustment occurred; and (ii) the tax effect of certain acquired companies losing eligibility for reduced tax rates upon acquisition by the Company. 3. OFFERING ADJUSTMENTS The effects of the Offering and the application of the net proceeds therefrom on the unaudited pro forma consolidated financial statements are as follows: (A) An increase in interest expense of $7,234,000 for the year ended December 31, 1996, $5,599,500 for the nine months ended September 30, 1996 and $5,484,500 for the nine months ended September 30, 1997, reflecting the net of the following: (i) related interest expense of $11,500,000 for the year ended December 31, 1996 and $8,625,000 for each of the nine months ended September 30, 1996 and 1997 on the Notes using an interest rate of 11.5%; (ii) interest expense reductions of $4,616,000 for the year ended December 31, 1996, $3,288,000 for the nine months ended September 30, 1996 and $3,403,000 for the nine months ended September 30, 1997, resulting from the application of a portion of the proceeds of the Offering to the repayment of outstanding amounts under the Existing Credit Facility and capital leases; and (iii) increase in interest expense of $350,000 for the year ended December 31, 1996 and $262,500 for each of the nine months ended September 30, 1996 and 1997 relating to the amortization of expenses of the Offering. (B) A recovery of income taxes of $3,255,300 for the year ended December 31, 1996, $2,519,800 for the nine months ended September 30, 1996 and $2,468,000 for the nine months ended September 30, 1997, representing the tax savings associated with the above increase in net interest expense. (C) An increase in cash of $22,529,000 reflecting the net of items (E) through (G) below. (D) Goodwill and deferred charges have been reduced in the amount of $1,367,000, deferred taxes have been increased by $615,000 and the deficit has been increased by $752,000, representing the write-off of deferred financing fees. 28 35 SPARKLING SPRING WATER GROUP LIMITED NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED (E) Reflects receipt of net proceeds of the Offering of $96,500,000, comprised of gross proceeds of $100,000,000 and estimated expenses of $3,500,000. (F) Reflects utilization of $60,065,000 of the proceeds of the Offering to retire the Existing Credit Facility, current maturities and capitalized lease obligations. (G) Reflects utilization of $14,168,000 of the proceeds of the Offering to acquire shares from certain shareholders in connection with the Reorganization. In addition, the Company intends to sell 9,360 shares of Common Stock to certain members of management for aggregate gross proceeds of approximately $262,000. 4. INTEREST ON SURPLUS CASH The unaudited pro forma consolidated financial statements do not include the potential earnings resulting from the investment of surplus cash. Had this surplus cash been invested (assuming a 5.0% per annum rate of return), net income would increase by approximately $608,000 for the year ended December 31, 1996 and $456,000 for each of the nine months ended September 30, 1996 and 1997. 5. RESTRUCTURING COSTS The unaudited pro forma consolidated statements of operations do not include the effect of expensing previously deferred costs of $752,000, net of applicable taxes, relating to restructured debt or the effect of expensing $4,511,000 related to the repurchase of previously issued compensatory stock options. The unaudited pro forma deficit as of September 30, 1997 includes the effect of both of these amounts. 29 36 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The following selected historical consolidated financial data of the Company for the five years ended December 31, 1996 have been derived from the consolidated financial statements of the Company which have been audited by Ernst & Young, independent public accountants. The financial data for the nine months ended September 30, 1996 and September 30, 1997 have been derived from the Company's unaudited financial statements, which in the opinion of management include all adjustments necessary for a fair presentation of the data for interim periods. The results of operations for the nine months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the full fiscal year. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the consolidated financial statements of the Company, including the notes thereto, and "Unaudited Pro Forma Consolidated Financial Data" included elsewhere in this Prospectus.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31, SEPTEMBER 30, ------------------------------------------------- ------------------ (dollars in thousands) 1992 1993 1994 1995 1996 1996 1997 ------ ------ ------- ------- ------- ------- ------- INCOME STATEMENT DATA: Revenue.................................... $3,814 $3,867 $8,725 $15,349 $27,326 $21,064 $31,798 Cost of sales.............................. 1,430 1,139 1,755 2,863 4,676 3,403 5,864 Operating expenses......................... 1,839 2,175 5,356 9,041 15,756 12,636 16,818 Depreciation and amortization.............. 333 438 1,095 1,465 3,842 2,752 3,918 Interest expense........................... 228 228 625 1,294 2,481 1,703 2,901 Net income (loss) before extraordinary items.................................... (8) (63) (94) 411 166 216 1,234 Net (loss) income.......................... (8) (260) (238) 19 (653) (599) 1,234 OTHER DATA: EBITDA(1).................................. $545 $553 $1,614 $3,445 $6,894 $5,025 $9,116 EBITDA margin.............................. 14.3% 14.3% 18.5% 22.4% 25.2% 23.8% 28.7% Ratio of EBITDA to interest expense........ 2.39 2.43 2.58 2.66 2.78 2.95 3.14 Net capital expenditures................... 898 1,043 1,257 2,287 6,736 5,475 5,750 Installed cooler base(2)................... 8,321 11,181 23,838 30,344 74,160 67,090 114,971 Ratio (deficiency) of earnings to fixed charges(3)............................... -- -- -- 1.4x 1.1x 1.2x 1.6x BALANCE SHEET DATA: Cash and cash equivalents.................. $31 $731 $67 $860 $2,231 $577 $898 Total assets............................... 3,895 5,398 13,835 18,521 44,409 41,905 70,082 Long-term debt(4).......................... 2,470 3,227 7,623 11,309 30,474 28,906 52,283 Common shareholders' equity................ 49 755 2,331 2,207 7,002 5,134 8,125
- --------------- (1) "EBITDA" means operating profit plus depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered as an alternative to net income as a measure of operating results or to cash flow from operations as a measure of liquidity in accordance with generally accepted accounting principles. (2) Installed cooler base information as of September 30, 1997 is adjusted to reflect the acquisition of Cullyspring, which was completed on October 23, 1997. (3) For the purpose of determining the ratio of earnings to fixed charges "earnings" consist of net income before provision for corporate income taxes, non-controlling interest, extraordinary items and fixed charges. Fixed charges consist of interest expense and the interest portion of the Company's rent expense (assumed to be one third of rent expense). Earnings were inadequate to cover fixed charges by approximately $12,000, $95,000 and $104,000 in the years ended December 31, 1992, 1993 and 1994, respectively. (4) Includes amounts due under capital lease obligations, seller note and current maturities. 30 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the results of operations of the Company should be read in conjunction with "Selected Historical Consolidated Financial Data," "Unaudited Pro Forma Consolidated Financial Data" and the consolidated financial statements of the Company and the other historical financial statements, and the notes thereto, included elsewhere in this Prospectus. This Prospectus contains, in addition to historical information, forward-looking statements that include risks and uncertainties. The Company's actual results may differ materially from those anticipated in these forward-looking statements. GENERAL The Company is one of the world's largest providers of bottled water delivered directly to commercial and residential customers in Canada, the United Kingdom and the United States. The Company's revenue is primarily generated from two relatively stable and recurring sources: bottled water sales and the rental and service of water coolers. Additionally, the Company engages in certain related activities. The Company's revenue growth in recent years is primarily attributable to increased water cooler penetration, strategic acquisitions in existing and new geographic territories and higher sales of ancillary products sold through the Company's established distribution channels. In 1996, the Company generated approximately 26.9% of its total revenue from the rental of water coolers. The Company typically charges its customers a monthly water cooler rental charge. Total rental revenue is a function of the size of the installed base of water coolers and the monthly cooler rental charge. From December 31, 1994 to December 31, 1996, the Company's installed base of water coolers increased by 211.1% from 23,838 to 74,160. The Company's average monthly cooler rental charge remained relatively stable during this period. Revenue from the sale of bottled water to commercial and residential markets, which accounted for 61.5% of the Company's total revenue in 1996, is driven by a number of factors, including the installed base of water coolers, consumption of bottled water per customer and the price charged per bottle of water. The remaining 11.6% of the Company's total revenue in 1996 was generated from related activities, including the sale of paper cups, coffee, water filtration devices and water through vending machines. In addition, the Company provides cooler sanitation services and bottles water for independent beverage companies and supermarkets. The Company plans to continue these ancillary activities to maximize the profitability of its established distribution system. Since 1994, the Company has substantially improved its sales and profitability by increasing its installed base of water coolers through internal growth and acquisitions. The Company's operations are characterized by relatively high fixed costs due to the significant investment required to establish a bottling and distribution infrastructure. As the Company grows its revenue base by acquiring and consolidating new routes within its existing route structure, operating costs decline as a percentage of revenue. This operating leverage is driven by the following factors: (i) improved route efficiency, (ii) consolidation of production and distribution facilities; (iii) realization of savings from greater purchasing volume; (iv) elimination of duplicative administrative costs; (v) improved management control through centralized accounting and reporting systems; and (vi) enhanced marketing efficiency. As a result, positive changes in revenue tend to have a larger corresponding impact on EBITDA and operating income. The continued consolidation of production and distribution capabilities is a key component of the Company's business strategy both within its current markets and in any new markets it may enter. Consequently, the Company expects operating expenses to grow at a rate less than that of anticipated revenue growth. For certain financial information relating to each of the geographic regions in which the Company operates, see Note 19 to the Notes to Consolidated Financial Statements of Sparkling Spring Water Group Limited included elsewhere in this Prospectus. 31 38 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain statement of operations and other data of the Company. NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS ENDED SEPTEMBER 30, 1996 Revenue. Revenue increased $10.7 million, or 51.0%, to $31.8 million in the nine months ended September 30, 1997 compared to $21.1 million in the nine months ended September 30, 1996. This increase resulted from the inclusion of approximately $8.1 million in revenue from the following acquisitions completed in fiscal 1996: (i) Mountain Fresh, acquired January 2, 1997, contributed approximately $2.0 million in revenue and 4,600 water cooler customers; (ii) Withey's Water, acquired January 28, 1997, contributed approximately $1.2 million in revenue and 3,000 water cooler customers; (iii) High Valley, acquired January 30, 1997, contributed $0.6 million in revenue and 6,000 water cooler customers; (iv) Water at Work, acquired February 5, 1997, contributed $3.4 million in revenue and 4,500 water cooler customers; and (v) Crystal Springs of Portland, Oregon, acquired June 23, 1997, contributed $0.9 million in revenue and 5,900 water cooler customers. The remaining $2.6 million, or 24.3%, was primarily the result of additional water coolers installed in the Company's existing territories and a full nine months being recognized in 1997 for the 1996 acquisitions. After giving effect to the Pro Forma Transactions, the Company's revenue would have increased $3.2 million, or 9.3%, to $37.3 million in the nine months ended September 30, 1997 compared to $34.1 million in the nine months ended September 30, 1996, primarily as a result of an increase in the installed cooler base from approximately 99,500 to approximately 115,000. Cost of Sales. Cost of sales increased $2.5 million, or 72.3%, to $5.9 million for the nine months ended September 30, 1997 compared to $3.4 million for the nine months ended September 30, 1996 largely as a result of the acquisitions completed in 1996 and 1997. Cost of sales as a percentage of revenue increased to 18.4% in the nine months ended September 30, 1997 from 16.2% in the nine months ended September 30, 1996 based on faster growth in revenue derived from ancillary activities, including retail sales of bottled water and the provision of cooler sanitation services, which typically generate lower margins. After giving effect to the Pro Forma Transactions, cost of sales would have increased $0.7 million, or 10.2%, to $7.9 million for the nine months ended September 30, 1997 compared to $7.2 million for the nine months ended September 30, 1996 largely as a result of the increase in the installed cooler base. Cost of sales as a percentage of revenue would have increased slightly to 21.3% in the nine months ended September 30, 1997 from 21.1% in the nine months ended September 30, 1996. Operating Expenses. Operating expenses increased $4.2 million or 33.1% to $16.8 million in the nine months ended September 30, 1997 compared to $12.6 million in the nine months ended September 30, 1996 as a result of the acquisitions completed in 1996 and 1997. Operating expenses as a percentage of revenue decreased to 52.9% in the nine months ended September 30, 1997 from 60.0% in the nine months ended September 30, 1996. This decrease as a percentage of revenue was the result of incremental sales volumes being applied to relatively fixed distribution costs; specifically, more efficient utilization of the existing route fleet through increased route density. After giving effect to the Pro Forma Transactions, operating expenses would have increased $0.9 million, or 4.9%, to $18.4 million in the nine months ended September 30, 1997 compared to $17.5 million in the nine months ended September 30, 1996, as a result of the increase in the installed cooler base. Operating expenses as a percentage of revenue would have decreased to 49.3% in the nine months ended September 30, 1997 from 51.3% in the nine months ended September 30, 1996, primarily as a result of incremental sales volume being applied to relatively fixed distribution costs. EBITDA. For the reasons stated above, EBITDA for the nine months ended September 30, 1997 increased by $4.1 million, or 81.4%, to $9.1 million from $5.0 million for the nine months 32 39 ended September 30, 1996. As a percentage of revenue, EBITDA for the nine months ended September 30, 1997 increased to 28.7% from 23.8% for the nine months ended September 30, 1996. After giving effect to the Pro Forma Transactions, EBITDA would have increased $1.6 million, or 16.7%, to $11.0 million for the nine months ended September 30, 1997 compared to $9.4 million for the nine months ended September 30, 1996. As a percentage of revenue, EBITDA would have increased to 29.4% for the nine months ended September 30, 1997 from 27.6% in the nine months ended September 30, 1996. Depreciation and Amortization. Depreciation and amortization expense increased to $3.9 million in the nine months ended September 30, 1997 from $2.8 million in the nine months ended September 30, 1996. This increase was due to significant increases in fixed assets as a result of the acquisitions consummated in the period and the standard levels of capital expenditures for existing operations. After giving effect to the Pro Forma Transactions, depreciation and amortization expense would have increased $0.1 million to $4.3 million in the nine months ended September 30, 1997 from $4.2 million in the nine months ended September 30, 1996 due to the higher depreciation expense associated with the increased installed cooler base. Interest Expense. Interest expense increased $1.2 million or 70.3% to $2.9 million in the nine months ended September 30, 1997 from $1.7 million in the nine months ended September 30, 1996. This increase was a result of increased borrowings made to fund acquisitions. YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995 Revenue. Revenue increased $12.0 million, or 78.0%, to $27.3 million in 1996 compared to $15.3 million in 1995. This increase resulted from the inclusion of approximately $9.9 million of revenue from the following acquisitions completed in 1996: (i) Water Jug, acquired in May 1996, contributed $0.8 million in revenue and 2,700 water cooler customers and (ii) Canadian Springs, acquired in January 1996, contributed $9.1 million in revenue and 26,000 water cooler customers. The remaining $2.1 million, or 17.5%, was primarily the result of 5,055 additional water coolers installed in the Company's existing territories. Cost of Sales. Cost of sales increased $1.8 million, or 63.3%, to $4.7 million in 1996 compared to $2.9 million in 1995, largely as a result of the acquisitions completed in 1995 and 1996. Cost of sales as a percentage of revenue decreased to 17.1% in 1996 from 18.7% in 1995 based on the elimination of duplicate expenses in connection with the Company's acquisitions and economies of scale realized from an increase in volume. Operating Expenses. Operating expenses (selling, delivery and administrative) increased $6.7 million, or 74.3%, to $15.7 million in 1996 compared to $9.0 million in 1995 as a result of acquisitions completed in 1995 and 1996. Operating costs as a percentage of revenue decreased to 57.7% in 1996 from 59.0% in 1995. This decrease as a percentage of revenue was the result of incremental sales volume being applied to relatively fixed distribution costs; specifically, the Company achieved more efficient utilization of its existing route fleet through increased route density. EBITDA. For the reasons stated above, EBITDA in 1996 increased by $3.5 million, or 100.1%, to $6.9 million from $3.4 million in 1995. As a percentage of revenue, EBITDA increased to 25.2% in 1996 from 22.4% in 1995. Depreciation and Amortization. Depreciation and amortization expense increased $2.4 million to $3.8 million in 1996 from $1.4 million in 1995. This increase was due to significant increases in the fixed assets as a result of the acquisitions consummated in such period and the standard levels of capital expenditures for existing operations. Interest Expense. Interest expense increased $1.2 million, or 91.7%, to $2.5 million in 1996 from $1.3 million in 1995. This increase was a result of increased borrowings made to fund acquisitions and to repay a portion of the Company's existing indebtedness. 33 40 YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994 Revenue. Revenue increased $6.6 million, or 75.9%, to $15.3 million in 1995 compared to $8.7 million in 1994. This increase resulted from the inclusion of approximately $1.6 million of revenue from the acquisition of Aquaporte UK in April 1995, which contributed 2,800 water cooler customers to the Company's operations in the United Kingdom. The remaining $5.0 million was primarily the result of additional water coolers installed in the Company's Canadian and U.K. operations and the full year impact of acquisitions made in 1994. Cost of Sales. Cost of sales increased $1.1 million, or 63.1%, to $2.9 million in 1995 compared to $1.8 million in 1994. Cost of sales as a percentage of sales decreased to 18.7% in 1995 from 20.1% in 1994. This decrease as a percentage of revenue was due to the newly acquired businesses, which were mainly involved in the five- and six-gallon bottled water segment, generating higher margins. Operating Expenses. Operating expense (selling, delivery and administrative) increased $3.7 million, or 68.8%, to $9.0 million in 1995 compared to $5.3 million in 1994, primarily as a result of the acquisitions completed in 1994 and 1995. Selling, delivery and administrative costs as a percentage of revenue decreased to 59.0% in 1995 from 61.4% in 1994. Delivery costs declined as a percentage of revenue as increased sales volumes were applied to relatively fixed distribution costs. This factor was offset by administration costs increasing as a percentage of revenue as the Company incurred additional expenses associated with managing the Company's U.K. operations. EBITDA. For the reasons stated above, EBITDA in 1995 increased by $1.8 million, or 113.4%, to $3.4 million from $1.6 million in 1995. As a percentage of revenue, EBITDA increased to 22.4% in 1995 from 18.5% in 1994. Depreciation and Amortization. Depreciation and amortization expense increased $0.4 million to $1.5 million in 1995 from $1.1 million in 1994. This increase was due to significant increases in fixed assets as a result of the acquisitions consummated in such period and the standard levels of capital expenditures for existing operations. Interest Expense. Interest expense increased $0.7 million, or 107.0%, to $1.3 million in 1995 from $0.6 million in 1994. This increase was primarily the result of increased borrowings made to fund acquisitions. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded its capital and operating requirements with a combination of cash flow from operations, borrowings under the Existing Credit Facility and equity investments from shareholders. The Company has utilized these sources of funds to make acquisitions, to fund significant capital expenditures at its properties, to fund operations and to service debt. The Company presently expects to fund its future capital and operating requirements at its existing operations through a combination of cash generated from operations, excess cash proceeds from the Offering and borrowings under the Credit Agreement. Net cash provided by operating activities was $2.9 million for the nine months ended September 30, 1997 and $2.4 million in the year ended December 31, 1996. Net cash used in investment activities was $26.8 million for the nine months ended September 30, 1997 and $24.4 million in the year ended December 31, 1996. These amounts related primarily to six acquisitions completed in the nine months ended September 30, 1997 for $19.8 million and three acquisitions completed in 1996 for $17.4 million. Capital expenditures include expenditures related to the addition of bottling lines at existing facilities, construction of new bottling facilities, and the purchase of water bottles, water coolers and delivery trucks. The Company made capital expenditures of $5.7 million in the nine months ended September 30, 1997 and $6.7 million in 1996. Based on the Company's existing operations, management expects that the Company's capital expenditure requirements will total approximately $5.0 million from October 1, 1997 through 1998. Borrowings under the Existing Credit Facility were secured by substantially all of the Company's assets. At September 30, 1997, borrowings under the Existing Credit Facility bore interest at a 34 41 blended rate of 8.5% per annum. Borrowings under the Existing Credit Facility as of September 30, 1997 were $47.3 million, and the Company borrowed an additional $7.6 million under the Existing Credit Facility in connection with the Cullyspring acquisition. The Company used a portion of the net proceeds from the Offering to repay all amounts outstanding under the Existing Credit Facility and expects to enter into the Credit Agreement. The Indenture specifically permits the Company to enter into a senior credit facility providing borrowing availability of up to $30.0 million and also provides for additional general borrowing capacity of $10.0 million, all or a portion of which may be incurred under such credit facility. See "Description of the Credit Agreement." The Company believes that the net proceeds from the Offering, together with available cash, cash generated from operations and available borrowings under the Credit Agreement will be sufficient to finance the Company's working capital and capital expenditure requirements as well as acquisitions for the foreseeable future. However, there can be no assurance that such resources will be sufficient to meet the Company's anticipated requirements or that the Company will not require additional financing within this time frame. In addition, while the Company has received proposals from certain prospective lenders with respect to the Credit Agreement, such proposals are non-binding and no assurances can be given that the Company will enter into the Credit Agreement on the terms currently contemplated or at all. If the Company is unable to secure financing pursuant to the Credit Agreement on satisfactory terms, it may be required to seek alternative sources of financing, which may not be available to the Company on commercially reasonable terms. The inability of the Company to consummate the Credit Agreement or obtain other acceptable financing could have a material adverse effect on the Company's plans for expansion. See "Risk Factors -- Dependence on Financing for Expansion; Acquisition Strategy" and "Description of the Credit Agreement." GOVERNMENT REGULATION The Company's operations are subject to the jurisdiction of the various governmental and regulatory agencies which regulate the quality of drinking water and other products, including the FDA in the United States, and the Federal Department of Health and Welfare in Canada. In the United Kingdom, bottled water is governed by the European Union's Mineral Water Directive and Drinking Water in Containers Regulations. The Company believes that it is in substantial compliance with all applicable laws and regulations and has all required permits and licenses to conduct its business. Any failure by the Company to comply with existing and future laws and regulations could subject it to significant penalties. In addition, there can be no assurance that such laws or regulations will not be modified in a manner that imposes additional costs on the Company or otherwise has a material adverse effect on the Company's financial position or results of operations. See "Risk Factors -- Government Regulation." THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The Private Notes were sold by Sparkling Spring on November 19, 1997 (the "Issue Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers subsequently sold the Private Notes in the United States to QIBs, in reliance on Rule 144A and to a limited number of accredited investors (as defined in Rule 501(A)(1), (2), (3) or (7), and outside the United States in compliance with Regulation S under the Securities Act. As a condition to the sale of the Private Notes, Sparkling Spring, the Subsidiary Guarantors and the Initial Purchasers entered into the Registration Rights Agreement on the Issue Date. Pursuant to the Registration Rights Agreement, each of Sparkling Spring and the Subsidiary Guarantors agreed that they would, at their cost, to the extent not prohibited by any applicable law or applicable interpretation of the staff of the Commission, (i) prepare and, on or prior to 45 days after the Issue Date, file with the Commission a Registration Statement under the Securities Act with respect to the Exchange Offer, (ii) use their reasonable best efforts to cause the Registration Statement relating to the Exchange Offer to be 35 42 declared effective by the Commission under the Securities Act on or prior to 150 days after the Issue Date, and (iii) commence the Exchange Offer and use their reasonable best efforts to issue, on or prior to 195 days after the Issue Date, the Exchange Notes. A copy of the Registration Rights Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Registration Statement is intended to satisfy certain of Sparkling Spring's and the Subsidiary Guarantors' obligations under the Registration Rights Agreement and the Purchase Agreement. See "-- Resale of the Exchange Notes." Pursuant to the Registration Rights Agreement, if (i), because of any change in law or in currently prevailing interpretations of the staff of the Commission, Sparkling Spring and the Subsidiary Guarantors are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 195 days of the Issue Date, (iii) in certain circumstances, certain holders of unregistered Exchange Notes so request, or (iv) in the case of any holder of Private Notes that participates in the Exchange Offer, such holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such holder as an affiliate of Sparkling Spring within the meaning of the Securities Act), then in each case, Sparkling Spring and the Subsidiary Guarantors will (x) promptly deliver to the holders of Private Notes and the Trustee under the Indenture written notice thereof and (y) at their sole expense, (a) file a shelf registration statement covering resales of the Private Notes (the "Shelf Registration Statement"), (b) use their reasonable best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) use their reasonable best efforts to, subject to certain exceptions, keep effective the Shelf Registration Statement until the earlier of two years after the Issue Date or such time all of the applicable Private Notes have been sold thereunder. Pursuant to the Registration Rights Agreement, Sparkling Spring will, in the event that a Shelf Registration Statement is filed, provide to each holder of Private Notes copies of the prospectus that is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement for the Private Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Private Notes. A holder of Private Notes that sells Private Notes pursuant to the Shelf Registration Statement will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement that are applicable to such a holder (including certain indemnification rights and obligations). Additional interest (the "Additional Interest") shall become payable by Sparkling Spring and the Subsidiary Guarantors in respect of the Private Notes: (i) if (A) neither the Registration Statement relating to the Exchange Offer (the "Exchange Offer Registration Statement") nor the Shelf Registration Statement is filed with the Commission on or prior to the date required by the Registration Rights Agreement or (B) notwithstanding that Sparkling Spring and the Subsidiary Guarantors have consummated or will consummate an Exchange Offer, Sparkling Spring and the Subsidiary Guarantors are required to file a Shelf Registration Statement and such Shelf Registration Statement is not filed on or prior to the date required by the Registration Rights Agreement, then commencing on the day after either such required filing date, Additional Interest shall accrue on the principal amount of the Private Notes at a rate of 0.50% per annum for the first 90 days immediately following each such filing date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (ii) if (A) the Exchange Offer Registration Statement is not declared effective within 150 days after the Issue Date or (B) notwithstanding that Sparkling Spring and the Subsidiary Guarantors have consummated or will consummate an Exchange Offer, Sparkling Spring and the Subsidiary Guarantors are required to file a Shelf Registration Statement and such Shelf Registration Statement is not declared effective by the Commission on or prior to the 75th day following the date such Shelf Registration Statement was filed, then, commencing on the day after the date on which the applicable Registration Statement was required to be declared 36 43 effective, Additional Interest shall accrue on the principal amount of the Private Notes at a rate of 0.50% per annum for the first 90 days immediately following such date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) Sparkling Spring and the Subsidiary Guarantors have not exchanged Exchange Notes for all Private Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 45th day after the date of this Prospectus or (B) if applicable, the Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time prior to the second anniversary of the Issue Date (other than as permitted by the Registration Rights Agreement or after such time as all Private Notes have been disposed of thereunder), then Additional Interest shall accrue on the principal amount of the Private Notes at a rate of 0.50% per annum for the first 90 days commencing on (x) the 46th day after such effective Date, in the case of (A) above, or (y) the day such Shelf Registration Statement ceases to be effective in the case of (B) above (other than as permitted by the Registration Rights Agreement), such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; provided, however, that the Additional Interest rate on the Private Notes may not exceed at any one time in the aggregate 2.00% per annum; and provided, further, that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (i) above), (2) upon the effectiveness of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (ii) above), or (3) upon the exchange of Exchange Notes for all Private Notes tendered (in the case of clause (iii)(A) above), or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii)(B) above), Additional Interest on the Private Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue and, in any case, such Additional Interest shall not be payable in respect of more than one of the preceding provisions at any one time. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and the Letter of Transmittal, Sparkling Spring will accept any and all Private Notes validly tendered and not withdrawn prior to the Expiration Date. Sparkling Spring will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Private Notes validly tendered pursuant to the Exchange Offer and not withdrawn prior to the Expiration Date. Holders may tender some or all of their Private Notes pursuant to the Exchange Offer; provided, however, that Private Notes may be tendered only in integral multiples of $1,000. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Private Notes being tendered for exchange. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the Private Notes except that the Exchange Notes will have been registered under the Securities Act and, therefore, the Exchange Notes will not bear legends restricting the transfer thereof and holders of the Exchange Notes will not be entitled to any of the registration rights of holders of Private Notes under the Registration Rights Agreement (or related rights to certain interest payments upon the failure of Sparkling Spring to fulfill certain conditions set forth in the Registration Rights Agreement), which rights will terminate upon the consummation of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as the Private Notes (which they replace), and will be issued under, and be entitled to the benefits of, the Indenture, which also authorized the issuance of the Private Notes, such that both series of Notes will be treated as a single class of debt securities under the Indenture. See "-- Resale of the Exchange Notes." Interest on each Exchange Note will accrue (A) from the later of (i) the last interest payment date on which interest was paid on the Private Note surrendered in exchange therefor or (ii) if the 37 44 Private Note is surrendered for exchange on a date in a period on or after the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B) if no interest has been paid on the Private Notes, from the Issue Date. As of the date of this Prospectus, $100,000,000 aggregate principal amount of the Private Notes is outstanding, all of which is registered in the name of Cede & Co., as nominee of the Depositary. Only a registered holder of the Private Notes (or such holder's legal representative or attorney-in-fact) as reflected on the records of DTC or the Trustee under the Indenture may participate in the Exchange Offer. Solely for reasons of administration, Sparkling Spring has fixed the close of business on , 1997 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. There will be no fixed record date for determining registered holders of the Private Notes entitled to participate in the Exchange Offer. Holders of the Private Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. Sparkling Spring intends to conduct the Exchange Offer in accordance with the provisions of the Registration Rights Agreement and the applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder. Sparkling Spring shall be deemed to have accepted validly tendered Private Notes when, as and if Sparkling Spring has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Private Notes for the purposes of receiving the Exchange Notes from Sparkling Spring. Holders who tender Private Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Private Notes pursuant to the Exchange Offer. Sparkling Spring will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "-- Fees and Expenses." EXPIRATION DATE; EXTENSIONS; TERMINATION The term "Expiration Date" shall mean 5:00 p.m., New York City time on , 1997, unless Sparkling Spring, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. In order to extend the Exchange Offer, Sparkling Spring will (i) notify the Exchange Agent of any extension by oral or written notice and (ii) will make a public announcement thereof (which shall include disclosure of the approximate number of Private Notes deposited to date), each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Sparkling Spring expressly reserves the right, in its sole discretion, (i) to delay accepting any Private Notes, (ii) to extend the Exchange Offer, (iii) if any conditions set forth below under "-- Certain Conditions to the Exchange Offer" shall not have been satisfied (or shall occur), to terminate the Exchange Offer by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (iv) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a press release or other public announcement thereof. If the Exchange Offer is amended in a manner determined by Sparkling Spring to constitute a material change, Sparkling Spring will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders of Private Notes, and Sparkling Spring will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the amendment and the manner of disclosure to such registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. The rights reserved by Sparkling Spring in this 38 45 paragraph are in addition to Sparkling Spring's rights set forth below under the caption "-- Certain Conditions to the Exchange Offer." Without limiting the manner in which Sparkling Spring may choose to make a public announcement of any delay, extension, amendment or termination of the Exchange Offer, Sparkling Spring shall have no obligation to publish, advertise or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. If Sparkling Spring extends the period of time during which the Exchange Offer is open, or if it is delayed in accepting for exchange of, or in issuing and exchanging the Exchange Notes for, any Private Notes, or is unable to accept for exchange of, or issue Exchange Notes for, any Private Notes pursuant to the Exchange Offer for any reason, then, without prejudice to Sparkling Spring's rights under the Exchange Offer, the Exchange Agent may, on behalf of Sparkling Spring, retain all Private Notes tendered, and such Private Notes may not be withdrawn except as otherwise provided below in "-- Withdrawal of Tenders." The adoption by Sparkling Spring of the right to delay acceptance for exchange of, or the issuance and the exchange of the Exchange Notes for, any Private Notes is subject to applicable law, including Rule 14e-1(c) under the Exchange Act, which requires that Sparkling Spring pay the consideration offered or return the Private Notes deposited by or on behalf of the holders thereof promptly after the termination or withdrawal of the Exchange Offer. RESALE OF THE EXCHANGE NOTES Sparkling Spring is making the Exchange Offer in reliance on the interpretations of the staff of the Commission as set forth in no-action letters issued to third parties unrelated to Sparkling Spring. However, Sparkling Spring has not sought its own no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as it has in such no-action letters issued to such third parties. With respect to the Exchange Notes, based upon these interpretations by the staff of the Commission, Sparkling Spring believes that a holder (other than (i) any person who is an "affiliate" of Sparkling Spring within the meaning of Rule 405 under the Securities Act or (ii) a broker-dealer that purchases Notes from Sparkling Spring to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act) who exchanges Private Notes for Exchange Notes in the ordinary course of its business and is not engaging, and has no intention to engage, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, will be allowed to resell the Exchange Notes without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in the distribution of the Exchange Notes or is a broker-dealer, such holder cannot rely on the position of the staff of the Commission described above and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. A broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities, may be deemed to be an "underwriter" within the meaning of the Securities Act and must therefore deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. Each such broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by such a broker-dealer in connection with resales of any Exchange Notes received in exchange for Private Notes acquired by such a broker-dealer for its own account, as a result of market-making or other trading activities. Pursuant to the Registration Rights 39 46 Agreement, Sparkling Spring has agreed to make this Prospectus, as it may be amended or supplemented from time to time, available to any such broker-dealer that requests copies of such Prospectus in the Letter of Transmittal for use in connection with any such resale for a period of up to 90 days after the Expiration Date. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Exchange Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdictions or an exemption from registration or qualification is available and complied with. Sparkling Spring and the Subsidiary Guarantors have agreed, pursuant to the Registration Rights Agreement (subject to certain specified limitations set forth therein), to use their reasonable best efforts to register or qualify the Exchange Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing. PROCEDURES FOR TENDERING Subject to the terms and conditions hereof and the Letter of Transmittal, only a registered holder of Private Notes may tender such Private Notes in the Exchange Offer. To tender in the Exchange Offer, a holder of Private Notes must complete, sign and date the Letter of Transmittal, or facsimile thereof, have the signature thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile to the Exchange Agent at the address set forth below under "-- Exchange Agent" for receipt prior to the Expiration Date. In addition, either (i) certificates for such Private Notes must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Private Notes into the Exchange Agent's account at DTC pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or (iii) the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTATION TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD BE SENT TO SPARKLING SPRING. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. The tender by a holder which is not withdrawn prior to the Expiration Date will constitute a binding agreement between such holder and Sparkling Spring in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. Any beneficial owner of the Private Notes whose Private Notes are held through a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such intermediary promptly and instruct such intermediary to tender on such beneficial owner's behalf. Signatures on a Letter of Transmittal or a notice of withdrawal described below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed by an Eligible Institution unless the Private Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be made by a member firm of a registered national securities exchange or of the NASD, a commercial bank or trust company having an office or correspondent in the United States, or another "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (any of the foregoing, an "Eligible Institution"). 40 47 If the Letter of Transmittal is signed by a person other than the registered holder of any Private Notes (which term includes any participants in DTC whose name appears on a security position listing as the owner of Private Notes) or if delivery of the Notes is to be made to a person other than the registered holder, such Private Notes must be endorsed or accompanied by a properly completed bond power, in either case, signed by such registered holder exactly as the name or names of such registered holder or holders name appear(s) on such Private Notes with the signature on the Private Notes or the bond power guaranteed by an Eligible Institution. If the Letter of Transmittal or any Private Notes or assignments or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by Sparkling Spring, evidence satisfactory to Sparkling Spring of their authority to so act must be submitted with the Letter of Transmittal. The Exchange Agent and the Depositary have confirmed that any financial institution that is a participant in the Depositary's system may utilize the Depositary's Automated Tender Offer Program to tender Private Notes. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Private Notes will be determined by Sparkling Spring in its sole discretion, which determination will be final and binding. Sparkling Spring reserves the absolute right to reject any and all Private Notes not properly tendered or any Private Notes, Sparkling Spring's acceptance of which would be unlawful. Sparkling Spring also reserves the right to waive any defects, irregularities or conditions of tender as to particular Private Notes. Sparkling Spring's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Private Notes must be cured within such time as Sparkling Spring shall determine. Although Sparkling Spring intends to request the Exchange Agent to notify holders of defects or irregularities with respect to tenders of Private Notes, neither Sparkling Spring, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Private Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. While Sparkling Spring has no present plan to acquire any Private Notes which are not tendered in the Exchange Offer or to file a registration statement to permit resales of any Private Notes which are not tendered pursuant to the Exchange Offer, Sparkling Spring reserves the right in its sole discretion to purchase or make offers for any Private Notes that remain outstanding subsequent to the Expiration Date or, as set forth herein under "-- Expiration Date; Extensions; Termination" and "-- Certain Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the extent permitted by applicable law, purchase Private Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. By tendering Private Notes pursuant to the Exchange Offer and executing a Letter of Transmittal, each holder of Private Notes will represent to and agree with Sparkling Spring that, among other things, (i) the Exchange Notes to be acquired in connection with the Exchange Offer are being acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, (ii) that neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iii) such holder acknowledges and agrees that any person who is a broker-dealer registered under the Exchange Act or is participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale of the Exchange Notes acquired by such person and cannot rely on the position of the staff of the Commission set forth in certain no-action letters described herein, (iv) such holder understands that a secondary resale transaction described in clause (iii) above and any resales of Exchange Notes obtained by such holder in exchange for 41 48 Private Notes acquired by such holder directly from Sparkling Spring should be covered by an effective registration statement containing the selling securityholder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the Commission, and (v) such holder or such other person is not an "affiliate" of Sparkling Spring within the meaning of Rule 405 under the Securities Act (or, if it is an affiliate, that such holder or other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable). If the holder is a broker-dealer that will receive Exchange Notes for such holder's own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities, such holder must acknowledge in the Letter of Transmittal that such holder will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, such holder will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of Distribution." RETURN OF PRIVATE NOTES If any tendered Private Notes are not accepted for exchange because of an invalid tender, or due to the occurrence of certain other events set forth herein or any other reason set forth in the terms and conditions of the Exchange Offer or if Private Notes are withdrawn or are submitted for a greater principal amount than the holders desire to exchange, such unaccepted, withdrawn or nonexchanged Private Notes will be returned without expense to the tendering holder thereof (or, in the case of Private Notes tendered by book-entry transfer into the Exchange Agent's account at the Depositary pursuant to the book-entry transfer procedures described below, such Private Notes will be credited to an account maintained with the Depositary) as promptly as practicable. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Private Notes at the Depositary for purposes of the Exchange Offer within two business days after the date of this Prospectus, and any financial institution that is a participant in the Depositary's system may make book-entry delivery of Private Notes by causing the Depositary to transfer such Private Notes into the Exchange Agent's account at the Depositary in accordance with the Depositary's procedures for transfer. However, although delivery of Private Notes may be effected through book-entry transfer at the Depositary, the Letter of Transmittal or facsimile thereof, with any required signature guarantees and any other required documentation, must, in any case, be transmitted to and received by the Exchange Agent at the address set forth below under "-- Exchange Agent" on or prior to the Expiration Date or pursuant to the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Private Notes and (i) whose Private Notes are not immediately available or (ii) who cannot deliver their Private Notes (or complete the procedures for book-entry transfer), the Letter of Transmittal or any other required documentation to the Exchange Agent prior to the Expiration Date, may effect a tender if: (a) The tender is made through an Eligible Institution; (b) Prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by Sparkling Spring (by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier), mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Private Notes (if applicable) and the principal amount of Private Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or a facsimile thereof), together with the certificate(s) representing the Private Notes in proper form for transfer or a Book-Entry Confirmation, 42 49 as the case may be, and any other documentation required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) Such properly executed Letter of Transmittal (or a facsimile thereof), as well as the certificate(s) representing all tendered Private Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and all other documentation required by the Letter of Transmittal are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Private Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Private Notes may be withdrawn at any time prior to the Expiration Date. Any holder who has tendered Private Notes may withdraw the tender by delivering written notice of withdrawal (which may be sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier) or hand delivery) to the Exchange Agent prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and principal amount of such Private Notes), (iii) be timely received and signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered or as otherwise set forth in the instructions to the Letter of Transmittal (including any required signature guarantees), or be accompanied by documents of transfer sufficient to have the Trustee under the Indenture register the transfer of such Private Notes pursuant to the terms of the Indenture into the name of the person withdrawing the tender and (iv) specify the name in which any such Private Notes are to be registered, if different from that of the Depositor. If Private Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Private Notes or otherwise comply with the book-entry transfer facility's procedures. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by Sparkling Spring, in its sole discretion, whose determination shall be final and binding on all parties. None of Sparkling Spring, any Subsidiary Guarantor, any employees, agents, affiliates or assigns of Sparkling Spring, or any Subsidiary Guarantor, the Exchange Agent or any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give such notification. Any Private Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered by following one of the procedures described above under "-- Procedures for Tendering" at any time prior to the Expiration Date. CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other term of the Exchange Offer, Sparkling Spring shall not be required to accept for exchange, or exchange the Exchange Notes for, any Private Notes not theretofore accepted for exchange, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Private Notes, if any of the following events shall occur: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency which would be reasonably likely to materially impair the ability of Sparkling Spring to proceed with the Exchange Offer or there shall have occurred any material 43 50 adverse development in any existing action or proceeding with respect to Sparkling Spring or any of its subsidiaries; or (b) the Exchange Offer shall violate any applicable law, rule, regulation or interpretation of the staff of the Commission; or (c) any governmental approval which Sparkling Spring shall deem necessary for the consummation of the Exchange Offer as contemplated hereby shall have not been obtained. If Sparkling Spring determines in its reasonable discretion that any of these conditions are not satisfied (or any of such events shall have occurred), Sparkling Spring may (i) refuse to accept any Private Notes and return all tendered Private Notes to the tendering holders and/or terminate the Exchange Offer, (ii) extend the Exchange Offer and retain all Private Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Private Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Private Notes which have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, Sparkling Spring will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered holders of the Private Notes, and Sparkling Spring will extend the Exchange Offer for a period of five to ten business days, depending upon the significance of the waiver and the manner of disclosure to the registered holders, if the Exchange Offer would otherwise expire during such five to ten business day period. Holders may have certain rights and remedies against Sparkling Spring under the Registration Rights Agreement should Sparkling Spring fail to consummate the Exchange Offer, notwithstanding a failure of the conditions stated above. Such conditions are not intended to modify those rights or remedies in any respect. The foregoing conditions are for the sole benefit of Sparkling Spring and may be asserted by Sparkling Spring regardless of the circumstances giving rise to such condition or may be waived by Sparkling Spring in whole or in part at any time and from time to time in Sparkling Spring's reasonable discretion. The failure by Sparkling Spring at any time to exercise the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. TERMINATION OF CERTAIN RIGHTS All registration rights under the Registration Rights Agreement of holders of the Private Notes eligible to participate in the Exchange Offer (and all rights to receive Additional Interest as described under "-- Purpose of the Exchange Offer") will terminate upon consummation of the Exchange Offer except with respect to Sparkling Spring's continuing obligations (i) to indemnify the holders (including any broker-dealers) and certain parties related to the holders against certain liabilities (including liabilities under the Securities Act), and (ii) for a period of up to 90 days after the Expiration Date, to use its reasonable best efforts to keep the Registration Statement effective and to provide copies of the latest version of the Prospectus to any broker-dealer that requests copies of such Prospectus in the Letter of Transmittal for use in connection with any resale by such broker-dealer of Exchange Notes received for its own account pursuant to the Exchange Offer. Insofar as indemnification for liabilities arising under the Securities Act may be permitted pursuant to the foregoing provisions, Sparkling Spring has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. 44 51 EXCHANGE AGENT Bankers Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance as well as all correspondence in connection with the Exchange Offer and the Letter of Transmittal should be addressed to the Exchange Agent, as follows: By Hand or Overnight Delivery: Facsimile By Registered or Transmissions: Certified Mail: (Eligible Institutions Only) (212) To confirm by Telephone or for Information Call: (212)
Requests for additional copies of this Prospectus, the Letter of Transmittal or the Notice of Guaranteed Delivery should be directed to the Exchange Agent. Bankers Trust Company also serves as Trustee under the Indenture. FEES AND EXPENSES The expenses of soliciting tenders will be borne by Sparkling Spring. The principal solicitation is being made by mail; however, additional solicitation may be made by facsimile transmission, telephone or in person by officers and regular employees of Sparkling Spring, the Subsidiary Guarantors and their affiliates. Sparkling Spring has not retained any dealer-manager or other soliciting agent in connection with the Exchange Offer and will not make any payments to brokers, dealers or others soliciting acceptance of the Exchange Offer. Sparkling Spring, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection with the Exchange Offer. The cash expenses to be incurred in connection with the Exchange Offer will be paid by Sparkling Spring and are estimated in the aggregate to be approximately $ . Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. Sparkling Spring will pay all transfer taxes, if any, applicable to the transfer of Private Notes to it or its order pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the exchange of Private Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder of Private Notes. CONSEQUENCE OF FAILURE TO EXCHANGE Participation in the Exchange Offer is voluntary. Holders of the Private Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. Private Notes that are not exchanged for the Exchange Notes pursuant to the Exchange Offer will remain "restricted securities" within the meaning of Rule 144(a)(3)(iv) of the Securities Act. Accordingly, such Private Notes will remain subject to the restrictions on transfer of such Private Notes as set forth in the legend thereon and may not be offered, sold, pledged or otherwise transferred except (i) to a person whom the seller reasonably believes is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting the requirements of Rule 144A under the Securities Act, (ii) in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant to an exemption from registration under the 45 52 Securities Act provided by Rule 144 thereunder (if available), (iv) pursuant to an effective registration statement under the Securities Act or (v) pursuant to another available exemption from the registration requirements of the Securities Act, and, in each case, in accordance with all other applicable securities laws. See "Risk Factors -- Consequences of Failure to Exchange Private Notes." ACCOUNTING TREATMENT The Exchange Notes will be recorded at the same carrying value as the Private Notes as reflected in Sparkling Spring's accounting records on the date of the exchange. Accordingly, no gain or loss for accounting purposes will be recognized. The expenses of the Exchange Offer will be amortized over the term of the Exchange Notes. 46 53 THE COMPANY The Company is one of the world's largest providers of bottled water delivered directly to the residential and commercial markets. Presently, the Company has the leading market share position in British Columbia and the Maritime Provinces of Canada, England and Scotland in the United Kingdom, and the State of Oregon in the United States. In addition, the Company has the second largest market share in the State of Washington. The Company's strategy has been to achieve strong market positions in a number of attractive markets and thereby realize the operating leverage that can be obtained once a distribution system is established. The Company's primary focus is on the bottling and delivery of high quality drinking water in five-gallon and six-gallon bottles to homes and offices, and the rental of water coolers. The Company has grown through both strong internal growth and the execution of a proven acquisition strategy. The Company's revenue and EBITDA have increased from $3.8 million and $0.5 million, respectively, in 1992, to $27.3 million and $6.9 million, respectively, in 1996, representing a CAGR of 63.6% and 88.6%, respectively. On a pro forma basis, revenue and EBITDA for the nine months ended September 30, 1997 of $37.3 million and $11.0 million, respectively, increased by 9.3% and 16.7% compared to the prior year period, reflecting the significant internal growth of the Company's operations. The Company has been a leader in the consolidation of the highly fragmented bottled water industry by executing a disciplined acquisition strategy. In addition, the Company has significantly improved the operations and profitability of each company it has acquired. For the four acquired companies for which the Company has comparable full-year pre-acquisition and post-acquisition data, revenue and EBITDA increased, on average, by 18.5% and 64.0%, respectively, in the first year after the acquisition. Management believes that it has realized similar improved performance in its other acquisitions for which post-acquisition information is available. Since January 1, 1997, the Company has completed seven acquisitions through which it entered the attractive U.S. bottled water market and expanded its leadership positions in Canada and the United Kingdom. BUSINESS STRATEGY Bottled water continues to be the fastest growing segment of the beverage industry, growing at a CAGR of 10.5% since 1980 according to Beverage Marketing Corporation. Management believes this growth stems primarily from two sources: (i) consumer dissatisfaction with tap water and (ii) increased consumer health consciousness resulting in the substitution of water for other less-healthy beverages. The Company expects to benefit from the growing demand for quality drinking water by increasing its installed base of water coolers, increasing the water and related products offered through its established distribution system, and continuing to be a leader in the consolidation of the highly fragmented bottled water industry. In particular, the Company expects to continue to pursue the following business strategies: Focus on the Water Cooler Segment Within the Growing "Alternative to Tap Water" Market. Management believes that the overall growth of the bottled water industry and the relatively low level of water cooler penetration in Canada and the U.K., in particular, provide the Company with significant growth opportunities. The Company believes that health concerns and problems with the taste and odor of tap water have generated consumer demand for an "alternative to tap water," driving consumers to increasingly rely on bottled water and filtration systems in order to satisfy their drinking water needs. The Company intends to take advantage of this growth in demand by offering a premium product through multiple channels (i.e., direct delivery, retail and filtration systems), with a specific focus on the "direct delivery" water cooler segment. The water cooler business enjoys higher margins, less competition and greater operating leverage than either the retail bottled water or the water filter businesses. Sales in this segment are generally less price sensitive than retail sales of bottled water because the customer is generally more concerned with service and convenience. In addition, there are incremental cost and 47 54 inconvenience factors associated with switching suppliers. Furthermore, water cooler companies generally have lower advertising costs than companies pursuing retail sales of bottled water because consumers generally do not select a water cooler provider on the basis of brand name. The water cooler business is also generally less competitive than other segments of the bottled water industry due to the relative capital intensity of the operations. Finally, the significant growth potential in the water cooler market and the low levels of water cooler penetration allow industry participants to focus on attracting new customers rather than on capturing market share from competitors. Leverage Existing Infrastructure. Due to the significantly fixed distribution system associated with the direct delivery of bottled water in a geographic area, additional operating leverage can be achieved by increasing route density through incremental market penetration. In addition to increasing the overall customer base, the Company expects to continue to benefit as per capita consumption continues to climb with each existing customer consuming more water. Finally, the Company utilizes its route systems to offer products which are complementary to bottled water, including cups, cooler sanitation services, coffee and related products. In addition to benefiting from internal growth in its markets, the Company leverages its infrastructure with each acquisition in adjacent or overlapping territories. Specific operating initiatives employed by the Company typically include: (i) maximizing distribution route efficiencies, (ii) consolidating bottling facilities, (iii) eliminating duplicative administrative costs and (iv) utilizing favorable purchasing opportunities. The Company's existing infrastructure and scale of operations provide an attractive opportunity to continue to add incremental customers at a higher marginal profitability rate. The Company has achieved significant cost savings in its existing operations as reflected in the increase in its EBITDA margin from 14.3% in 1992 to 25.2% in 1996 and 28.7% in the nine months ended September 30, 1997. Pursue Strategic Acquisitions. The Company has successfully pursued a disciplined acquisition strategy to create value by taking advantage of the consolidation of the highly fragmented bottled water industry. The Company has developed and successfully implemented a "hub and spoke" approach to acquiring companies in new markets by identifying one of the largest bottled water companies as a platform acquisition, and complementing it with smaller fill-in acquisitions in neighboring or overlapping geographic territories. The Company is generally unwilling to enter a new market through an acquisition unless the company being acquired is both one of the market share leaders and provides the critical mass and local management talent necessary to act as a platform in that market. While the purchase price paid for a platform company is typically higher than that for a fill-in acquisition, the Company is able to reduce its average acquisition multiple by opportunistically acquiring "spoke" distribution routes at more attractive prices due to the limited strategic options available to these smaller operators. In addition to buying companies at relatively low multiples of EBITDA, management has been able to create value by improving the operations of acquired entities and by realizing operating synergies. The Company's recent acquisition of Cullyspring demonstrates its plan to continue to expand in the U.S. Cullyspring is the second largest water cooler provider in Washington, and management believes it has the opportunity to enhance its market position through fill-in acquisitions. Provide Outstanding Customer Service. The Company believes quality of service and reliability of delivery are the primary competitive factors in the water cooler business. The quality of service is measured by the Company's ability to: (i) reliably deliver bottled water on schedule, (ii) meet customer shortages with the quick delivery of refills, (iii) provide regular maintenance and sanitation of water coolers and (iv) effectively address any other needs of a customer. Management monitors on a monthly basis the Company's customer "churn" rate (its non-renewal rate with respect to its water cooler rental agreements) in an effort to continually enhance customer service. The Company's churn rate was approximately 2.0% per month in 1996 and 1.6% per month for the nine months ended September 30, 1997, which management believes is significantly lower than the industry average churn rate. 48 55 INVESTMENT HIGHLIGHTS Attractive Industry Fundamentals. The Company believes that the "alternative to tap water" market represents an attractive industry opportunity due to the strong growth in demand for bottled water in the Company's primary markets and the ability to enhance profit margins as revenue grows. In the U.S., bottled water continues to be the fastest growing segment of the beverage industry, according to a study prepared by Beverage Marketing Corporation. Total bottled water consumption in the U.S. increased from 2.8 gallons per capita in 1980 to 11.7 gallons per capita in 1996. According to Zenith International Ltd., in the U. K., total bottled water consumption increased at a CAGR of 11.2% from 1990 to 1996, with annual consumption increasing from 1.9 gallons per capita in 1990 to 3.6 gallons per capita in 1996. Management believes the strong industry growth will continue to be driven by: (i) concerns related to the quality of tap water, (ii) trends in consumer selection of healthy products, (iii) taste preferences over tap water and other refreshment beverages and (iv) favorable demographics. Leading Market Share. The Company holds leading market share positions in the water cooler markets which it serves. Based upon its own internal estimates, the Company believes it has approximately 45% market share in British Columbia, 70% in the Maritime Provinces, 22% in the United Kingdom, 40% in Oregon and 20% in Washington. The Company believes it is the market share leader in each of these markets, except in Washington where it believes it is the second largest provider. By virtue of its leadership position in its markets, the Company benefits from several competitive advantages over smaller operators, including more efficient distribution operations, purchasing synergies, superior customer service and well-established infrastructure. Management believes the Company's leadership in each of its served markets creates a significant barrier to entry for prospective competitors. Significant Installed Cooler Base. The Company delivers bottled water to a significant installed base of approximately 115,000 water coolers in its served markets. Customers typically sign a one-year contract, providing the Company with a dual stream of relatively stable and recurring revenue from both a monthly cooler rental charge and the sale of bottled water. The Company believes that direct delivery water cooler companies enjoy several advantages over retailers of bottled water. Customers suffer both incremental cost and inconvenience if they choose to switch from one water cooler company to another. In addition, direct delivery water cooler operators such as the Company have made significant capital investments in inventories of water coolers and bottles, a truck fleet and bottling facilities. Management believes the capital intensity of the water cooler business provides a second significant barrier to entry. Proven Beverage Industry Consolidation Track Record. The Company has a successful record of completing and integrating acquisitions, having made 12 acquisitions since 1993. These acquisitions have enabled the Company to rapidly expand into attractive markets and increase production capacity. In addition to completing the acquisitions of fast-growing bottled water companies at attractive purchase price multiples, management has dramatically improved the operations and profitability of each acquired company. For the four acquired companies for which the Company has comparable full-year pre-acquisition and post-acquisition data, revenues and EBITDA increased, on average, by 18.5% and 64.0%, respectively, in the first year after the acquisition. Management believes its reputation as a proven and well-capitalized industry consolidator facilitates its access to additional acquisition candidates and generates unsolicited offers from prospective sellers. Experienced Management Team with Significant Equity Ownership. The Company is led by an experienced senior management team whose members average more than 13 years in the beverage industry. A trust for the benefit of G. John Krediet, the Chairman of Sparkling Spring, and his children owns 50.9% of the Common Stock of Sparkling Spring (after giving effect to the Reorganization). Mr. Krediet successfully executed a consolidation of Canadian Pepsi-Cola bottlers and, together with Stephen L. Larson, identified the bottled water consolidation opportunity. Stephen L. Larson, Vice Chairman of Sparkling Spring, has led the Company's successful acquisition 49 56 strategy. In addition to identifying new acquisition targets, Mr. Larson has been responsible for the negotiation, financing, consummation and integration of each of the Company's acquisitions. Stewart E. Allen, President of Sparkling Spring, has managed the operations of the business focusing on profitably increasing the penetration levels in each of its markets. The senior management team is strongly motivated through its equity ownership of 63.9% of the Common Stock of Sparkling Spring (including shares beneficially owned by a trust for the benefit of the family of one senior manager), after giving effect to the Reorganization. Management has successfully consolidated both water cooler companies and Pepsi-Cola bottlers, and has consistently demonstrated an ability to achieve strong internal growth and to identify, acquire, integrate and improve the performance of acquired companies. Strong Financial Performance. The success of the Company's operating strategy is evidenced by its growth in revenue and EBITDA over the past five years. Revenue increased at a CAGR of 63.6% from $3.8 million in 1992 to $27.3 million in 1996. Over the same period, EBITDA increased at a CAGR of 88.6% from $0.5 million to $6.9 million, with EBITDA margins increasing from 14.3% to 25.2%. In addition to expansion through acquisitions, the Company's operations exhibit significant internal growth. On a pro forma basis, revenue and EBITDA of $37.3 million and $11.0 million, respectively, increased 9.3% and 16.7%, respectively, in the nine months ended September 30, 1997 over the comparable period in the prior year. The principal executive offices of Sparkling Spring are located at 19 Fielding Avenue, Dartmouth, Nova Scotia, Canada B3B-1C9, and its telephone number at that address is (902) 468-8430. The Company also maintains executive offices in the U.S. at One Landmark Square, Stamford, CT 06901, and its telephone number at that address is (203) 325-0077. HISTORY SSWL, a wholly-owned subsidiary of Sparkling Spring, was founded in 1971 in Halifax, Nova Scotia to operate in the bottled water industry. In 1988, a controlling interest in the Company was acquired by MBL, a Pepsi-Cola bottler, which was managed by G. John Krediet and Stephen L. Larson, principals of CFCC. When MBL sold its soft drink bottling holdings to Pepsi-Cola Canada Limited in 1992, Messrs. Krediet and Larson retained their ownership of SSWL. Recognizing the growth opportunities in the bottled water industry, Messrs. Krediet and Larson identified SSWL as their platform for consolidation and recruited Stewart E. Allen from MBL to manage the day-to-day operations of the Company. Messrs. Krediet, Larson and Allen have managed the Company since late 1992, when they began to grow the water cooler business in Nova Scotia and New Brunswick. Since 1993, the Company has successfully completed 12 acquisitions. These acquisitions have enabled the Company to rapidly expand into attractive markets and increase production capacity. Additionally, the management team has been responsible for introducing new investors to the Company, including Clairvest and certain members of the MacMillan family. In connection with the Offering, Sparkling Spring was formed as a holding company and the shareholders of SSWL received either an equivalent number of shares of Common Stock of Sparkling Spring or a combination of Common Stock and cash. The total cash payments to shareholders of SSWL in connection with the Reorganization were funded with a portion of the net proceeds to the Company from the Offering. In addition, in connection with the Reorganization and the Offering, the Company sold shares of Common Stock to certain members of management for aggregate gross proceeds to the Company of approximately $262,000. RECENT DEVELOPMENTS On October 23, 1997, the Company acquired all of the issued and outstanding shares of capital stock of Cullyspring for $7.6 million, including transaction expenses. Cullyspring is a Seattle-based bottled water company focusing on the direct delivery of five-gallon containers to homes and offices, 50 57 and the rental of water coolers. The acquisition represents a continuation of the Company's consolidation activities in the attractive Pacific Northwest market. In this market, the Company now services territories from Eugene, Oregon through British Columbia, with primary markets in Portland, Oregon; Seattle, Washington; and Vancouver, British Columbia. INDUSTRY OVERVIEW Bottled water continues to be one of the fastest growing segments of the U.S. beverage industry for the past ten years, generating $3.6 billion of sales in 1996. According to Beverage Marketing Corporation, the U.S. bottled water market experienced a CAGR of 8.5% from 1986 to 1996, and is projected to grow at a slightly lower CAGR of 7.3% between 1996 and 2001. Bottled water volume in the U.S. increased from 629.7 million gallons in 1980 to 3.1 billion gallons in 1996, and is projected to reach 4.4 billion gallons in 2001. Furthermore, per capita bottled water consumption quadrupled from 1980 to 1996 with annual consumption in the U.S. increasing from 2.8 gallons per capita in 1980 to 11.7 gallons per capita in 1996. The projected per capita consumption is expected to reach 15.8 gallons in the U.S. by the year 2001. The water cooler segment generated approximately $1.2 billion of sales in 1996 or 1.2 billion gallons, representing 38.5% of the total U.S. bottled water market. The U.S. water cooler market experienced a CAGR of 3.9% between 1990 and 1996, and is projected to grow at an annual rate of 6.5% from 1996 to 2001, reaching 1.6 billion gallons by 2001. According to Zenith International Ltd., the bottled water market in the U.K. generated L400.0 million of sales in 1996, experienced a CAGR of 11.6% from 1990 to 1996, and is projected to grow at an annual rate of 9.0% between 1996 and 2000. Bottled water volume has increased from 111.0 million gallons in 1990 to approximately 214.0 million gallons in 1996 and is projected to reach 302.0 million gallons by the year 2000. Annual consumption of bottled water in the U.K. has increased from 1.9 gallons per capita in 1990 to 3.6 gallons per capita in 1996 and is projected to grow to 5.1 gallons per capita by 2000. The water cooler segment generated approximately L65.0 million or 25.1 million gallons, representing 11.7% of the total U.K. bottled water market in 1996, increasing from 3.5% in 1990. In addition, the U.K. water cooler market experienced a CAGR of 36.8% between 1990 and 1996, and is projected to grow at a CAGR of 13.9% from 1996 to 2000, reaching 42.3 million gallons by the year 2000. Management believes the strong industry growth has been and will continue to be driven by: (i) concerns related to the quality of tap water sources, (ii) consumer preferences for healthy products, (iii) taste preferences over tap water and other refreshment beverages and (iv) favorable demographics. Tap Water Concerns. The aging of the tap water supply infrastructure and the high cost of adequately maintaining or replacing existing water delivery systems have resulted in an increase of tap water contamination incidences in recent years. Consequently, there has been a decrease in consumers' confidence in the quality of tap water, accompanied by an increase in consumption of bottled water. Management believes that this trend will continue. Healthy Products. There is a movement toward a healthier lifestyle and the consumption of healthy products. Within the "healthy products" segment, clear or natural colored products are experiencing significant growth. Bottled water is perceived as a product with strong health and fitness appeal. Taste Preferences. The taste of tap water is affected by cleaning substances used to filter water. The products used to sterilize tap water, such as chlorine, are safe but often produce an undesirable after-taste and, consequently, many people prefer to drink bottled water. Favorable Demographics. Consumption of bottled water is much more prevalent among younger consumers. According to Beverage Marketing Corporation, adults between the ages of 25 and 34 comprise the demographic group most likely to consume bottled water. The Company 51 58 believes that, as younger consumers age and their purchasing power increases, sales of bottled water will continue to grow. The bottled water industry is highly fragmented in North America. The bottled water market is comprised of approximately 2,500 companies generating approximately $4.0 billion of sales. Of these companies, the five largest companies account for approximately 55% of the total market, with the remainder comprised of hundreds of small regional companies. Management believes that the industry will continue to consolidate as (i) operating leverage of the larger companies makes the smaller companies uncompetitive, (ii) succession issues at many smaller, family owned companies lead a number of independent companies to exit the industry, and (iii) pressure to meet improving water quality standards eliminates low quality producers. The Company believes that the competitive structure of the water cooler segment favors a larger operator with a successful consolidation track record. As a market leader in each of its geographic markets, the Company believes that it is well-positioned to benefit from the growth and consolidation trends in the industry. BUSINESS AND PRODUCTS The Company generated approximately 88.4% of its 1996 revenue from the sale of bottled water products for water coolers and the rental of water coolers. The remaining 11.6% of revenue in 1996 was generated from related activities including the sale of paper cups, coffee, water filtration devices and water through vending machines. In addition, the Company provides cooler sanitation services and bottles water for independent beverage companies and supermarkets. Bottled Water. The Company generated approximately 61.5% of its 1996 revenue from the sale of bottled water used in water coolers. Bottled water for water coolers is primarily sold in two sizes: a five-gallon (19 liter) bottle and a six-gallon (22 liter) bottle. In each market, a smaller package exists for residential customers who may not be capable of lifting the five- or six-gallon product or who may have storage constraints. The Company offers water bottles in plastic packaging that facilitates storage, and has non-spill caps. While its pricing varies from market to market and the Company frequently offers promotional discounts in certain markets, the Company charges on average approximately $7 for a five-gallon bottle of water. The Company primarily markets four types of water: spring, premium drinking, steam-distilled, and fluoridated. The sale of steam-distilled water and fluoridated water accounted for less than 1.0% of the Company's revenue in 1996. Descriptions of each type of water follow: Spring Water. Water, which has been naturally filtered by its passage through various geological layers, is drawn from a protected underground reservoir called an aquifer. It can then be either bottled at the source or transported in stainless steel tankers to a more strategically located bottling facility. Before bottling, spring water is passed through a micron filter which removes sediment while retaining the natural mineral content of the water. The water is then purified through an industry standard purification process known as ozonation. This sterilization process is over 400 times more effective than chlorination and does not leave a residual taste. Premium Drinking Water. This water is drawn from local municipal sources. It is passed through a series of carbon and sand filters, processed by either reverse osmosis or deionization, ozonated and then bottled. Premium drinking water has 99.9% of all impurities removed from it, including its natural mineral content. Steam-Distilled Water. This water can be obtained from either a spring or municipal source. The water is then converted to steam. Once the steam condenses it is then ozonated and bottled. Steam-distilled water is similar to premium drinking water since it has 99.9% of all impurities removed. 52 59 Fluoridated Water. Fluoridated water is premium drinking water that has one part per million of fluoride added. It is a niche market product that appeals to families with young children. The following table summarizes the Company's operations in its existing markets:
REGION PRINCIPAL PRODUCTS BRAND NAMES - ------------------ ----------------------- -------------------------- British Columbia Premium Drinking Water Canadian Springs Premium Drinking Water Water Jug Spring Water Withey's Canadian Springs Maritime Provinces Spring Water Sparkling Springs United Kingdom Spring Water Nature Springs Spring Water Galloway Spring Water Water At Work United States Premium Drinking Water Crystal Springs Premium Drinking Water Mountain Fresh Premium Drinking Water Cullyspring
Water Coolers. The Company generated approximately 26.9% of its revenue in 1996 from the rental of water coolers. The Company enjoys a significant installed base of approximately 115,000 water coolers in its served markets. Customers typically sign a one-year contract, providing the Company with a dual stream of relatively stable and recurring revenue from both a monthly cooler rental charge and the sale of bottled water. In addition, the Company's large installed customer base creates operating efficiencies by supporting a level of infrastructure that can be leveraged to support incremental cooler installations at an attractive marginal profitability rate. While its pricing varies from market to market and depends on the water cooler selected by the customer, the Company's current average monthly rental charge for its coolers is approximately $11. The following table presents management estimates of certain information relating to the Company's installed cooler base as of September 30, 1997, after giving effect to the acquisition of Cullyspring:
BRITISH COLUMBIA MARITIME PROVINCES UNITED KINGDOM UNITED STATES ---------------- ------------------ -------------- ------------- Number of Installed Coolers 54,596 14,436 25,906 20,033 % Residential Customers 65% 52% 2% 35% % Commercial Customers 35% 48% 98% 65%
The Company purchases its water coolers from one of three preferred suppliers and maintains a stock of spare parts at delivery depots. The Company strips down, cleans, and redeploys returned water coolers prior to all new installations. The Company's average cost per water cooler is approximately $150, and the Company estimates that the average life of a water cooler is ten years. The typical pay back period on a water cooler investment (assuming only rental revenue) is approximately 15 months. In the event of termination of the rental agreement, water coolers can be readily redeployed at a relatively low cost to the Company. In addition, in certain markets the Company charges a water cooler collection fee when a customer opts to discontinue purchasing water. The Company believes that it could support an additional 20,000 coolers without a significant increase to its overhead costs. Other. The remaining 11.6% of the Company's 1996 revenue was generated through the sale of bottled water in retail sizes, the sale of paper cups, cooler sanitation services, coffee delivery, the sale of water filtration devices and the sale of water through vending machines. The Company has a number of bottling contracts, including Sobey's Own brand spring water and Pepsi-Cola's Aquafina brand, as well as bottling contracts with supermarkets such as Fred Meyer, Inc. and Safeway, Inc. 53 60 THE BOTTLING PROCESS The Company draws its spring water from local sources. The spring water is bottled at the source, in the case of the Maritime Provinces, or transported to a Company bottling facility by stainless steel tanker in other locations. Prior to final bottling, the spring water is filtered and ozonated. Ozonation is a process whereby impurities not removed through ordinary filtration are removed through the injection of oxygen. The process involves a special form of oxygen, ozone, which is the strongest disinfectant and oxidizing agent available for water treatment. The added oxygen quickly dissipates and results in tasteless and odorless purification as compared to chlorination. This process is designed to prevent bacteria and other contaminants from being transferred from the spring or the tanker to the finished product. In addition to spring water, the Company also produces premium drinking water. The Company accesses local, publicly-available water supplies and processes and purifies the product through reverse osmosis to remove chlorine and other chemicals frequently found in tap water. The product then goes through the ozonation process prior to bottling as premium drinking water. The Company has ten bottling facilities located throughout British Columbia, the Maritime Provinces of Canada, England, Scotland and the Pacific Northwestern United States. British Columbia. The Company operates four bottling facilities located in Vancouver, Victoria, Kamloops and Prince George, British Columbia. The Vancouver and Prince George facilities produce both premium drinking water and spring water. The Company transports the spring water from sources located in the Coastal Mountains pursuant to a non-exclusive contract without a fixed term. The bottling line in Victoria is capable of producing both spring water and premium drinking water but currently only produces premium drinking water. Maritime Provinces. The Company's bottling line is located in Valley, Nova Scotia, which is also the site of a spring owned by the Company. Water is bottled at the source, processed and distributed to the Company's four depots and distributors in Nova Scotia, New Brunswick and Prince Edward Island. England. The Company operates its bottling operations in a newly-constructed production facility, adjacent to its largest distribution depot, in Buckinghamshire, England. Completed in January 1997, the cost of construction of the new facility was $1.3 million. The new high speed bottling line installed at the facility is expected to generate significant cost savings in the future. Spring water is purchased from various sources and transported to the bottling line for processing. Scotland. The Company operates a bottling line which processes water drawn from a 100-year old well in Dumfries, Scotland. The water is processed and bottled in a bottling line operated by Natural Water Ltd., a wholly-owned subsidiary of Sparkling Spring. United States. From its Portland, Oregon facilities, the Company processes premium drinking water, as well as spring water shipped from a source in the Cascade Mountains pursuant to a non-exclusive contract without a fixed term. From its Seattle, Washington facility, the Company processes premium drinking water. 54 61 The following table provides certain information regarding the Company's bottling facilities:
LOCATION TYPE OF WATER BOTTLING CAPACITY - ---------------------------- ---------------------------- ---------------------------- Vancouver, British Premium Drinking 490 bottles per hour Columbia Spring Victoria, British Premium Drinking 225 bottles per hour Columbia Kamloops, British Premium Drinking 300 bottles per hour Columbia Prince George, British Premium Drinking 125 bottles per hour Columbia Spring Valley, Nova Scotia Spring 485 bottles per hour Buckinghamshire, England Spring 1,250 bottles per hour Glasgow, Scotland Spring 200 bottles per hour Portland, Oregon Premium Drinking 300 bottles per hour Spring 450 bottles per hour Seattle, Washington Premium Drinking 425 bottles per hour
SEASONALITY Bottled water sales have been subject to seasonal variations with decreased sales during cold weather months and increased sales during warm weather months. Water cooler rentals are typically paid monthly and mitigate the seasonal effect of water sales. CUSTOMERS The Company has grown from an installed base of approximately 8,000 water coolers in 1991 to an installed base of approximately 115,000 water coolers as of September 30, 1997 (after giving effect to the acquisition of Cullyspring). Customers typically sign a one-year contract providing the Company with a dual stream of relatively stable and recurring revenue from both a monthly cooler rental charge and the sale of bottled water. No customer accounted for more than 1.0% of the Company's revenue in 1996 or in the nine months ended September 30, 1997. Approximately 65% of the Company's revenue in 1996 was derived from sales to commercial establishments, with the balance attributable to residential customers. Substantially all of the Company's U.K. customers are commercial establishments. The Company's commercial customers include not only large established businesses, but also smaller regional and local shops, offices, warehouses and production facilities. The Company's customers include British Rail, British Telecom, the Bank of Scotland, Heathrow Airport, National Westminster Bank, the Canadian Department of National Defense, Nike, Toronto Dominion Bank and the Canadian Pacific Railway. Management believes that the diversity of its customer base protects the Company from reliance on any one customer or a particular industry segment. In addition, the Company has a number of bottling contracts with independent beverage companies, including Sobey's and Pepsi-Cola, as well as with supermarkets such as Fred Meyer, Inc. and Safeway, Inc. SALES AND MARKETING The Company markets its products principally through yellow page advertisements, newspaper advertisements, mall shows, coupons, product sponsorship programs, direct mail, radio commercials and various referral programs which are supported by the efforts of approximately 75 salaried sales and marketing personnel. Almost half of the Company's new customers are derived from incoming telephone calls resulting from yellow page advertisements, the key advertising vehicle for the Company. To supplement this effort, the Company's marketing team solicits potential new custom- 55 62 ers in specific geographical areas in which the Company desires to increase the density of existing routes or in which it desires to establish new routes. A potential new customer may be offered various introductory promotions including a free trial offer. The Company's marketing activity emphasizes the benefits of bottled water, the convenience of a water cooler as well as the associated regular delivery of bottled water and, to a lesser extent, the creation of brand awareness. An important part of the Company's sales, marketing and customer service strategy is its focus on retaining customers. The Company experienced a relatively low churn rate of its water cooler rental agreements of 2.0% per month in 1996, which management believes is significantly lower than the industry average. The Company has also generally lowered the churn rate of the businesses it has acquired. Its primary strategy for minimizing its churn rate is a focus on outstanding customer service. In addition, the Company employs certain strategies to retain customers who indicate they wish to discontinue receiving bottled water. Customer service representatives are compensated for the customers they help to retain. DISTRIBUTION As of September 30, 1997, the Company owned or leased approximately 100 trucks and employed 190 people in its distribution operations. The average cost per new truck is approximately $80,000, and the Company generally delivers to neighborhoods within a ninety minute drive from its distribution centers. Each truck has a useful life of 7 to 12 years and can hold 120 to 300 five- or six- gallon bottles. The Company's drivers are generally paid on a per-delivered-bottle basis, promoting efficiency and higher utilization of the delivery trucks. On average, a truck driver services approximately 1,000 customers. The average customer typically receives delivery once every two weeks. In addition, the Company's drivers actively generate sales and are compensated for each new customer contract they originate. Management believes that one of the most important success factors in the delivered bottled water business is delivery route efficiency. Route efficiency is the critical cost factor in the water cooler business, as the average cost of local delivery per bottle is over four times the cost of preparing one bottle for distribution. However, the marginal distribution cost of an additional bottle on an existing route is relatively low. ACQUISITION STRATEGY The Company has successfully pursued a disciplined acquisition strategy to create value by actively participating in the consolidation of the highly fragmented bottled water industry. The Company perceives two separate segments in its acquisition strategy: larger entities with more sophisticated management and financing alternatives, or "platforms," and smaller, less sophisticated entities known as "fill-ins" or "spokes" which can be consolidated with platforms. Accordingly, the Company's approach to acquiring companies in new markets is to identify one of the largest bottled water companies in a market as a platform acquisition, and complement it with smaller fill-in acquisitions in neighboring or overlapping geographic territories. The Company is generally unwilling to enter a new market through acquisition unless the company being acquired is both one of the market share leaders and provides the critical mass necessary to act as a platform in that market. The acquisition of Cullyspring as a platform is an example of this strategy. While the purchase price paid for a platform company is higher than that for a fill-in acquisition, the Company is able to reduce its average acquisition multiple by opportunistically acquiring the "spoke" distribution routes at more attractive prices due to the limited strategic options available to these smaller operators. In addition to buying companies at relatively low multiples of EBITDA, management has been able to create value by improving the operations of acquired entities and realizing operating synergies. The Company anticipates that, for the foreseeable future, attractive acquisition opportunities will exist both in the U.S. and in the other markets served by the Company. The Company also expects that more acquisition opportunities will exist in the U.S. than elsewhere. See "Risk Factors -- Dependence on Financing for Expansion; Acquisition Strategy." 56 63 Platform Acquisitions. The Company faces more competition in the marketplace for platform acquisitions resulting in the necessity to pay relatively high multiples of pre-acquisition EBITDA. The Company believes that its size, management infrastructure and ability to consummate future "spoke" acquisitions enable it to significantly reduce the purchase price multiple on a post-acquisition EBITDA basis. For the four acquired companies for which the Company has comparable full-year pre-acquisition and post-acquisition data, revenue and EBITDA increased, on average, by 18.5% and 64.0%, respectively, in the first year after the acquisition. As a large buyer of water coolers, water bottles and delivery trucks, the Company can factor into its acquisition valuations significant purchasing cost savings. Additionally, its management infrastructure can be leveraged to run a substantially larger organization, thereby resulting in significant general and administrative cost savings. Finally, the Company eliminates the significant cash and non-cash compensation paid to the owner/operators of the companies it acquires. As noted above, the Company seeks to purchase the leader in each market it enters, although in certain markets it has acquired the second largest bottled water company where it has seen opportunities to make further consolidating acquisitions. The market for smaller acquisitions is significantly less competitive than the market for larger acquisitions. Smaller acquisitions are typically not brokered (i.e. auctioned) transactions, and to date the Company has sourced 10 of its 12 acquisitions on a privately negotiated basis. Fill-in Acquisitions. Smaller fill-in acquisitions are consolidated with larger platform acquisitions to achieve the following cost savings and synergies: - Decreased operating costs through elimination of duplicative administrative costs. - Decreased production and distribution costs through integration with a larger, geographically adjacent entity, and the resulting achievement of greater delivery route density. - Decreased purchasing costs through realization of economies of scale. - Improved management control through centralized accounting and reporting systems. - Improved marketing efficiency. The Company seeks to increase the sales and profitability of acquired companies by implementing the Company's sales and delivery programs and by improving operating efficiencies of the acquired businesses. Consistent with the Company's management approach, integration of a platform acquisition involves creating a new division. The Company centralizes many of the acquired company's functions including purchasing, accounting, benefits, sales and marketing programs and general administrative functions. Integration of a fill-in acquisition generally involves a fundamental change in the operations of the acquired company, including the consolidation of its distribution and production operations to maximize operating efficiencies. ACQUISITIONS The Company has expanded its operations through a number of acquisitions designed to consolidate existing markets or enter new markets. The Company has been successful in integrating acquired companies into its existing operations and increasing the profitability of acquired companies through the elimination of duplicative overhead functions, realization of operating and purchasing efficiencies and implementation of the Company's management systems. As a result of these acquisitions, the Company has expanded its leadership position in Canada, entered the attractive U.S. water cooler market and further bolstered its leading presence in the U.K. On April 14, 1993, the Company acquired Crystal Springs Limited ("CSL"). CSL served the Cape Breton, Nova Scotia bottled water and cooler rental market. CSL was subsequently merged into SSWL. 57 64 On June 8, 1994, the Company acquired the water cooler division of Buxton Mineral Water Company Limited through Sparkling Spring Water (UK) Limited ("SSWUK"), a wholly-owned subsidiary of SSWL. The water cooler industry in the U.K. was identified as being much less developed than the North American market and, thus, having a significant growth potential. On April 24, 1995, the Company acquired Aquaporte (UK) Limited ("Aquaporte UK"). Aquaporte UK had a predominantly London-based customer list and a depot close to central London. The operation was merged with SSWUK and the combined businesses became the largest water cooler company serving the commercial market in the U.K. On January 17, 1996, the Company acquired Canadian Springs Water Company Ltd. ("Canadian Springs"). Canadian Springs is the leading home and office water cooler company in British Columbia, with operations in Vancouver, Victoria, Kelowna and Nanaimo. The acquisition served to consolidate the Company's position in Canada while providing it with access to the fastest growing bottled water market in Canada. On May 9, 1996, the Company acquired Water Jug Enterprises Limited ("Water Jug"). Water Jug, which serves the Kamloops area in British Columbia, has further solidified the Company's market position in British Columbia. On January 2, 1997, the Company acquired D & D and Company, Inc., doing business as Mountain Fresh Bottled Water Co. ("Mountain Fresh"). Mountain Fresh is headquartered in Portland, Oregon, and held the number three position in the Oregon market. The acquisition of Mountain Fresh was designed to fulfill the Company's strategic objective of establishing a platform company in the U.S. market. The Company believes that the Portland market represents an attractive water cooler market, sharing many of the same characteristics as the British Columbia market, where the Company has extensive operations. The Company believes that this market is experiencing strong economic growth, has strong consumer awareness about drinking water and has experienced difficulties with respect to the quality of its municipal water supply. Mountain Fresh is operated as a small hub and will benefit from its proximity to the Company's Vancouver, British Columbia operations. On January 28, 1997, the Company acquired Withey's Water Softening & Purification Limited ("Withey's Water"). Withey's Water is headquartered in Prince George, British Columbia, and is the dominant supplier of bottled water and filtration systems in the rural market of upper British Columbia. Withey's Water represents a fill-in acquisition, strengthening the Company's already leading presence in the home and office water cooler market in British Columbia. On January 30, 1997, the Company acquired High Valley Water Limited ("High Valley"). High Valley is headquartered in Kelowna, British Columbia and is comprised of four bottled water distributors. On February 5, 1997, the Company acquired Water At Work Limited ("Water at Work"). Water at Work is headquartered in Glasgow, Scotland, and is Scotland's largest water cooler company and the fourth largest in the U.K., serving both the Glasgow and Edinburgh markets. The acquisition of Water At Work further bolsters the Company's leadership position in the U.K. market and establishes its leading presence in the attractive Scottish market. On June 4, 1997, the Company acquired the water cooler operations of Soja Enterprises, Inc. ("Soja"). Soja serves the commercial community of Portland, Oregon. On June 23, 1997, the Company acquired Crystal Springs Bottled Water Co., Inc. ("Crystal Springs"). Crystal Springs is the second largest five-gallon distributor serving Oregon and is based in Portland. This acquisition provided the Company with greater route density in its established Portland market. 58 65 On October 23, 1997, the Company acquired Cullyspring. Cullyspring is a Seattle-based bottled water company focusing on the direct delivery of five-gallon containers to homes and offices and the rental of water coolers. See "The Company -- Recent Developments." On December 17, 1997, Crystal Springs of Seattle, Inc., a wholly-owned subsidiary of Sparkling Spring, purchased all of the outstanding capital stock of Crystal Springs Drinking Water, Inc. ("CSD"). CSD is a Seattle-based bottled water company focusing on the direct delivery of five-gallon containers to homes and offices and the rental of water coolers. COMPETITION The Company competes in the "alternative to tap water" market in two areas. First, it competes directly with other home and office delivery bottled water companies in its geographic markets. This segment is highly fragmented with the vast majority of the companies being operated as small entrepreneurial and family-owned businesses. The Company has a leading market share position in England and Scotland in the U.K., British Columbia and the Maritime Provinces of Canada, and Oregon in the U.S. Furthermore, it has a second market share position in the state of Washington. Management believes that its access to capital, professional management, and sophisticated reporting and accounting systems are equal to or greater than those of its local competitors in these markets. The Company believes quality of service and reliability of delivery are the primary competitive factors in the water cooler business. Additionally, the Company believes that the capital intensity of its operations creates significant barriers to entry. The Company also competes indirectly with companies that distribute water through retail stores and vending machines. The competitive advantage of water coolers over these alternative distribution channels is primarily based on the convenience of home or office delivery and, to a lesser extent, price. Similarly, the Company competes with providers of on-premises water filtration systems, including systems distributed through retail outlets, which the Company believes are aimed at less affluent consumers. In certain markets the Company itself markets and provides on-premises water filtration systems. The "alternative to tap water" industry also includes a number of well-established, well-capitalized companies, most of which do not currently compete directly in the Company's markets. These include Nestle S.A., which owns Perrier and the Perrier Group of America. Perrier Group of America operates the Arrowhead, Poland Spring, Zephyrills, Ozarka, Oasis and Great Bear brands. Suntory owns Belmont Springs, Hinkley & Schmitt, Crystal, Kentwood, and Polar. BSN Group owns the Evian and Dannon brands and also operates the Crystal Spring (Toronto), Spring Valley, and Laurentian businesses. McKesson Corporation operates the Sparkletts business. Ionics Incorporated operates the Aquacool businesses. In addition, United States Filter Corp. and Culligan Water Technologies Inc. compete in the water filtration segment. 59 66 PROPERTIES The Company maintains its corporate headquarters in Dartmouth, Nova Scotia. The following table sets forth certain information relating to each of the Company's facilities:
SIZE OWNED/ LEASE LOCATION SQ. FT. PURPOSE LEASED EXPIRATION - -------------------------------- ------- ---------------------------------- ------ --------------- CANADA: Dartmouth, Nova Scotia 14,000 Corporate Headquarters, Leased June 2002 Distribution Valley, Nova Scotia 14,500 Bottling, Distribution Owned N/A Sydney, Nova Scotia 4,500 Offices, Distribution Leased June 1998 Moncton, New Brunswick 3,700 Offices, Distribution Leased May 1998 Saint John, New Brunswick 4,300 Offices, Distribution Leased Oct. 1998 Vancouver, British Columbia 19,600 Offices, Bottling, Distribution Leased Feb. 1998 Victoria, British Columbia 7,250 Offices, Bottling, Distribution Leased July 1998 Nanaimo, British Columbia 1,300 Distribution Leased May 1998 Kamloops, British Columbia 4,000 Offices, Bottling, Distribution Leased May 2000 Prince George, British Columbia 7,000 Bottling, Distribution Leased June 2002 UNITED KINGDOM: Tewkesbury, England 8,600 Offices, Distribution Leased Apr. 2008 High Wycombe, England 18,000 Offices, Distribution Leased Dec. 2006 High Wycombe, England 18,000 Bottling Leased Dec. 2006 Arklo Road, England 8,000 Offices, Distribution Leased Mar. 1998 Glasgow, Scotland 4,000 Offices, Distribution Leased Monthly Dumfries, Scotland 4,000 Bottling Leased June 2009 Dundee, Scotland 2,000 Offices, Distribution Leased Feb. 2000 UNITED STATES: Stamford, Connecticut 675 Offices Leased June 2000 Portland, Oregon 30,000 Bottling, Distribution, Offices Leased Oct. 2007 Portland, Oregon 6,000 Bottling, Distribution, Offices Leased June 2000, 2002 Seattle, Washington 25,000 Bottling, Distribution, Offices Leased Oct. 2002
All of the Company's bottling and distribution facilities, in the opinion of the Company's management, have been adequately maintained, are in good operating condition and generally have sufficient capacity to handle all present sales volume and all sales volume contemplated in the foreseeable future. EMPLOYEES As of September 30, 1997, the Company had approximately 464 full-time employees, of which 95 were in sales and services, 190 in distribution, 24 in maintenance and service, 67 in production and warehouse and 88 in administration. The workforce is non-unionized and temporary workers are used during peak demand periods. The Company believes that it enjoys generally good relations with its employees. REGULATION The Company's operations are subject to various federal, state and local laws and regulations, which require the Company, among other things, to obtain licenses for its business and equipment, to pay annual license and inspection fees, to comply with certain detailed design and quality standards regarding the Company's bottling plant and equipment, and to continuously control the quality and quantity of the water dispensed. Several jurisdictions have regulations that require the Company to obtain certification for its bottled water. The Company believes that it is currently in substantial compliance with these laws and regulations and has passed all regulatory inspections. In 60 67 addition, the Company does not believe that the cost of compliance with applicable government laws and regulations is material to its business. However, governmental laws and regulations are subject to change, and no assurance can be given that future actions by governmental authorities will not have an adverse effect on the Company's business. See "Risk Factors -- Government Regulation." Each of the Company's operating subsidiaries employs a Quality Control Manager and follows internal, industry and government testing requirements. In addition, all water is ozonated to ensure purity of the Company's product. Ozonation is the government and industry standard for the treatment of water prior to bottling. Canada. In Canada, bottled water is considered a food product and, as such, is governed by the Federal Department of Health and Welfare -- Health Protection Branch under the Food and Drug Act. The Company's production site is audited annually according to the Good Manufacturing Practices governing such plants. This inspection is performed by the National Sanitation Foundation ("NSF") and the Health Protection Branch. The Company is in good standing with the International Bottled Water Association (the "IBWA") and the Canadian Bottled Water Association (the "CBWA"). The IBWA mandates compliance with strict quality control standards on a global basis. The CBWA is the Canadian chapter of the IBWA. United Kingdom. In the U.K., bottled water is governed by the European Union's Mineral Water Directive and Drinking Water in Containers Regulations. In addition, the Company is a member of the Bottled Water Cooler Association (the "BWCA") and the IBWA, both of which play a major role in setting industry standards. The BWCA requires its members to adhere to a Code of Practice and pass an annual quality inspection conducted by an independent third-party organization. The current BWCA plant inspection program is administered by the NSF. The Company believes that it is in good standing with the BWCA. United States. In the U.S., bottled water is regulated by the FDA and follows the Quality Standards, Standards of Identity and Current Good Manufacturing Practices guidelines under the Code of Federal Regulations. As in the case of Canada and the U.K., inspections of the Company's production sites in the U.S. are conducted annually by the NSF. LITIGATION The Company is not a party to any litigation other than routine legal proceedings incidental to its business. Management does not expect that these proceedings will have a material adverse effect on the Company. ENVIRONMENTAL MATTERS The Company's operations and properties are subject to a wide variety of federal, state, local and international laws and regulations, including those governing the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes and the health and safety of employees (collectively, "Environmental Laws"). Such laws, including but not limited to, those under the Comprehensive Environmental Response, Compensation & Liability Act may impose joint and several liability and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessor as well as to conditions of properties at which wastes or other contamination attributable to an entity or its predecessor have been sent or otherwise come to be located. Based upon its experience to date, the Company believes that it is in substantial compliance with existing Environmental Laws and that any liability for known environmental claims pursuant to such Environmental Laws will not have a material adverse effect on the Company's financial position or results of operations and cash flows. However, future events, such as new information, changes in existing Environmental Laws or their interpretation, and more vigorous enforcement policies of regulatory agencies, may give rise to additional expenditures or liabilities that could be material. 61 68 MANAGEMENT The following table sets forth certain information as of the date of this Offering Memorandum with respect to each of the directors, executive officers and key management personnel of Sparkling Spring. The individuals listed below hold the same positions with Sparkling Spring as they hold in SSWL and have held these positions since the formation of Sparkling Spring.
NAME AGE POSITION WITH SPARKLING SPRING - ------------------------------ --- ------------------------------------------ G. John Krediet............... 46 Chairman of the Board of Directors and Chief Executive Officer Stephen L. Larson............. 39 Vice Chairman of the Board of Directors and Chief Financial Officer Stewart E. Allen.............. 38 President and Director Michael Bregman............... 43 Director C. Sean Day................... 48 Director Kenneth B. Rotman............. 31 Director Lucy M. Stitzer............... 36 Director
G. JOHN KREDIET has been Chairman of the Board of Directors and Chief Executive Officer of SSWL since January 1991. From 1988 until 1992 he served as Chairman of the Board of MBL, the Pepsi-Cola franchisee and former parent company of SSWL. From September 1988 through November 1990 he also served as Chairman of the Board of Eastern Beverages Ltd., the Pepsi-Cola franchise for the territory in and around Ottawa, Ontario, Canada. Mr. Krediet initiated and managed the consolidation of the eastern Canadian Pepsi-Cola bottling business and arranged its sale to Pepsi-Cola Corporation in 1992. Mr. Krediet was the founder of CFCC in 1987 and, together with Mr. Larson, obtained direct control of SSWL in 1992 to use it as an acquisition vehicle for consolidating the bottled water industry. Prior to 1987 Mr. Krediet was employed by General Electric Credit Corporation, AMRO Bank and Citibank, NA. He is a citizen of the Netherlands and received his graduate degree in economics from Erasmus University in Rotterdam. STEPHEN L. LARSON has been Vice Chairman of the Board of Directors and Chief Financial Officer of SSWL since 1992. In addition, he has served as a managing director of CFCC since 1990 and he has been with CFCC since 1987. Mr. Larson, in conjunction with Mr. Krediet, developed the consolidation strategy for the bottled water industry. Mr. Larson has been responsible for qualifying and selecting acquisition candidates generated by the Company and outside sources. Mr. Larson is responsible for negotiating the acquisition terms and related financing. He also oversees consolidation into the Company as well as the larger capital expenditures. At CFCC, Mr. Larson acted as an intermediary arranging financing for corporations primarily involved in the area of bottling, publishing, outdoor advertising and other media. Mr. Larson was principally involved in the negotiations leading to the acquisition of nine Pepsi-Cola franchisees, the related consolidation and the ultimate sale to Pepsi-Cola Corporation. Mr. Larson worked as a Senior Associate at Claremont Group Limited, a management buyout firm, from 1986 to 1987. He began his career at Arthur Andersen & Co. Mr. Larson earned an M.B.A. in Finance from the University of Chicago and a Bachelor of Science in Accounting from the University of Illinois. Mr. Larson is a C.P.A. and a member of both the American Institute of Certified Public Accountants and the Accounting Research Association. STEWART E. ALLEN has been President of SSWL since 1992. Mr. Allen has been responsible for overseeing the daily operations of the Company, including integrating acquired companies and corporate strategic planning. Mr. Allen is the President of the Canadian Bottled Water Association and a member of the International Bottled Water Association's International Council. 62 69 Mr. Allen has over 20 years of experience in the beverage industry. He served as Vice President of Sales and Marketing for MBL, the Pepsi-Cola franchisee and former parent of the Company, from 1988 to 1992. Mr. Allen was primarily responsible for consolidating two other bottlers into MBL and for major cost initiatives, including a reduction in salaried employees, closure of four warehouses and three wage freezes with unionized employees. Prior to joining MBL, Mr. Allen spent three years with Crush Canada and Pepsi-Cola Canada. Prior to this, Mr. Allen held several operational positions in Pepsi-Cola owned bottler operations in Toronto and Oshawa, Ontario. MICHAEL BREGMAN has served as a member of the Board of Directors of SSWL since October 1997. Mr. Bregman is Vice Chairman of the Board of Directors of Clairvest, a Toronto-based, publicly traded merchant bank with a portfolio in excess of $180 million, where his primary responsibilities include assessing investment transactions, with an emphasis on the retail food and beverage industries. Mr. Bregman is the Chairman and Chief Executive Officer and a major shareholder of The Second Cup Ltd., a coffee retailer in North America. Mr. Bregman is also a member of the board of directors of Signature Security Group, Inc. and Vincor International Inc. In addition, Mr. Bregman was the founder of the now-divested Mmmuffins Inc., a specialty baking company in Canada. Mr. Bregman received his M.B.A. degree in 1977 from Harvard Business School and earned a B.S. in Economics from The Wharton School at the University of Pennsylvania. C. SEAN DAY has served as a member of the Board of Directors of SSWL since March, 1997. Mr. Day is President and Chief Executive Officer of Navios Corporation, a company engaged in the worldwide operation of ocean going bulkships. Mr. Day has a wide range of experience in the shipping, finance and industrial sectors. Prior to joining Navios Corporation, Mr. Day's prior experience included positions with Citicorp Venture Capital Ltd. in New York, Fednav Ltd. in Montreal and Jardine, Matheson & Co., Ltd. in Hong Kong and Taiwan. Mr. Day is also a member of the board of directors of Kirby Corporation. Mr. Day is a graduate of University of Cape Town and Oxford University. KENNETH B. ROTMAN has served as a member of the Board of Directors of SSWL since January 1996. Mr. Rotman is a Managing Director of Clairvest, a Toronto-based, publicly traded merchant bank with a portfolio in excess of $180 million. Mr. Rotman's role with Clairvest involves the sourcing and execution of transactions and working closely with the management of companies in which Clairvest has invested. Mr. Rotman also serves on the board of directors of Consoltex Group Inc., NRI Industries and Signature Security Group Inc. Mr. Rotman is a volunteer director of The Power Plant art gallery of Toronto and the Empire Club of Canada. Prior to joining Clairvest in October, 1993, Mr. Rotman worked in the Venture Banking Division of E.M. Warburg, Pincus & Co. in New York. Mr. Rotman received a B.A. in Economics from Tufts University, an M.Sc. from the London School of Economics, and an M.B.A. from New York University's Stern School of Business. LUCY M. STITZER has served as a member of the Board of Directors of SSWL since January 1994. Ms. Stitzer has also served on the board of directors of Cargill Inc. since 1992. From 1990 to 1992, Ms. Stitzer was employed as an associate at Sandler O'Neill and Partners, an investment bank. From 1983 to 1990, Ms. Stitzer was employed by the Consumer Banking Division of Citibank, N.A., where she attained the position of Assistant Vice President. 63 70 EXECUTIVE COMPENSATION The following table sets forth a summary of the compensation of each executive officer of Sparkling Spring who earned in excess of $100,000 in annual salary and bonus during Sparkling Spring's year ended December 31, 1996, for services rendered in all capacities to the Company in the years ended December 31, 1996, 1995 and 1994. G. John Krediet, Chief Executive Officer of Sparkling Spring, received compensation from CFCC pursuant to the Management Agreement rather than directly from the Company. See "Certain Relationships and Related Transactions -- Management Agreement." SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ANNUAL COMPENSATION ------------ ---------------------------------------------- SECURITIES OTHER UNDERLYING ALL NAME AND PRINCIPAL ANNUAL OPTIONS/ OTHER POSITION YEAR SALARY BONUS COMPENSATION SARS COMPENSATION - ----------------------- ---- -------- ------- ------------ ------------ ------------ Stewart E. Allen, 1996 $129,070 -- $ 15,576(1) -- $ 16,957(2) President 1995 94,122 $36,427 -- 39,595 10,905(2) 1994 76,158 18,330 -- 96,192 6,509(2)
- --------------- (1) Includes $13,926 representing a housing allowance. (2) Consists of contributions of $16,015, $9,530 and $5,568 to a defined contribution pension plan in 1996, 1995 and 1994, respectively, and annual premiums of $942 in connection with a group life insurance policy for Mr. Allen. EMPLOYMENT AGREEMENTS Stewart E. Allen, the President of Sparkling Spring, has an employment agreement with the Company pursuant to which he is paid a base salary of $219,000. In addition, his employment agreement provides for a bonus payment to Mr. Allen at the end of each fiscal year based primarily upon the Company achieving certain levels of EBITDA. 64 71 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS MANAGEMENT AGREEMENT Pursuant to the Management Agreement dated December 16, 1993, as amended and restated (the "Management Agreement"), between SSWL, CFCC, G. John Krediet and Stephen L. Larson, CFCC has agreed to perform certain management services for the Company through December 31, 2002. These services include managing the operations of the Company and negotiating contracts, financial agreements and other arrangements. The Management Agreement provides that CFCC shall not take any action with respect to certain extraordinary transactions without the approval of the Board of Directors of Sparkling Spring, including material acquisitions and capital expenditures, issuances of securities, sale or disposition of a material portion of the business of the Company, compensation of CFCC, merger of the Company, liquidation and declaration of dividends. The Management Agreement provides that CFCC shall receive annual compensation for its services in the form of a base fee of $400,000 during the fiscal year ended December 31, 1996, and in each successive year a base fee equal to the prior year's base fee plus an amount equal to the prior year's base fee multiplied by the percentage increase or decrease, as the case may be, of the Company's total annual revenue from the prior year, but the base fee may not exceed $750,000 in any given year. An annual bonus of up to 75% of the base fee is due to CFCC each year in the event that the Company achieves certain targeted levels of per share earnings before depreciation and amortization. In the event such targets are not met, lesser amounts may be paid. The Company has also agreed to pay CFCC a fee in respect of its investment banking advisory services rendered to the Company in connection with successful acquisitions. The total amounts paid to CFCC pursuant to the Management Agreement for the years 1994, 1995 and 1996 and the nine months ended September 30, 1997 were $277,000, $521,000, $769,000 and $1,032,500, respectively. The Company may also pay to Messrs. Krediet and Larson non-cash options, incentives or other remuneration, consistent with industry standards. The Company is also responsible for reasonable disbursements and office expenses incurred by CFCC. SHAREHOLDER AGREEMENT Sparkling Spring, Clairvest, Gaspar Limited (a corporation wholly-owned by a trust organized for the benefit of G. John Krediet and his children), Stephen L. Larson, Lucy Stitzer, Stewart E. Allen and certain other shareholders of the Company are parties to a shareholder agreement, dated as of October 22, 1997 (the "Shareholder Agreement"), which provides, among other things, for preemptive rights in favor of the shareholders under certain circumstances if Sparkling Spring issues additional securities and for certain registration rights. The Shareholder Agreement also provides restrictions on the transfer of the Company's capital stock, for rights of first refusal and for rights of certain shareholders to require all other shareholders to join with them in their sale of the Company's capital stock. The Shareholder Agreement fixes the number of directors comprising Sparkling Spring's Board of Directors at seven, and provides that Gaspar Limited shall be entitled to nominate four directors, Clairvest shall be entitled to nominate two directors and Lucy Stitzer and her affiliates shall be entitled to nominate one director. Certain actions by the Company require the approval of at least one of the Clairvest nominees (which approval shall not be unreasonably withheld). These actions include, among other things, any acquisition by the Company in excess of Cdn $5.0 million, the making of certain capital expenditures, the issuance by the Company of debt or equity securities, the disposition by the Company of a material part of its business, any change in management compensation, the declaration of dividends by the Company and the approval of the Company's annual budget. In addition, under the Shareholder Agreement, if no liquid public market (as defined in the Shareholder Agreement) then exists, Clairvest may, any time after March 31, 2003, offer all of its shares of capital stock of Sparkling Spring for sale to Sparkling Spring. If Sparkling Spring does not then repurchase those shares, Clairvest may, under certain circumstances, require the other parties to the Shareholder Agreement to join with Clairvest in selling to a third party all of 65 72 their shares of Common Stock of Sparkling Spring, which could cause a change of control. See "Risk Factors -- Change of Control." REORGANIZATION The shareholders of Sparkling Spring have approved the Reorganization, which management expects to be completed by January 1998. Under the Reorganization, the former shareholders of SSWL transferred their shares of SSWL to Sparkling Spring. As a part of the Reorganization, certain shareholders have reduced their interest in Sparkling Spring by exchanging their shares of common stock of SSWL for Common Stock of Sparkling Spring and cash or for cash only. See "The Offering." Other shareholders simply exchanged their shares of common stock of SSWL for Common Stock of Sparkling Spring on a one-for-one basis. Certain key managers of the Company have subscribed for an aggregate of 9,360 shares of Common Stock of Sparkling Spring at $28.00 per share, the same purchase price per share used for the purpose of the Reorganization. These managers have granted an option to Sparkling Spring enabling Sparkling Spring to repurchase those shares of Common Stock at any time at an agreed-upon formula price. Similarly, Sparkling Spring is obligated, under certain circumstances, to purchase those shares for the same formula price at the option of the key managers. OTHER TRANSACTIONS Each shareholder of Sparkling Spring pledged all of his or its outstanding shares of Common Stock as collateral in favor of the lenders under the Existing Credit Facility. A portion of the gross proceeds from the Offering was used by Sparkling Spring to repay the entire principal amount and accrued interest outstanding under the Existing Credit Facility. See "The Offering." Upon the repayment of the Existing Credit Facility, the pledges were terminated. In connection with their purchase of shares of common stock of SSWL, Stephen L. Larson and Stewart E. Allen incurred indebtedness to the Company in the amounts of $122,000 and $108,000, respectively. In connection with the Reorganization, the shares were subsequently exchanged for shares of Common Stock of Sparkling Spring. See "-- Reorganization." The loans bear interest at a rate of 7% per annum and mature on January 31, 1998. Each of the borrowers has pledged his shares of Common Stock to the Company to secure his loan. On June 6, 1994, trusts formed for the benefit of Lucy M. Stitzer, a Director of Sparkling Spring, and her sister, Alexandra M. Daitch, together with their father, W. Duncan MacMillan, loaned SSWL an aggregate of $1,300,000. In return for the loan, SSWL issued its unsecured redeemable subordinated notes, bearing interest at a rate of 8% per annum, and warrants to purchase an aggregate of 60,099 shares of common stock of SSWL. On January 18, 1996, the Company redeemed the unsecured redeemable subordinated notes and the attached warrants for a cash consideration of $1,816,041. 66 73 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the ownership of Common Stock of Sparkling Spring after giving effect to the Reorganization, with respect to (i) each person known by the Company to own beneficially more than 5.0% of the outstanding shares of Common Stock, (ii) each of the Sparkling Spring's directors, (iii) each person named in the Summary Compensation Table and (iv) all directors and officers as a group. Except as otherwise indicated, each of the shareholders has sole voting and investment power with respect to the shares of Common Stock beneficially owned. Unless otherwise indicated, the address for each shareholder is in care of the Company, 19 Fielding Avenue, Dartmouth Nova Scotia, Canada B3B-1C9. After giving effect to the Reorganization, there were outstanding an aggregate of 1,392,688 shares of Common Stock and an aggregate of 252,197 options and warrants to purchase shares of Common Stock. All shares of Common Stock issuable upon exercise of options and warrants are not entitled to vote on matters submitted to a vote of the shareholders of Sparkling Spring.
BENEFICIAL OWNERSHIP(1) ------------------------ SHARES OF NAME OF BENEFICIAL OWNER COMMON STOCK PERCENT - ------------------------------------------------------------------- ------------ ------- Gaspar Limited..................................................... 713,300(2) 50.9% c/o Cartrust Corporated Limited White Park House White Park Road Bridgetown, Barbados Clairvest Group Inc................................................ 423,190 30.4% 22 St. Clair Avenue East Toronto, Ontario G. John Krediet.................................................... 8,250(3) * Stephen L. Larson.................................................. 172,996(4) 12.0% Stewart E. Allen................................................... 110,378(5) 7.4% Lucy M. Stitzer.................................................... 94,010 6.8% Michael Bregman.................................................... --(6) -- Kenneth B. Rotman.................................................. --(7) -- C. Sean Day........................................................ 8,994 * All Directors and Executive Officers as a Group (7 persons)........ 1,099,678 70.5%
- --------------- * Less than one percent. (1) Shares of Common Stock which an individual or group has a right to acquire at any time pursuant to the exercise of options or warrants, whether or not currently vested or exercisable, are deemed to be outstanding for the purpose of computing the percentage ownership of that individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Information in this Prospectus regarding the ownership of the Common Stock of Sparkling Spring is calculated in accordance with the foregoing methodology. (2) Gaspar Limited is a Barbados corporation wholly-owned by a trust organized for the benefit of G. John Krediet and his children. Includes 8,250 shares of Common Stock issuable upon exercise of options held by Mr. Krediet. (3) Includes 8,250 shares of Common Stock issuable upon exercise of options. Does not include shares owned by Gaspar Limited. (4) Includes 53,787 shares of Common Stock issuable upon exercise of options. (5) Includes 104,706 shares of Common Stock issuable upon exercise of options. (6) Excludes 423,190 shares held by Clairvest Group Inc., of which Mr. Bregman is the Vice Chairman and a Director, and with respect to which Mr. Bregman disclaims beneficial ownership. (7) Excludes 423,190 shares held by Clairvest Group Inc., of which Mr. Rotman is a Managing Director, and with respect to which Mr. Rotman disclaims beneficial ownership. 67 74 DESCRIPTION OF THE CREDIT AGREEMENT The Company intends to enter into a credit agreement (the "Credit Agreement") for the purposes of financing its future acquisitions and providing for its ongoing working capital requirements. The Company has received proposals from BT Bank of Canada and Toronto Dominion Bank with respect to the terms and conditions of a proposed Credit Agreement. The proposed Credit Agreement is anticipated to be structured as a multi-currency revolving credit facility having a term of five years. The Indenture specifically permits the Company to enter into a senior credit facility providing borrowing availability of up to $30.0 million and also provides for additional general borrowing capacity of $10.0 million, all or a portion of which may be incurred under such credit facility. The Company's payment obligations under the proposed Credit Agreement would be secured by a first priority security interest granted in favor of the lenders in substantially all of the assets of the Company. Amounts outstanding under the proposed Credit Agreement would bear interest at specified rates. The Company would be required to prepay its outstanding loans from: (i) the cash proceeds derived from the sale or other disposition of any of its properties or assets other than in the ordinary course of its business; (ii) the net cash proceeds received from its issuance of debt or equity securities; or (iii) a portion of its excess cash flow (as defined) for each year. It is expected that the Credit Agreement will contain financial and other covenants customary for agreements of this type, including limitations on liens, indebtedness, contingent obligations, mergers and acquisitions, investments, loans, asset sales, leases, transactions with affiliates and capital expenditures. Events of default under the proposed Credit Agreement would include, among others, (i) failure of the Company to make payments when due, (ii) defaults under certain other evidences of indebtedness, (iii) non-compliance with covenants, (iv) breaches of representations and warranties, (v) bankruptcy, (vi) changes of control (as defined) and (vii) material invalidity or non-perfection of security interests in lender collateral. 68 75 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS TAX CONSEQUENCES OF THE EXCHANGE OFFER The following summary of the material anticipated Federal income tax consequences of the Exchange Offer is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the final, temporary and proposed regulations promulgated thereunder, and administrative rulings and judicial decisions now in effect, all of which are subject to change (possibly with retroactive effect) or different interpretations. Holders of Notes should note the following summary is not binding on the Internal Revenue Service (the "Service") and there can be no assurance that the Service will take a similar view with respect to the tax consequences described below. No ruling has been or will be requested by Sparkling Spring from the Service on any tax matters relating to the Private Notes of the Exchange Notes. This summary is not intended to be applicable to all categories of investors, some of which, such as dealers in securities, financial institutions, insurance companies and tax-exempt organizations may be subject to special rules. ALL HOLDERS OF NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES. The exchange of the Exchange Notes for the Private Notes pursuant to the Exchange Offer should not be treated as an "exchange" for federal income tax purposes because Exchange Notes should not be considered to differ materially in kind or extent from Private Notes. Rather, Exchange Notes received by a holder should be treated as a continuation of Private Notes in the hand of such holder. As a result, there should be no federal income tax consequences to holders exchanging Private Notes for the Exchange Notes pursuant to the Exchange Offer. If, however, the exchange of the Private Notes for the Exchange Notes were treated as an "exchange" for federal income tax purposes, such exchange should constitute a recapitalization for federal income tax purposes. Holders exchanging the Private Notes pursuant to such recapitalization should not recognize any gain or loss upon the exchange. 69 76 DESCRIPTION OF THE NOTES The Notes were issued under an indenture (the "Indenture"), dated November 19, 1997, among the Company, the Subsidiary Guarantors and Bankers Trust Company, as Trustee (the "Trustee"). The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture. A copy of the Indenture may be obtained from the Company or the Initial Purchasers. The definitions of certain capitalized terms used in the following summary are set forth below under "-- Certain Definitions." For purposes of this section, references to the "Company" include only Sparkling Spring and not its Subsidiaries. The Notes are unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Indebtedness of the Company. The Notes are issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof. Initially, the Trustee will act as Paying Agent and Registrar for the Notes. The Notes may be presented for registration or transfer and exchange at the offices of the Registrar, which initially will be the Trustee's corporate trust office. The Company may change any Paying Agent and Registrar without notice to holders of the Notes (the "Holders"). The Company will pay principal (and premium, if any) on the Notes at the Trustee's corporate office in New York, New York. At the Company's option, interest may be paid at the Trustee's corporate trust office or by check mailed to the registered address of Holders. Any Notes that remain outstanding after the completion of the Exchange Offer, together with the Exchange Notes issued in connection with the Exchange Offer, shall constitute a single class of securities under the Indenture. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $100,000,000 and will mature on November 15, 2007. Interest on the Notes will accrue at the rate of 11 1/2% per annum and will be payable semiannually in cash on each May 15 and November 15, commencing on May 15, 1998, to the persons who are registered Holders at the close of business on the May 1 and November 1 immediately preceding the applicable interest payment date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance. The Notes will not be entitled to the benefit of any mandatory sinking fund. REDEMPTION Optional Redemption. The Notes will be redeemable at the Company's option, in whole at any time or in part from time to time, on and after November 15, 2002, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on November 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption:
YEAR PERCENTAGE - ------------------------------------------------------ ---------- 2002.................................................. 105.750% 2003.................................................. 103.833% 2004.................................................. 101.917% 2005 and thereafter................................... 100.000%
Optional Redemption upon Public Equity Offerings. Notwithstanding the foregoing, at any time, or from time to time, on or prior to November 15, 2000, the Company may, at its option, redeem up to $30.0 million aggregate principal amount of the Notes originally issued with the net 70 77 cash proceeds of one or more Public Equity Offerings (as defined below) by the Company at a redemption price equal to 111.50% of the principal amount thereof, plus accrued interest to the date of redemption, provided that at least $70.0 million in aggregate principal amount of the Notes originally issued remains outstanding immediately following such redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 60 days after the consummation of any such Public Equity Offering. As used in the preceding paragraph, "Public Equity Offering" means an underwritten public offering of Qualified Capital Stock of the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act, or a comparable filing under the laws of any province of Canada, in either case yielding gross proceeds to the Company of at least $35.0 million. Optional Redemption upon the Occurrence of Certain Tax Events. In addition to the foregoing, the Notes are redeemable, in whole but not in part, at the option of the Company upon not less than 30 nor more than 60 days' notice mailed to each Holder at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption in the event the Company has become obligated to pay Additional Amounts in respect of the Notes pursuant to the provisions set forth in "-- Taxation; Redemption for Tax Reasons," and such obligation cannot be avoided by the Company taking reasonable measures available to it, such obligation did not arise, directly or indirectly, from any transaction, action or omission by the Company (whether or not such transaction, action or omission is otherwise permitted under the terms of the Indenture) and certain other conditions are satisfied. See "-- Taxation; Redemption for Taxation Reasons." SELECTION AND NOTICE OF REDEMPTION In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed or, if such Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; provided further, however, that if a partial redemption is made with the proceeds of a Public Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to the Indenture. SUBORDINATION The payment of all Obligations on the Notes is subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Indebtedness whether outstanding on the Issue Date, or thereafter incurred including, without limitation, the Company's obligations under the Credit Agreement. Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Indebtedness shall first be paid in full in cash or Cash 71 78 Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Indebtedness, before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition of any of the Notes for cash or property or otherwise. No direct or indirect payment by or on behalf of the Company of principal of, premium, if any, or interest on, the Notes whether pursuant to the terms of the Notes or upon acceleration or otherwise shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of principal of, premium, if any, or interest on, any Designated Senior Indebtedness (and the Trustee has received written notice thereof), and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Designated Senior Indebtedness. In addition, if any other event of default occurs and is continuing with respect to any Designated Senior Indebtedness, as such event of default is defined in the instrument creating or evidencing such Designated Senior Indebtedness, permitting the holders of such Designated Senior Indebtedness then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Senior Indebtedness gives written notice of the event of default to the Trustee (a "Default Notice"), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice from the Representative for the respective issue of Designated Senior Indebtedness terminating the Blockage Period (as defined below), during the 179 days after the delivery of such Default Notice (the "Blockage Period"), neither the Company nor any other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on the Notes or (y) acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 179 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Indebtedness shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Senior Indebtedness whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). By reason of such subordination, in the event of the insolvency of the Company, creditors of the Company who are not holders of Senior Indebtedness, including the Holders of the Notes, may recover less, ratably, than holders of Senior Indebtedness. As of September 30, 1997, on a pro forma basis, after giving effect to the Offering and the application of the net proceeds therefrom, the Company would have had no Senior Indebtedness outstanding. However, the Indenture permits the Company to enter into a senior credit facility providing borrowing availability of up to $30.0 million and also provides for additional borrowing capacity of $10.0 million, all or a portion of which may be incurred under such credit facility and which would constitute Senior Indebtedness or Guarantor Senior Indebtedness. GUARANTEES Each Subsidiary Guarantor has unconditionally guaranteed, on a senior subordinated basis, jointly and severally, to each Holder and the Trustee, the full and prompt performance of the Company's obligations under the Indenture and the Notes, including the payment of principal of and interest on the Notes. The Guarantees are subordinated to Guarantor Senior Indebtedness on the same basis as the Notes are subordinated to Senior Indebtedness. As of September 30, 1997, on a pro forma basis after giving effect to the Offering and the application of the net proceeds therefrom, the Subsidiary Guarantors would have had approximately $1.5 million of Guarantor Senior Indebtedness outstanding. 72 79 The obligations of each Subsidiary Guarantor will be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, will result in the obligations of such Subsidiary Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal, state or other applicable law. In addition, the obligations of each Subsidiary Guarantor organized outside the United States will be limited to the maximum amount permitted under applicable Canadian, English, Scottish or other foreign law. Each Subsidiary Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Subsidiary Guarantor in an amount pro rata, based on the net assets of each Subsidiary Guarantor, determined in accordance with GAAP. Each Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Company or another Subsidiary Guarantor that is a Wholly Owned Subsidiary without limitation, or with or to the Persons upon the terms and conditions set forth in the Indenture. See "-- Certain Covenants -- Merger, Consolidation and Sale of Assets." In the event all of the Capital Stock of a Subsidiary Guarantor is sold by the Company and/or one or more of its Subsidiaries and the sale complies with the provisions set forth in "-- Certain Covenants -- Limitation on Asset Sales," such Subsidiary Guarantor will be released from all of its obligations under its Guarantee. The Subsidiary Guarantors are Wholly Owned Subsidiaries of the Company and are jointly and severally liable with respect to the Company's Obligations pursuant to the Notes. In addition, the aggregate assets, liabilities, earnings and equity of the Subsidiary Guarantors are substantially equivalent to the assets, liabilities, earnings and equity of the Company on a consolidated basis. Accordingly, the separate financial statements of the Subsidiary Guarantors are not included herein because the Company has determined that they would not be material to investors. CHANGE OF CONTROL The Indenture provides that upon the occurrence of a Change of Control, each Holder will have the right to require that the Company purchase all or a portion of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. The Indenture provides that, prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full all indebtedness, and terminate all commitments, under the Credit Agreement and all other Senior Indebtedness the terms of which require repayment upon a Change of Control or offer to repay in full all indebtedness, and terminate all commitments, under the Credit Agreement and all other such Senior Indebtedness and to repay the Indebtedness owed to each lender which has accepted such offer or (ii) obtain the requisite consents under the Credit Agreement and all other Senior Indebtedness to permit the repurchase of the Notes as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described below. The Company's failure to comply with the second preceding sentence shall be governed by clause (iii), and not clause (iv), of "Events of Default" below. Within 30 days following the date upon which a Change of Control occurs, the Company must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of 73 80 the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change of Control purchase price for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event the Company is required to purchase outstanding Notes pursuant to a Change of Control Offer, the Company expects that it would need to seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Company would be able to obtain any such financing. Neither the Board of Directors of the Company nor the Trustee may waive the covenant relating to a Holder's right to redemption upon a Change of Control. Restrictions in the Indenture described herein on the ability of the Company and its Subsidiaries to incur additional Indebtedness, to grant liens on its property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the management of the Company. Consummation of any such transaction in certain circumstances may require redemption or repurchase of the Notes, and there can be no assurance that the Company or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged buyout of the Company or any of its Subsidiaries by the management of the Company. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the Holders of Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof. The definition of the term "Change of Control" includes a phrase relating to the sale, lease, exchange, transfer or other disposition of "all or substantially all" of the assets of the Company and its Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder to require the Company to repurchase its Notes as a result of a sale, lease, exchange, transfer or other disposition of less than all of the assets of the Company and its Subsidiaries to another Person or Group may be uncertain. CERTAIN COVENANTS The Indenture will contain, among others, the following covenants: Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur"), any Indebtedness (including, without limitation, Acquired Indebtedness) other than Permitted Indebtedness. Notwithstanding the foregoing, if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, (x) the Company may incur Senior Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.25 to 1.0 if such incurrence occurs on or prior to December 31, 1999 and 74 81 2.50 to 1.0 if such incurrence occurs thereafter and (y) the Company may otherwise incur Indebtedness (which does not constitute Senior Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0 if such incurrence occurs on or prior to December 31, 1999 and 2.25 to 1.0 if such incurrence occurs thereafter. Prior to any incurrence of Indebtedness pursuant to the last sentence of the preceding paragraph (other than Permitted Indebtedness), the Company shall deliver to the Trustee an Officer's Certificate setting forth the calculations by which such incurrence was determined to be permitted. Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions made to the Company or any Wholly-Owned Subsidiary of the Company and other than any dividend or distribution payable solely in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock (other than the exchange of such Capital Stock or any warrants, rights or options to acquire shares of any class of Capital Stock of the Company for Qualified Capital Stock of the Company), (c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or a Subsidiary Guarantor that is subordinate or junior in right of payment to the Notes or such Subsidiary Guarantor's Guarantee or (d) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing, or (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant above, or (iii) the aggregate amount of all Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of Directors of the Company) shall exceed the sum of: (v) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned during the period beginning on the first day of the fiscal quarter including the Issue Date and ending on the last day of the fiscal quarter ending at least 30 days prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (w) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company, including treasury stock; plus (x) without duplication of any amounts included in clause (iii) (w) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding, in the case of clauses (iii) (w) and (x), any net cash proceeds from a Public Equity Offering to the extent used to redeem the Notes and any net cash proceeds received by the Company from the sale of Qualified Capital Stock of the Company or equity contribution which has been financed, directly or indirectly, using funds (1) borrowed from the Company or any of its Subsidiaries, unless and until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Company or by any of its Subsidiaries); plus (y) to the extent that any Investment made after the Issue Date has been treated as a Restricted Payment and such Investment is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Investment (less the cost of disposition, if any) (but only to the extent not included in clause (iii)(v) above), and (B) the initial amount of such Investment. 75 82 Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph shall not prohibit: (1) the payment of any dividend or consummation of irrevocable redemption within 60 days after the date of declaration of such dividend or giving of irrevocable redemption notice if the dividend or redemption would have been permitted on the date of declaration or giving of irrevocable redemption notice; (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (A) shares of Qualified Capital Stock of the Company or (B) Refinancing Indebtedness; (4) if no Default or Event of Default shall have occurred and be continuing, payments by the Company to repurchase Capital Stock or other securities of the Company from shareholders of the Company (other than Permitted Holders) in an aggregate amount not to exceed $500,000 in any calendar year and $2,500,000 in the aggregate; and (5) during the period ending 60 days after the Issue Date, the application of the proceeds of the Offering to fund the Reorganization in an amount not to exceed the amount set forth in "Use of Proceeds" above. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, amounts expended pursuant to clauses (1), (2) (ii), and (3) (ii) (A) shall be included in such calculation. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officer's Certificate stating that such Restricted Payment complies with the Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. Limitation on Asset Sales. The Company will not, and will not cause or permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company or the applicable Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors); (ii) at least 75% of the consideration received by the Company or the Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; and (iii) upon the consummation of an Asset Sale, the Company shall apply, or cause such Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either (A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness and, in the case of any Senior Indebtedness or Guarantor Senior Indebtedness under any revolving credit facility, effect a permanent reduction in the commitment available under such revolving credit facility, (B) to make an investment in properties and assets that replace the properties and assets that were the subject of such Asset Sale or in properties and assets that will be used in the business of the Company and its Subsidiaries as existing on the Issue Date or in businesses reasonably related thereto (as determined in good faith by the Company's Board of Directors) ("Replacement Assets"), or (C) a combination of prepayment and investment permitted by the foregoing clauses (iii) (A) and (iii) (B). Pending final application, the Company or the applicable Subsidiary may temporarily reduce Indebtedness under any revolving credit facility or invest in cash or Cash Equivalents. On the 361st day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii) (A), (iii) (B) and (iii) (C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which the Company or such Subsidiary has failed to apply on or before such Net Proceeds Offer Trigger Date as permitted in clauses (iii) (A), (iii) (B) and (iii) (C) of the next 76 83 preceding sentence (each, a "Net Proceeds Offer Amount") shall be applied by the Company or such Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. The Company or any such Subsidiary of the Company, as the case may be, may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5.0 million, shall be applied as required pursuant to this paragraph). Notwithstanding the immediately preceding paragraph, the Company and its Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Replacement Assets and/or Cash Equivalents and (ii) such Asset Sale is for fair market value; provided, however, that any consideration not constituting Replacement Assets received by the Company or any of its Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the preceding paragraph. Notice of each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law. To the extent the amount of Notes tendered is less than the offer amount, the Company may use the remaining Net Proceeds Offer Amount for general corporate purposes and such Net Proceeds Offer Amount shall be reset to zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the Indenture by virtue thereof. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of the Company to (a) pay dividends or make any other distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Subsidiary of the Company; or (c) transfer any of its property or assets to the Company or any other Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) the Indenture; (3) the Credit Agreement; (4) non-assignment provisions of any contract or any lease governing a leasehold interest of any Subsidiary of the Company; (5) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or 77 84 assets of any Person, other than the Person or the properties or assets of the Person so acquired; (6) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; or (7) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (3), (5) or (6) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company or to the Holders in any material respect as determined by the Board of Directors of the Company in its reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (3), (5) or (6), respectively. Limitation on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the Company. Limitation on Liens. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes or any Guarantee, the Notes and such Guarantee, as the case may be, are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Notes and the Guarantees are equally and ratably secured, except for (A) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (B) Liens securing Senior Indebtedness; (C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a Wholly Owned Subsidiary of the Company on assets of any Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens (1) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and (2) do not extend to or cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so Refinanced (other than property or assets subject to Liens under clause (B) above); and (F) Permitted Liens. Prohibition on Incurrence of Senior Subordinated Debt. The Company will not incur or suffer to exist Indebtedness that by its terms is senior in right of payment to the Notes and subordinate in right of payment to any other Indebtedness of the Company. No Subsidiary Guarantor shall incur or suffer to exist Indebtedness that by its terms is senior in right of payment to the Guarantees and subordinate in right of payment to any other Indebtedness of such Subsidiary Guarantor. Merger, Consolidation and Sale of Assets. The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and its Subsidiaries) unless: (i) either (1) the Company shall be the surviving or continuing corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia or the federal laws of Canada or any province thereof and (y) shall expressly assume as primary obligor, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual 78 85 payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, the Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed, as the case may be; (ii) immediately after giving effect to such transaction and the assumption contemplated by clause (i) (2) (y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to such transaction and (2) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the "-- Limitation on Incurrence of Additional Indebtedness" covenant; (iii) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (i) (2) (y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (iv) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee an officer's certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Subsidiaries of the Company the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. The Indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes with the same effect as if such surviving entity had been named as such. Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and the Indenture in connection with any transaction complying with the provisions of the Indenture described under "-- Limitation on Asset Sales") will not, and the Company will not cause or permit any Subsidiary Guarantor to, consolidate with or merge with or into any Person other than the Company or another Subsidiary Guarantor that is a Wholly Owned Subsidiary unless: (a) the entity formed by or surviving any such consolidation or merger (if other than the Subsidiary Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia or the federal laws of Canada or any province thereof; (b) such entity assumes by execution of a supplemental indenture all of the obligations of the Subsidiary Guarantor under its Guarantee; (c) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (d) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the Company could satisfy the provisions of clause (ii) of the first paragraph of this covenant. Any merger or consolidation of a Subsidiary Guarantor with and into the Company (with the Company being the surviving entity) or another Subsidiary Guarantor that is a Wholly Owned Subsidiary need only comply with clause (iv) of the first paragraph of this covenant. Limitations on Transactions with Affiliates. (a) The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of 79 86 any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained or are obtainable in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $1.0 million shall be evidenced by an Officer's Certificate certifying that such transaction complies with the foregoing provisions. If the Company or any Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $10.0 million, the Company or such Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. (b) The restrictions set forth in clause (a) shall not apply to (i) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees, consultants or agents of the Company or any Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Wholly Owned Subsidiaries or exclusively between or among such Wholly Owned Subsidiaries, provided such transactions are not otherwise prohibited by the Indenture; (iii) any agreement as in effect as of the Issue Date (including, without limitation, the Management Agreement and the Shareholder Agreement) or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) or in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; and (iv) Restricted Payments permitted by the Indenture. Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Subsidiary that is not a Subsidiary Guarantor, or if the Company or any of its Subsidiaries shall organize, acquire or otherwise invest in another Subsidiary, then such transferee or acquired or other Subsidiary shall (a) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes and the Indenture on the terms set forth in the Indenture and (b) deliver to the Trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Subsidiary. After the execution and delivery of such supplemental indenture, such Subsidiary shall be a Subsidiary Guarantor for all purposes of the Indenture. Conduct of Business. The Company will not and will not cause or permit any of its Subsidiaries to engage in any businesses other than the businesses in which the Company is engaged on the Issue Date, and any businesses reasonably related thereto (as determined in good faith by the Company's Board of Directors). Reports to Holders. The Company will file with the Commission all information, documents and reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such filing requirements. The Company will file with the Trustee, within 15 days after it files them with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Company files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Regardless of whether the Company is required to furnish such reports to its stockholders pursuant to the Exchange Act, the Company will cause its consolidated financial statements, comparable to that which would have 80 87 been required to appear in annual or quarterly reports, to be delivered to the Trustee and the Holders. The Company will also make such reports available to prospective purchasers of the Notes or the Exchange Notes, as applicable, securities analysts and broker-dealers upon their request. In addition, the Indenture will require that for so long as of the Notes remain outstanding the Company will make available to any prospective purchaser of the Notes or beneficial owner of the Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act, until such time as the Company has either exchanged the Notes for securities identical in all material respects which have been registered under the Securities Act or until such time as the holders thereof have disposed of such Notes pursuant to an effective registration statement filed by the Company. The Company will also comply with the other provisions of TIA sec. 314(a). EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default": (i) the failure to pay interest (including Additional Interest, if any) on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by the subordination provisions of the Indenture); (ii) the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon acceleration, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by the subordination provisions of the Indenture); (iii) a default in the observance or performance of any other covenant or agreement contained in the Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to the "Merger, Consolidation and Sale of Assets" covenant, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); (iv) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, aggregates $10.0 million or more at any time; (v) one or more judgments in an aggregate amount in excess of $10.0 million shall have been rendered against the Company or any of its Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; (vi) certain events of bankruptcy affecting the Company or any of its Significant Subsidiaries; (vii) any of the Guarantees cease to be in full force and effect or any of the Guarantees are declared to be null and void or invalid and unenforceable or any of the Subsidiary Guarantors denies or disaffirms its liability under its Guarantee (other than by reason of the release of a Subsidiary Guarantor in accordance with the terms of the Indenture). If an Event of Default (other than an Event of Default specified in clause (vi) above) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of 81 88 Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the Credit Agreement, shall become due and payable upon the first to occur of an acceleration under the Credit Agreement, or five business days after receipt by the Company and the Representative under the Credit Agreement of such Acceleration Notice, unless all Events of Default specified in such Acceleration Notice (other than any Event of Default in respect of non-payment of principal) shall have been cured or waived. In the event of a declaration because an Event of Default set forth in clause (iv) of the preceding paragraph has occurred and is continuing, such declaration of acceleration shall be automatically annulled if the missed payments in respect of such Indebtedness have been paid or if the holders of the Indebtedness that is subject to acceleration have rescinded their declaration of acceleration and the Trustee has received written notice of such Indebtedness having been repaid in full, in each case within 60 days thereof and if (i) the annulment of such acceleration would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default, except non-payment of principal or interest which have become due solely because of the acceleration, have been cured or waived and (iii) the Company has delivered an Officer's Certificate to the Trustee to the effect of clauses (i) and (ii) above. If an Event of Default specified in clause (vi) above occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Indenture provides that, at any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in clause (vi) of the description above of Events of Default, the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. The Holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture and under the TIA. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have offered to the Trustee reasonable indemnity. Subject to all provisions of the Indenture and applicable law, the Holders of a majority in aggregate principal amount of the then outstanding Notes have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. Under the Indenture, the Company is required to provide an officers' certificate to the Trustee promptly upon any such officer obtaining knowledge of any Default or Event of Default (provided that such officers shall provide such certification at least annually whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof. 82 89 LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have its obligations and the corresponding obligations of the Subsidiary Guarantors discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, except for (i) the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments, (iii) the rights, powers, trust, duties and immunities of the Trustee and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and its Subsidiaries released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including nonpayment, bankruptcy, receivership, reorganization and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in United States dollars, non-callable United States government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) (w) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (x) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and, in either case, that the Holders will be subjected to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred and (B) an opinion of counsel in Canada reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for Canadian federal income tax purposes as a result of such Legal Defeasance and will be subject to Canadian federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee (A) an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred and (B) an opinion of counsel in Canada reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for Canadian federal income tax purposes as a result of such Covenant Defeasance and will be subject to Canadian federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes concurrently with such incurrence); (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party 83 90 or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (vii)the Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; (viii) the Company shall have delivered to the Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Indebtedness of the Company other than the Notes and (B) after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (ix) certain other customary conditions precedent are satisfied. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. MODIFICATION OF THE INDENTURE From time to time, the Company, the Subsidiary Guarantors and the Trustee, without the consent of the Holders, may amend the Indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel. Other modifications, waivers and amendments of the Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture, except that, without the consent of each Holder affected thereby, no amendment or waiver may: (i) reduce the amount of Notes whose Holders must consent to an amendment; (ii) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes; (iii) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (iv) make any Notes payable in money other than that stated in the Notes; (v) make any change in provisions of the Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default; (vi) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to 84 91 any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto; (vii) modify or change any provision of the Indenture or the related definitions affecting the subordination or ranking of the Notes or any Guarantee in a manner which adversely affects the Holders; (viii) modify or amend the obligation of the Company to pay Additional Amounts; or (ix) release any Subsidiary Guarantor from any of its obligations under its Guarantee or the Indenture other than in accordance with the terms of the Indenture. TAXATION; REDEMPTION FOR TAXATION REASONS All payments by the Company in respect of the Notes or any Subsidiary Guarantor in respect of its Guarantee shall be made free and clear of and without withholding or deduction for or on account of any present or future taxes, duties, assessments or other governmental charges of whatever nature, including penalties, interest and any other liabilities related thereto ("Taxes"), imposed or levied by or on behalf of Canada or any relevant jurisdiction or any political subdivision or authority thereof or therein having power to tax. The Indenture provides that if the Company or any Subsidiary Guarantor is required to make any withholding or deduction for or on account of any Taxes from any payment made under or with respect to the Notes or the Guarantees, the Company or such Subsidiary Guarantor, as the case may be, will pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount the Holder would have received had such Taxes not been withheld or deducted; provided, that no Additional Amounts will be payable to a Holder (an "Excluded Holder") (i) with which the Company does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment, (ii) which is subject to such Taxes by reason of its being connected with the jurisdiction imposing such tax or authority thereof otherwise than by the mere holding of the Notes or the receipt of payments thereunder, (iii) which presents any Note for payment of principal more than 60 days after the later of (x) the date on which payment first became due and (y) if the full amount payable has not been received by the Trustee on or prior to such due date, the date on which, the full amount payable having been so received, notice to that effect shall have been given to the Holders by the Trustee, except to the extent that the Holder would have been entitled to such Additional Amounts on presenting such Note for payment on the last day of the applicable 60-day period, (iv) which failed to duly and timely comply with a timely request of the Company to provide information, documents or other evidence concerning the Holder's nationality, residence, entitlement to treaty benefits, identity or connection with the jurisdiction imposing such tax, if and to the extent that due and timely compliance with such request would have reduced or eliminated any Taxes as to which Additional Amounts would have otherwise been payable to such Holder but for this clause (iv), (v) on account of any estate, inheritance, gift, sale, transfer, personal property or other similar Tax, (vi) which is a fiduciary, a partnership or not the beneficial owner of any payment on a Note, if and to the extent that any beneficiary or settlor of such fiduciary, any partner in such partnership or the beneficial owner of such payment (as the case may be) would not have been entitled to receive Additional Amounts with respect to such payment if such beneficiary, settlor, partner or beneficial owner had been the Holder of such Note or (vii) any combination of the foregoing numbered clauses of this proviso. The Company and each Subsidiary Guarantor will also (i) make such withholding or deduction as required by applicable law and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. The Company or any Subsidiary Guarantor, as the case may be, will furnish to the Trustee, within 60 days after the date the payment of any Taxes is due pursuant to applicable law, copies of tax receipts evidencing that such payment has been made by the Company or such Subsidiary Guarantor, in such form as provided in the normal course by the taxing authority imposing such Taxes and as is reasonably available to the Company or such Subsidiary Guarantor. The Trustee shall make such evidence available to the Holders of Notes upon request. 85 92 The Company and each Subsidiary Guarantor, jointly and severally, will indemnify and hold harmless each Holder of Notes that are outstanding on the date that withholding or deduction was required pursuant to applicable law (other than an Excluded Holder) and upon written notice reimburse each such Holder for the amount of (i) any taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Notes or the Guarantees, (ii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto and (iii) any taxes imposed with respect to any reimbursement under clause (i) or (ii) above. Whenever in the Indenture there is mentioned, in any context, (a) the payment of principal (and premium, if any), (b) purchase prices in connection with a repurchase of Notes, (c) interest or (d) any other amount payable on or with respect to any of the Notes, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this section to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. The foregoing obligations shall survive any termination of the Indenture or the defeasance of any obligations pursuant to the Indenture. The Company may redeem, at its option, all, but not less than all, the Notes at a redemption price equal to 100% of the principal amount so redeemed, plus accrued and unpaid interest, if any, thereon to the date of redemption if the Company determines and certifies to the Trustee immediately prior to the giving of the notice of redemption that (i) it has or will become obligated to pay any Additional Amounts in respect of the Notes as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Canada or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein affecting taxation, or any change in any official position regarding the application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction) which change, amendment, application or interpretation is announced or becomes effective on or after the Issue Date, (ii) such obligation cannot be avoided by the Company taking reasonable measures available to it, (iii) such obligation did not arise, directly or indirectly, from any transaction, action or omission by the Company (whether or not such transaction, action or omission is otherwise permitted under the terms of the Indenture) and (iv) certain other conditions set forth in the Indenture are satisfied. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. The Company will pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies that arise in any jurisdiction from the execution, delivery or registration of the Notes or the Guarantees or any other document or instrument referred to in the Indenture or the Notes. GOVERNING LAW The Indenture provides that it, the Notes and the Guarantees will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. ENFORCEABILITY OF JUDGMENTS Since a substantial portion of the assets of the Company and the Subsidiary Guarantors are outside the United States, any judgment obtained in the United States against them, including judgments with respect to the payment of principal, premium, if any, or interest on the Notes, may not be collectible within the United States. 86 93 The Company has been informed by its counsel, Stewart McKelvey Stirling Scales, that the laws of the province of Nova Scotia permit an action to be brought in a court of competent jurisdiction in the province of Nova Scotia (a "Canadian Court") on any final and conclusive judgment in personam of any federal or state court located in the Borough of Manhattan in the City of New York (a "New York Court") that is not impeachable as void or voidable under the internal laws of the State of New York for a sum certain if (i) the court rendering such judgment had jurisdiction over the judgment debtor, as recognized by a Canadian Court (and submission by the Company in the Indenture to the jurisdiction of the New York Court will be sufficient for the purpose); (ii) such judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be inconsistent with public policy, as such term is understood under the laws of the province of Nova Scotia; (iii) the enforcement of such judgment does not constitute, directly or indirectly, the enforcement of foreign revenue, expropriatory or penal laws; (iv) the action to enforce such judgment is commenced within six years of the date of such judgment; and (v) certain other conditions are satisfied. In the opinion of such counsel, a Canadian Court would not avoid enforcement of judgments of a New York Court respecting the Indenture, the Notes or the Guarantees on the basis of public policy, as that term is understood under the laws of the province of Nova Scotia and the federal laws of Canada applicable therein. Certain of the existing Subsidiary Guarantors are organized or operate outside the United States and Canada. In addition, the Company may form or acquire additional subsidiaries after the Issue Date that become Subsidiary Guarantors which are organized or conduct operations outside the United States or Canada. The ability of the Trustee or the holders of the Notes to enforce judgments against such Subsidiary Guarantors may be significantly limited by the application of foreign law. CONSENT TO JURISDICTION AND SERVICE The Indenture provides that each of the Company and the Subsidiary Guarantors will appoint CT Corporation System, 1633 Broadway, New York, New York 10019 as its agent for service of process in any suit, action or proceeding with respect to the Indenture, the Notes or the Guarantees and for actions brought under Federal or state securities laws brought in any Federal or state court located in the borough of Manhattan in the City of New York and will submit to such jurisdiction. THE TRUSTEE The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are specifically set forth in the Indenture. During the existence of an Event of Default, the Trustee will exercise such rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise as a prudent man or woman would exercise or use under the circumstances in the conduct of his own affairs. The Indenture and the provisions of the TIA contain certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payments of claims in certain cases or to realize on certain property received in respect of any such claim as security or otherwise. Subject to the TIA, the Trustee will be permitted to engage in other transactions; provided, however, that if the Trustee acquires any conflicting interest as described in the TIA, it must eliminate such conflict or resign. CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "Acquired Indebtedness" of a Person means Indebtedness of another Person or any of its Subsidiaries existing at the time such other Person becomes a Subsidiary of the referent Person or at the time it merges or consolidates with the referent Person or any of the referent Person's 87 94 Subsidiaries or is assumed by the referent Person or any Subsidiary of the referent Person in connection with the acquisition of assets from such other Person and in each case not incurred by such other Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the referent Person or such acquisition, merger or consolidation. "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise (and the terms "controlling" and "controlled" have meanings correlative of the foregoing); provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to constitute control. "Asset Acquisition" means (a) an Investment by the Company or any Subsidiary of the Company in any other Person pursuant to which such Person shall become a Subsidiary of the Company or any Subsidiary of the Company, or shall be merged with or into the Company or any Subsidiary of the Company, or (b) the acquisition by the Company or any Subsidiary of the Company of the assets of any Person (other than a Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Subsidiary of the Company of (a) any Capital Stock of any Subsidiary of the Company; or (b) any other property or assets of the Company or any Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sale shall not include (i) any transaction or series of related transactions for which the Company or its Subsidiaries receive aggregate consideration of less than $2.0 million in any twelve-month period, (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under "Merger, Consolidation and Sale of Assets" or any disposition that constitutes a Change of Control, and (iii) the sale, lease, conveyance, disposition or other transfer by the Company or any Subsidiary of assets or property to one or more Wholly Owned Subsidiaries in connection with Investments permitted under the "Limitation on Restricted Payments" covenant. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or the Canadian Government or issued by any agency 88 95 thereof and backed by the full faith and credit of the United States or Canada, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or province of Canada or any political subdivision of any such state or province or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or Canada or any province thereof or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means (i) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture); (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture); (iii) any Person or Group other than the Permitted Holders or a Group controlled by the Permitted Holders shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company; or (iv) the replacement of a majority of the Board of Directors of the Company from the directors who constituted the Board of Directors of the Company on the Issue Date, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors on the Issue Date or whose election as a member of such Board of Directors was previously so approved. "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business), (B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be 89 96 calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence or repayment of any Indebtedness of such Person or any of its Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Securities Act as in effect on the Issue Date) (provided that such Consolidated EBITDA shall be included only to the extent includable pursuant to the definition of "Consolidated Net Income") attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or, liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (i) the aggregate of the interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of debt discount, (b) the net costs under Interest Swap Obligations, (c) all capitalized interest and (d) the interest portion of any deferred payment obligation; and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP, minus amortization or write off of deferred financing costs. 90 97 "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided, however, that there shall be excluded therefrom (a) gains (and losses) on an after tax effected basis from asset sales or abandonments or reserves relating thereto, (b) items classified as extraordinary or nonrecurring gains or losses on an after tax effected basis, (c) the net income or loss of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Subsidiary of the referent Person, (d) the net income (but not loss) of any Subsidiary of the referent Person for such period to the extent that the declaration of dividends or similar distributions by that Subsidiary to the referent Person or any Subsidiary thereof of that income is restricted, directly or indirectly, by operation of the terms of its charter or constituent documents or any agreement, instrument, judgment, decree, law, order, statute, rule, governmental regulation or for any other reason whatsoever, (e) the net income or loss of any other Person, other than a Subsidiary of the referent Person, except to the extent (in the case of net income) of cash dividends or distributions paid to the referent Person, or to a Wholly Owned Subsidiary of the referent Person, by such other Person, (f) any restoration to income of any contingency reserve of an extraordinary, nonrecurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, (g) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), and (h) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets. "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to Disqualified Capital Stock of such Person. "Consolidated Non-cash Charges" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charge which requires an accrual of or a reserve for cash charges for any future period). "Credit Agreement" means any credit agreement or facility entered into on or after the Issue Date between the Company and/or any Subsidiary of the Company and one or more financial institutions that provides borrowing availability to the Company and its Subsidiaries on a senior secured basis, as any such agreement or facility may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided, however, that such increase in borrowings is permitted by the "Limitation on Incurrence of Additional Indebtedness" covenant above) or adding Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Subsidiary of the Company against fluctuations in currency values. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Designated Senior Indebtedness" means (i) Indebtedness under or in respect of the Credit Agreement and (ii) any other Indebtedness constituting Senior Indebtedness or Guarantor Senior Indebtedness which, at the time of determination, has an aggregate principal amount of at least $5.0 91 98 million and is specifically designated in the instrument evidencing such Senior Indebtedness or Guarantor Senior Indebtedness as "Designated Senior Indebtedness" by the Company or the applicable Subsidiary Guarantor, as the case may be. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof on or prior to the final maturity date of the Notes. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Except as otherwise specified in the Indenture, fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect on the Issue Date. "Guarantor Senior Indebtedness" means, with respect to any Subsidiary Guarantor, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of such Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantees. Without limiting the generality of the foregoing, "Guarantor Senior Indebtedness" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, to the extent such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations of every nature of a Subsidiary Guarantor under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all obligations under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include (i) any Indebtedness of a Subsidiary Guarantor to a Subsidiary of such Subsidiary Guarantor or any Affiliate of such Subsidiary Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability for federal, state, local or other taxes owed or owing by a Subsidiary Guarantor, (vi) Indebtedness incurred in violation of the Indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness," (vii) Indebtedness which, when incurred and without respect to any election under Section 1111 (b) of Title 11, United States Code is without recourse to a Subsidiary Guarantor and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of a Subsidiary Guarantor. 92 99 "Holder" means any holder of Notes. "Indebtedness" means with respect to any Person, without duplication, (i) all Obligations of such Person for borrowed money, (ii) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 60 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted), (v) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below, (vii) all Obligations of any other Person of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured, (viii) all Obligations under currency agreements and interest swap agreements of such Person and (ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. "Independent Financial Advisor" means a firm (i) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Subsidiary, as the case may be. For the purposes of the "Limitation on Restricted Payments" covenant, the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or writeoffs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided, however, that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be 93 100 included in Consolidated Net Income. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, greater than 50% of the outstanding Common Stock of such Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such former Subsidiary not sold or disposed of. "Issue Date" means the date of original issuance of the Notes. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Management Agreement" means the Management Agreement, dated December 16, 1993, as amended on October 22, 1997, among the Company, C.F. Capital Corporation, G. John Krediet and Stephen L. Larson. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Subsidiaries from such Asset Sale net of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c)repayment of Indebtedness that is required to be repaid in connection with such Asset Sale and (d) appropriate amounts to be provided by the Company or any Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer's Certificate" means, with respect to any Person, a certificate signed by the Chairman, Chief Executive Officer, the President or any Vice President and the Chief Financial Officer, Controller or any Treasurer of such Person that shall comply with applicable provisions of the Indenture. "Permitted Holders" means: (i) G. John Krediet, Stephen L. Larson, Stewart E. Allen, any trust solely for the benefit of G. John Krediet, Stephen L. Larson or Stewart E. Allen or any of their respective immediate family members, and any partnership all the partnership interests in which are, or holding company all the Capital Stock of which is, beneficially owned by any of the foregoing (including, without limitation, Gaspar Limited); provided that with respect to (a) any such partnership or holding company, G. John Krediet, Stephen L. Larson or Stewart E. Allen, as applicable, shall at all times have the exclusive power to direct, directly or indirectly, the voting of the Capital Stock of the Company held by such partnership or holding company and (b) any such trust, G. John Kredict, Stephen L. Larson or Stewart E. Allen or their immediate family members shall at all times either have the exclusive power to direct, directly or indirectly, the voting of the Capital Stock of the Company held by such trust or be the sole beneficiaries of such trust; and (ii) Clairvest Group Inc. ("Clairvest"). 94 101 "Permitted Indebtedness" means, without duplication, each of the following: (i) Indebtedness under the Notes, the Indenture and the Guarantees; (ii) Indebtedness of the Company or any of its Subsidiaries incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $30.0 million in the aggregate reduced by any required permanent repayments pursuant to the provisions set forth under "Certain Covenants -- Limitation on Asset Sales" (which are accompanied by a corresponding permanent commitment reduction) thereunder (it being recognized that a reduction in the borrowing base in and of itself shall not be deemed a required permanent repayment); (iii) Interest Swap Obligations of the Company covering Indebtedness of the Company or any of its Subsidiaries; provided, however, that such Interest Swap Obligations are entered into to protect the Company and its Subsidiaries from fluctuations in interest rates on Indebtedness incurred in accordance with the Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates; (iv) Indebtedness under Currency Agreements; provided, however, that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (v) Indebtedness of a Subsidiary to the Company or to a Wholly Owned Subsidiary of the Company for so long as such Indebtedness is held by the Company or a Wholly Owned Subsidiary of the Company, in each case subject to no Liens held by any Person other than the Company or a Wholly Owned Subsidiary of the Company; provided, however, that if as of any date any Person other than the Company or a Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (vi) Indebtedness of the Company to a Wholly Owned Subsidiary of the Company for so long as such Indebtedness is held by a Wholly Owned Subsidiary of the Company, in each case subject to no Lien; provided, however, that (a) any Indebtedness of the Company to any Wholly Owned Subsidiary of the Company is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under the Indenture and the Notes and (b) if as of any date any Person other than a Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company; (vii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within two business days of incurrence; (viii) Indebtedness of the Company or any of its Subsidiaries represented by letters of credit for the account of the Company or such Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (ix) Indebtedness existing on the date hereof; (x) Refinancing Indebtedness; 95 102 (xi) Indebtedness permitted by clause (viii) of the definition of "Permitted Investments"; and (xii) additional Indebtedness of the Company or any of its Subsidiaries in an aggregate principal amount not to exceed $10.0 million at any one time outstanding. "Permitted Investments" means (i) Investments by the Company or any Subsidiary of the Company in any Person that is or will become immediately after such Investment a Wholly-Owned Subsidiary of the Company or that will merge or consolidate into the Company or a Wholly-Owned Subsidiary of the Company; (ii) Investments in the Company by any Subsidiary of the Company; provided, however, that any Indebtedness evidencing such Investment by a Subsidiary is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under the Notes and the Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans and advances to employees and officers of the Company and its Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $500,000 at any one time outstanding; (v) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Subsidiaries' businesses and otherwise in compliance with the Indenture; (vi) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (vii) Investments made by the Company or its Subsidiaries as a result of non-cash consideration received in connection with an Asset Sale made in compliance with the "Limitation on Asset Sales" covenant; and (viii) additional Investments in an amount outstanding at any one time not to exceed $2.5 million. "Permitted Liens" means the following types of Liens: (i) Liens in favor of the Trustee in its capacity as trustee for the Holders; (ii) Liens securing Indebtedness outstanding under the Credit Agreement; (iii) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (iv) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (v) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (vi) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (vii) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; 96 103 (viii) any interest or title of a lessor under any Capitalized Lease Obligation; provided, however, that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation; (ix) Liens to secure Purchase Money Indebtedness of the Company or any Subsidiary not to exceed $5.0 million in the aggregate at any one time outstanding; provided, however, that (A) the related Purchase Money Indebtedness is permitted to be incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant, (B) the related Purchase Money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Subsidiary of the Company other than the property and assets so acquired and (C) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (x) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (xi) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (xii) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Subsidiaries, including rights of offset and set-off; (xiii) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the Indenture; (xiv) Liens securing Indebtedness under Currency Agreements; and (xv) Liens securing Acquired Indebtedness incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant; provided, however, that (A) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company and (B) such Liens do not extend to or cover any property or assets of the Company or of any of its Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Subsidiary of the Company and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company. "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Purchase Money Indebtedness" means Indebtedness the net proceeds of which are used to finance the cost (including the cost of construction) of property or assets acquired in the normal course of business by the Person incurring such Indebtedness. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. 97 104 "Receivables" means any right of payment from or on behalf of any obligor, whether constituting an account, chattel paper, instrument, general intangible or otherwise, arising from the financing by the Company or any Subsidiary of the Company of merchandise or services, and monies due thereunder, security in the merchandise and services financed thereby, records related thereto, and the right to payment of any interest or finance charges and other obligations with respect thereto, proceeds from claims on insurance policies related thereto, any other proceeds related thereto, and any other related rights. "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any Subsidiary of the Company of Indebtedness incurred in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant (provided that Refinancing Indebtedness shall not include Indebtedness described in clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (x), (xi) or (xii) of the definition of Permitted Indebtedness), in each case that does not (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company or such Subsidiary, as the case may be, in connection with such Refinancing), except to the extent that any such increase in Indebtedness is otherwise permitted by the Indenture or (2) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided, however, that (x) if such Indebtedness being Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Notes or the Guarantees, then such Refinancing Indebtedness shall be subordinate to the Notes or the Guarantees, as the case may be, at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Registration Rights Agreement" means the Registration Rights Agreement dated the Issue Date among the Company, the Subsidiary Guarantors and the Initial Purchasers. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Indebtedness; provided, however, that if, and for so long as, any Designated Senior Indebtedness lacks such a representative, then the Representative for such Designated Senior Indebtedness shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Indebtedness in respect of any Designated Senior Indebtedness. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of the Company of any property, whether owned by the Company or any Subsidiary of the Company at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "Senior Indebtedness" means, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the 98 105 instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Indebtedness" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, to the extent such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations of every nature of the Company under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all obligations under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) any Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability for federal, state, local or other taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of the Indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness," (vii) Indebtedness which, when incurred and without respect to any election under Section 1111 (b) of Title 11, United States Code is without recourse to the Company and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company. "Shareholder Agreement" means the Shareholder Agreement, dated as of October 22, 1997, among Sparkling Spring, SSWL, Clairvest, Gaspar Limited, C. Sean Day, Stephen L. Larson, Kevin Newman, Mark Stitzer, Lucy Stitzer, and Stewart E. Allen. "Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of Regulation S-X under the Securities Act. "Subsidiary", with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Subsidiary Guarantor" means (a) each of the Company's Subsidiaries as of the Issue Date and (b) each of the Company's Subsidiaries that in the future executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of the Indenture as a Subsidiary Guarantor; provided, however, that any Person constituting a Subsidiary Guarantor as described above shall cease to constitute a Subsidiary Guarantor when its Guarantee is released in accordance with the terms of the Indenture. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking, fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person of which all the outstanding voting securities normally entitled to vote in the election of directors are owned by such Person or any Wholly Owned Subsidiary of such Person. 99 106 BOOK ENTRY; DELIVERY AND FORM Except as described in the next paragraph, the Exchange Notes (and the related Guarantees) initially will be represented by one or more permanent global certificates in definitive, fully registered form (the "Global Notes"). The Global Notes will be deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC") and registered in the name of a nominee of DTC. Except as set forth below, each Global Note may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. THE GLOBAL NOTES The Company expects that pursuant to procedures established by DTC (i) upon the issuance of the Global Notes, DTC or its custodian will credit, on its internal system, the principal amount of Exchange Notes of the individual beneficial interests represented by such Global Notes to the respective accounts of persons who have accounts with such depositary and (ii) ownership of beneficial interests in the Global Notes will be shown on, and the transfer of such ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Ownership of beneficial interest in the Global Notes will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. So long as DTC, or its nominee, is the registered owner or holder of the Exchange Notes, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Exchange Notes represented by such Global Notes for all purposes under the Indenture. No beneficial owner of an interest in the Global Notes will be able to transfer that interest except in accordance with DTC's procedures, in addition to those provided for under the Indenture with respect to the Exchange Notes. Payments of the principal of, premium (if any) and interest (including Additional Interest) on the Global Notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Company, the Trustee or any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC or its nominee, upon receipt of any payment of principal, premium, if any, and interest (including Additional Interest) on the Global Notes, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Notes as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Notes held through such participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way through DTC's same-day funds system in accordance with DTC rules and will be settled in same day funds. If a holder requires physical delivery of certificates for Exchange Notes for any reason, including to sell Exchange Notes to persons in states that require physical delivery of the Exchange Notes, or to pledge such securities, such holder must transfer its interest in the Global Notes, in accordance with the normal procedures of DTC and with the procedures set forth in the Indenture. DTC has advised the Company that it will take any action permitted to be taken by a holder of Exchange Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of Exchange Notes as 100 107 to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Indenture, DTC will exchange the Global Notes for Certificated Securities, which it will distribute to its participants. DTC has advised the Company as follows: DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Notes among participants of DTC, it is under no obligation to perform such procedures and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. CERTIFICATED SECURITIES If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days, Certificated Securities will be issued in exchange for the Global Notes. PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account in exchange for Private Notes must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities. Sparkling Spring has agreed to make this Prospectus, as it may be amended or supplemented from time to time, available to any such broker-dealer that requests copies of this Prospectus in the Letter of Transmittal for use in connection with any such resale for a period of up to 90 days after the Expiration Date. In addition, until 1998, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. Sparkling Spring will not receive any proceeds from any sale of Exchange Notes by broker-dealers or any other persons. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes, or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such person may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a 101 108 prospectus a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 90 days after the Expiration Date, Sparkling Spring will promptly send additional copies of this Prospectus or any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. Sparkling Spring and the Subsidiary Guarantors have agreed to pay all expenses incident to Sparkling Spring's and the Subsidiary Guarantors' performance of, or compliance with, the Registration Rights Agreement and will indemnify the holders of Private Notes (including any broker-dealers), and certain parties related to such holders, against certain liabilities, including liabilities under the Securities Act. See "The Exchange Offer" for additional information concerning the Exchange Offer and interpretations of the staff of the Commission with respect to prospectus delivery obligations of broker-dealers. LEGAL MATTERS The validity of the Notes and the Guarantees offered hereby will be passed upon for Sparkling Spring and the Subsidiary Guarantors by Robinson & Cole LLP, Stamford, Connecticut. Certain legal matters governed by Canadian law will be passed upon for Sparkling Spring and the Subsidiary Guarantors by Stewart McKelvey Stirling Scales, Halifax, Nova Scotia. Robinson & Cole LLP may rely (i) as to matters governed by Canadian law, on the opinions of Stewart McKelvey Stirling Scales, (ii) as to matters of United Kingdom law, on the opinions of Norton Rose, London, England, (iii) as to matters of Scottish law, on the opinions of Dundas & Wilson Edinburgh, Scotland, and (iv) as to matters of Washington law, on the opinions of Lane Powell Spears Lubersky LLP, Seattle, Washington. INDEPENDENT AUDITORS The consolidated financial statements of Sparkling Spring Water Limited as of December 31, 1996 and 1995 and for each of the years in the three year period ended December 31, 1996 included in this Prospectus have been audited by Ernst & Young, independent auditors, as stated in their report appearing herein. The financial statements of Canadian Springs Water Company Ltd. as of January 17, 1996 and for the 292 days then ended and as of March 31, 1995 and for the year then ended included in this Offering Memorandum have been audited by Ernst & Young, independent auditors, as stated in their report appearing herein. The financial statements of Cullyspring Water Co., Inc. as of December 31, 1996 and 1995 and for the years then ended included in this Offering Memorandum have been audited by Ernst & Young, independent auditors, as stated in their report appearing herein. The financial statements of D & D and Company, Inc. as of December 31, 1996 and for the year then ended included in this Offering Memorandum have been audited by Ernst & Young, independent auditors, as stated in their report appearing herein. The financial statements of Marlborough Employment Limited and Subsidiaries as of January 31, 1997 and 1996 and for the years then ended included in this Offering Memorandum have been audited by Kidsons Impey, independent auditors, as stated in their report appearing herein. 102 109 ADDITIONAL INFORMATION Sparkling Spring and the Subsidiary Guarantors have filed with the Commission a Registration Statement on Form F-4 (which together with any amendments thereto is referred to as the "Registration Statement") under the Securities Act with respect to the Exchange Notes and Guarantees offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus, which is part of the Registration Statement, omits certain information, exhibits and undertakings contained in the Registration Statement. For further information with respect to Sparkling Spring, the Subsidiary Guarantors and the Exchange Notes and Guarantees offered hereby, reference is made to the Registration Statement, including the exhibits thereto and the financial statements, notes and schedules filed as a part thereof. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to herein are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. Sparkling Spring will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the documents incorporated by reference herein (not including the exhibits to such documents, unless such exhibits are specifically incorporated by reference in such documents). Requests for such copies should be directed to Sparkling Spring at One Landmark Square, Stamford, Connecticut 06901, telephone number (203) 325-0077, attention: Stephen L. Larson. The Registration Statement (and the exhibits and schedules thereto) may be inspected and copies at the public reference section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Registration Statement (and the exhibits and schedules thereto) can also be reviewed through the Commission's Electronic Data Gathering, Analysis and Retrieval System, which is publicly available through the Commission's Web Site (http://www.sec.gov). The Indenture provides that Sparkling Spring will deliver to the Trustee under the Indenture within 15 days after the filing of the same with the Commission, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further provides that, notwithstanding that Sparkling Spring may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, Sparkling Spring will provide the Trustee under the Indenture, holders of Notes and QIBs which request such information from Sparkling Spring and indicate a bona fide interest in purchasing Notes, with consolidated financial statements of Sparkling Spring and a related "Management's Discussion and Analysis of Financial Condition and Results of Operations" comparable to those which would have been required to appear in quarterly or annual reports of Sparkling Spring and, to holders of Private Notes, any other information required under Rule 144A (d) (4) or any successor provision under the Securities Act. In addition, Sparkling Spring will provide the Trustee under the Indenture and holders of Notes with unaudited combined financial data of Sparkling Spring and the Subsidiary Guarantors, substantially in the form provided under the caption "Summary -- Summary Historical and Unaudited Pro Forma Consolidated Financial Data" in this Prospectus, for each fiscal year of Sparkling Spring and for the first three fiscal quarters of each fiscal year of Sparkling Spring. Sparkling Spring will also comply with the other provisions of TIA sec. 314(a). 103 110 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SPARKLING SPRING WATER GROUP LIMITED
PAGE ---- SPARKLING SPRING WATER GROUP LIMITED Auditors' Report to the Directors..................................................... F-4 Consolidated Balance Sheets as at December 31, 1996 and 1995.......................... F-5 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994................................................................................ F-6 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994....................................................................... F-7 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994................................................................................ F-8 Notes to Consolidated Financial Statements............................................ F-9 Unaudited Consolidated Balance Sheet as at September 30, 1997 and Comparative Balance Sheet as at December 31, 1996....................................................... F-22 Unaudited Consolidated Statement of Operations and Deficit for the nine months ended September 30, 1997 and 1996......................................................... F-23 Unaudited Consolidated Statement of Cash Flows for the nine months ended September 30, 1997 and 1996....................................................................... F-24 Notes to Unaudited Consolidated Financial Statements.................................. F-25 CANADIAN SPRINGS WATER COMPANY LTD. Auditors' Report to the Directors..................................................... F-28 Balance Sheets as at January 17, 1996 and March 31, 1995.............................. F-29 Statements of Income and Retained Earnings for the 292 days ended January 17, 1996 and the year ended March 31, 1995....................................................... F-30 Statements of Cash Flows for the 292 days ended December 31, 1996 and year ended March 31, 1995............................................................................ F-31 Notes to Financial Statements......................................................... F-32 CULLYSPRING WATER CO., INC. Auditors' Report to the Directors..................................................... F-38 Balance Sheets as at December 31, 1996 and December 31, 1995.......................... F-39 Statements of Income for the years ended December 31, 1996 and 1995................... F-40 Statements of Shareholders' Equity for the years ended December 31, 1996 and 1995..... F-41 Statements of Cash Flows for the years ended December 31, 1996 and 1995............... F-42 Notes to Financial Statements......................................................... F-43 Unaudited Balance Sheet as at September 30, 1997 with comparative figures as at December 31, 1996................................................................... F-46 Unaudited Statements of Income and Retained Earnings for the nine months ended September 30, 1997 and 1996......................................................... F-47 Unaudited Statements of Cash Flows for the nine months ended September 30, 1997 and 1996................................................................................ F-48 Notes to Unaudited Financial Statements............................................... F-49
F-1 111
PAGE ---- D & D AND COMPANY, INC. (Operating as Mountain Fresh Bottled Water) Auditors' Report to the Directors..................................................... F-51 Balance Sheet as at December 31, 1996................................................. F-52 Statement of Income for the year ended December 31, 1996.............................. F-53 Statement of Shareholders' Equity for the year ended December 31, 1996................ F-54 Statement of Cash Flows for the year ended December 31, 1996.......................... F-55 Notes to Financial Statements......................................................... F-56 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES(Operating as Water At Work Limited) Company Information................................................................... F-62 Director's Report..................................................................... F-63 Statement of Director's Responsibilities.............................................. F-64 Auditors' Report to the Members of Marlborough Employment Limited and Subsidiaries.... F-65 Profit and Loss Account for the years ended 31 January 1997 and 1996.................. F-66 Balance Sheets as at 31 January 1997 and 1996......................................... F-67 Cash Flow Statement for the years ended 31 January 1997 and 1996...................... F-68 Notes on Financial Statements......................................................... F-69
F-2 112 CONSOLIDATED FINANCIAL STATEMENTS SPARKLING SPRING WATER GROUP LIMITED F-3 113 AUDITORS' REPORT To the Directors of Sparkling Spring Water Group Limited We have audited the consolidated balance sheets of Sparkling Spring Water Group Limited as at December 31, 1996 and 1995 and the consolidated statements of operations, shareholders' equity and cash flows for each of the years in the three year period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1996 and 1995 and the results of its operations and the changes in its financial position for each of the years in the three year period ended December 31, 1996 in accordance with accounting principles generally accepted in the United States. Halifax, Canada ERNST & YOUNG November 19, 1997 Chartered Accountants
F-4 114 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED BALANCE SHEETS
PRO FORMA SHAREHOLDERS' EQUITY AS AT AS AT DECEMBER 31, DECEMBER 31, 1995 1996 1996 ----------- ----------- ------------- (UNAUDITED) [NOTE 2] ASSETS [note 11] Current Cash and cash equivalents................................. $ 860,298 $ 2,230,735 Accounts receivable (net of allowance for doubtful accounts of $210,058, 1995 -- $471,824 [note 5])........ 3,126,781 4,799,080 Inventories [note 6]...................................... 589,311 940,520 Prepaid expenses.......................................... 557,063 1,278,530 Current portion of deferred taxes......................... -- 95,681 ---------- ---------- Total current assets............................. 5,133,453 9,344,546 Deferred taxes............................................ 243,147 440,856 Fixed assets [note 7]..................................... 8,545,403 15,823,231 Goodwill and deferred charges [note 8].................... 4,598,952 18,800,535 ---------- ---------- Total assets..................................... $18,520,955 $44,409,168 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities.................. $ 2,436,523 $ 4,073,847 Income tax payable........................................ -- 76,890 Unearned revenue.......................................... 385,166 161,790 Debt due within one year [note 9]......................... 2,236,816 1,581,036 ---------- ---------- Total current liabilities........................ 5,058,505 5,893,563 ---------- ---------- Customer deposits......................................... 1,890,526 2,620,495 Obligations under capital leases [note 10]................ 814,685 1,926,325 Loans payable [note 11]................................... 5,904,841 26,966,493 Subordinated notes payable [note 12]...................... 2,353,068 -- ---------- ---------- Total long-term liabilities...................... 10,963,120 31,513,313 ---------- ---------- Non-controlling interest [note 4]......................... 292,465 -- ---------- ---------- Shareholders' equity [Notes 2 and 13] Capital Stock Authorized 1,000,000 Class A Voting Common Shares, par value Cdn $0.0001................................................. 1,000,000 Class B Voting Common Shares, par value Cdn $6.779.................................................. 1,000,000 Class C Voting Common Shares, par value Cdn $13.4699................................................ 10,000,000 Class D Voting Common Shares, without nominal or par value............................................ 10,000,000 Class E Non-Voting Common Shares, without nominal or par value.................................... 1,000,000 Class F Voting Common Shares, par value Cdn $0.9401................................................. 10,000,000 Special Preferred Shares, par value Cdn $1.00, issuable in series...................................... Issued and outstanding: Common shares 1,720,746 (1995 and 1994 -- 1,216,308)...... 1,607,218 8,641,048 7,185,356 Common share warrants, (1995 and 1994 -- 165,767)......... 1,136,730 -- -- ---------- ---------- ---------- 2,743,948 8,641,048 7,185,356 Cumulative translation adjustment......................... 85,864 (362,935) (362,935) Deficit................................................... (622,947) (1,275,821) (14,478,842) ---------- ---------- ---------- Total shareholders' equity....................... 2,206,865 7,002,292 (7,656,421) ---------- ---------- Total liabilities and shareholders' equity....... $18,520,955 $44,409,168 ========== ========== Commitments [note 10 and 16]
See accompanying notes F-5 115 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ------------------------------------------ 1994 1995 1996 ---------- ----------- ----------- Revenue: Water............................................ $5,594,853 $ 9,640,919 $16,809,749 Rental........................................... 2,202,941 4,135,650 7,347,386 Other............................................ 927,512 1,572,545 3,169,214 --------- ---------- ---------- Total revenue.......................... 8,725,306 15,349,114 27,326,349 --------- ---------- ---------- Cost of sales: Water............................................ 1,200,176 2,118,880 3,400,298 Other............................................ 554,375 743,867 1,275,321 --------- ---------- ---------- Total cost of sales.................... 1,754,551 2,862,747 4,675,619 --------- ---------- ---------- Gross profit..................................... 6,970,755 12,486,367 22,650,730 Expenses: Selling, delivery and administrative [note 18]... 5,355,969 9,040,529 15,756,452 Depreciation and amortization.................... 1,094,538 1,464,668 3,841,614 --------- ---------- ---------- Operating profit................................. 520,248 1,981,170 3,052,664 Interest expense................................. 624,532 1,294,371 2,481,005 --------- ---------- ---------- Income (loss) before the following............... (104,284) 686,799 571,659 Provision for (recovery of) income taxes [note 17]............................................ (6,943) 299,107 398,325 --------- ---------- ---------- Net (loss) income before non-controlling interest and extraordinary item......................... (97,341) 387,692 173,334 Non-controlling interest [note 4]................ 3,358 22,996 (6,894) --------- ---------- ---------- Net (loss) income before extraordinary items..... (93,983) 410,688 166,440 Extraordinary item [note 14]..................... (143,732) (391,626) (819,314) --------- ---------- ---------- Net (loss) income................................ $ (237,715) $ 19,062 $ (652,874) ========= ========== ========== Primary (loss) earnings per share before extraordinary item............................. $ (0.081) $ 0.291 $ 0.097 ========= ========== ========== Fully diluted earnings (loss) per share before extraordinary item............................. $ (0.081) $ 0.291 $ 0.095 ========= ========== ========== Primary (loss) earnings per share................ $ (0.206) $ 0.014 $ (0.445) ========= ========== ==========
See accompanying notes F-6 116 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 --------------------------------------------------------------------------- COMMON SHARE COMMON STOCK PURCHASE WARRANTS CUMULATIVE ---------------------- ---------------------- TRANSLATION SHARES AMOUNT WARRANTS AMOUNT ADJUSTMENT DEFICIT --------- ---------- -------- ----------- ----------- ----------- Balance December 31, 1993 as restated [note 3].......... 1,096,116 $1,136,034 -- $ -- $ 207,022 $ (404,294) Net loss..................... (237,715) Shares issued for cash....... 120,192 492,759 Common share purchase warrants issued in connection with subordinated notes [notes 12 and 13]................. 165,767 1,135,149 Foreign currency translation adjustments................ 2,602 --------- --------- -------- ---------- -------- ---------- Balance December 31, 1994.... 1,216,308 1,628,793 165,767 1,135,149 209,624 (642,009) Net income................... 19,062 Foreign currency translation adjustments................ (21,575) 1,581 (123,760) --------- --------- -------- ---------- -------- ---------- Balance December 31, 1995.... 1,216,308 1,607,218 165,767 1,136,730 85,864 (622,947) Net loss..................... (652,874) Redemption of common share purchase warrants [note 13]........................ (165,767) (1,136,730) Shares issued for cash....... 504,438 7,077,716 Foreign currency translation................ (43,886) (448,799) --------- --------- -------- ---------- -------- ---------- Balance December 31, 1996.... 1,720,746 $8,641,048 -- $ -- $(362,935) $(1,275,821) ========= ========= ======== ========== ======== ==========
See accompanying notes F-7 117 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, -------------------------------------------- 1994 1995 1996 ----------- ----------- ------------ OPERATING ACTIVITIES Net (loss) income.............................. $ (237,715) $ 19,062 $ (652,874) Items not requiring cash Depreciation and amortization................ 1,094,538 1,464,668 3,841,614 Deferred taxes............................... (57,439) 85,673 (293,390) Foreign exchange loss........................ 8,571 1,815 1,043 Non-controlling interest..................... (3,358) (22,996) 6,894 Amortization of deferred financing costs..... 38,113 460,951 -- Amortization of subordinated notes payable discount.................................. 57,238 130,824 -- ----------- ---------- ---------- 899,948 2,139,997 2,903,287 Net change in non-cash working capital balances [note 15].................................... (30,693) (766,406) (460,132) ----------- ---------- ---------- Cash provided by operating activities.......... 869,255 1,373,591 2,443,155 ----------- ---------- ---------- INVESTING ACTIVITIES Purchase of fixed assets....................... (1,437,435) (2,741,204) (7,272,814) Sale of fixed assets, net...................... 180,695 453,927 536,627 Acquisitions [note 4].......................... (6,322,571) (1,932,057) (17,432,167) Increase in deferred charges................... (451,737) (36,980) (190,462) ----------- ---------- ---------- Cash used in investing activities.............. (8,031,048) (4,256,314) (24,358,816) ----------- ---------- ---------- FINANCING ACTIVITIES Increase in customer deposits.................. 168,457 118,735 197,951 Increase in long-term debt..................... 5,300,176 4,456,924 20,893,151 Repayment of long-term debt.................... (3,019,277) (868,466) (1,239,400) Issuance of common shares...................... 492,759 -- 7,077,716 Issue of common shares by subsidiary to minority shareholders........................ 309,686 -- -- Issue (redemption) of common share warrants.... 1,135,149 -- (1,136,730) Issue (redemption) of subordinated notes payable...................................... 2,159,777 -- (2,159,777) Effect of translation on cash.................. (48,210) (31,421) (346,813) ----------- ---------- ---------- Cash provided by financing activities.......... 6,498,517 3,675,772 23,286,098 ----------- ---------- ---------- Increase (decrease) in cash and cash equivalents during the year.................. (663,276) 793,049 1,370,437 Cash and cash equivalents, beginning of year... 730,525 67,249 860,298 ----------- ---------- ---------- Cash and cash equivalents, end of year......... $ 67,249 $ 860,298 $ 2,230,735 =========== ========== ==========
See accompanying notes F-8 118 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 1. DESCRIPTION OF BUSINESS Sparkling Spring Water Group Limited ("Sparkling Spring") provides containered water to home and office markets in British Columbia and the Maritime provinces of Canada, England and Scotland. 2. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared on a historic cost basis by management in accordance with accounting principles generally accepted in the United States ("US GAAP"), the more significant of which are as follows: BASIS OF PRESENTATION On November 19, 1997, the shareholders of Sparkling Spring and Sparkling Spring Water Limited ("SSWL") approved a reorganization whereby the former shareholders of SSWL transferred their shares of SSWL to Sparkling Spring. As part of the reorganization, certain shareholders have reduced their interest in Sparkling Spring by exchanging their shares of common stock of SSWL for Common Stock of Sparkling Spring and cash or for cash only. Other shareholders exchanged their shares of common stock of SSWL for common stock of Sparkling Spring on a one-for-one basis. Subsequent to the reorganization, Sparkling Spring owns 100% of the issued and outstanding shares of SSWL. Authorized share capital is presented after giving effect to the reorganization. The reorganization has been accounted for using the continuity of interests method of accounting whereby the consolidated financial statements reflect the consolidated historical carrying value of the assets, liabilities and shareholders' equity, and the consolidated historical operating results of SSWL for each of the periods presented. Sparkling Spring was incorporated on October 22, 1997 and, accordingly, had no assets, liabilities or shareholders' equity or historical operating results for the periods presented. The pro forma shareholders' equity at December 31, 1996 gives effect to the maximum reduction in shareholders' equity resulting from the decrease by certain shareholders in their interest in Sparkling Spring discussed above. BASIS OF CONSOLIDATION These consolidated financial statements include the accounts of Sparkling Spring and its subsidiaries, principally SSWL, Sparkling Spring Water U.K. Limited ("SSWUK"), Canadian Springs Water Company Ltd. ("Canadian Springs") and Water Jug Enterprises Limited ("Water Jug") (collectively referred to as the "Company") (see note 4). REPORTING CURRENCY The Company uses the United States dollar as its reporting currency and the Canadian dollar as its functional currency. Assets and liabilities are translated into United States dollars at the exchange rates in effect at the balance sheet date. The revenues and expenses have been translated into United States dollars at average exchange rates prevailing during the year. The gains and losses on translation are included in a separate component of shareholders' equity titled "Cumulative translation adjustment". Foreign currency denominated assets and liabilities of Canadian operations are translated into Canadian dollars at exchange rates prevailing at the balance sheet date for monetary items and at F-9 119 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 exchange rates prevailing at the transaction date for non-monetary items. Gains or losses on translation are recognized in the statement of operations. Balance sheet accounts denominated in foreign currencies and translated at year-end exchange rates have been translated to U.S. dollars at the following:
1994 1995 1996 ------ ------ ------ Canadian Dollars............................... $0.713 $0.733 $0.730 U.K. Pounds Sterling........................... $1.564 $1.552 $1.705
INVENTORIES Inventories are valued at the lower of cost, determined on a first-in, first-out basis, and net realizable value. FIXED ASSETS Fixed assets are recorded at cost less related government grants and investment tax credits. Depreciation is provided on the declining balance basis at the following annual rates: Well and buildings................................................... 5% Machinery, equipment and coolers..................................... 10-20% Motor vehicles....................................................... 30% Roadways............................................................. 8% Returnable bottles................................................... 20%
Equipment, computer hardware and motor vehicles under capital lease and leasehold improvements are amortized on a straight-line basis over the term of the related lease. ACQUISITIONS, GOODWILL On the acquisition of businesses, the excess of the purchase price over the fair value of the underlying net identifiable assets acquired is recognized as goodwill. Goodwill is amortized on a straight-line basis over periods of 20 to 40 years. The method used to assess if there has been a permanent impairment in the value of goodwill is based on projected and discounted cash flows. DEFERRED FINANCING COSTS Deferred financing costs represent professional fees and other related costs incurred in relation to long-term financing agreements. These costs are amortized on the interest method over the term of the related financing. DEBT DISCOUNT COSTS Debt discount costs are amortized to income under the interest method over the term of the related debt. UNEARNED REVENUE Unearned revenue represents the prepayment of cooler leases and bottled water charges. These amounts are recognized as revenue in the period to which the lease relates or the product is provided. F-10 120 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 CUSTOMER DEPOSITS AND RETURNABLE BOTTLES Deposits received on bottles and crates are classified as a long-term liability as they substantially are not required to be repaid in the current period. Returnable bottles are classified as fixed assets and are amortized to income based on estimated actual usage. FINANCIAL INSTRUMENTS The Company's primary financial instruments consist of accounts receivable, accounts payable, customer deposits and long-term debt. The difference between the carrying values and the fair market values of the primary financial instruments are not material due to the short-term maturities and, or the credit terms of those instruments. The Company has at any one time a significant number of commitments to extend credit. The accounts receivable are owed from a large number of customers on normal credit terms and therefore there is minimal customer concentration and credit risk. The Company does not have any exposure relating to derivative instruments. EARNINGS PER SHARE Primary and fully diluted earnings per share is calculated using the weighted average number of common shares outstanding during the period adjusted for the effect of the exercise of all outstanding options and warrants in accordance with APB 15. LEASES Leases are classified as capital or operating leases. Assets are recorded as capital leases when the substantial benefits and risks of ownership have been transferred to the Company. Obligations recorded under capital leases are reduced by lease payments, net of imputed interest. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. INCOME TAXES Income taxes are accounted for in accordance with SFAS 109, "Accounting for Income Taxes". Under SFAS 109, an assets and liability approach is required. Such approach results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The Company and its subsidiaries file separate federal, state, and foreign income tax returns and, accordingly, provide for such income taxes on separate company basis. 3. CHANGE IN ACCOUNTING POLICY As a result of increased business activity in the United States, the Company has retroactively changed its reporting policy from Canadian dollars and Canadian generally accepted accounting F-11 121 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 principles to United States dollars and United Stated generally accepted accounting principles, effective January 1, 1997. The historical financial statements have been translated to U.S. dollars at the exchange rates in effect at the balance sheet dates and the revenue and expenses have been translated into U.S. dollars at average exchange rates prevailing during the year. In order to comply with accounting principles generally accepted in the United States the following accounting policies have also been changed: EXPORT DEVELOPMENT COSTS Costs to develop export markets were previously deferred and amortized over five years. The Company has changed its accounting policy to expense these items in the period in which the expenditures were incurred. FOREIGN CURRENCY The Company previously deferred and amortized unrealized foreign exchange gains and losses on long-term monetary items over the remaining term of the item. These gains and losses are now charged to income during the period of the unrealized gain or loss. INCOME TAXES The Company now follows SFAS 109 for accounting for income taxes which requires an assets and liabilities approach, subject to a valuation allowance for deferred tax assets. The Company previously followed the deferral method. The effect of the changes to these accounting policies had the following impact on net assets, net income and cumulative translation adjustment:
1994 1995 1996 --------- --------- ---------- Goodwill and deferred charges................ $(140,340) $ (76,442) $ (217,280) Deferred taxes, asset........................ 328,820 243,147 147,530 -------- -------- --------- NET ASSETS (DECREASE) INCREASE............... $ 188,480 $ 166,705 $ (69,750) ======== ======== ========= Operating expenses........................... (167,873) 42,952 (406,361) Depreciation and amortization................ 23,844 24,410 61,186 Provision for income taxes................... 6,943 (299,107) (529,301) Extraordinary item........................... (143,732) (391,626) (819,314) Unusual items................................ 211,652 596,541 1,456,927 -------- -------- --------- NET INCOME DECREASE.......................... $ (69,166) $ (26,830) $ (236,863) ======== ======== ========= CUMULATIVE TRANSLATION ADJUSTMENT INCREASE (DECREASE)................................. $ (30,587) $ 4,755 $ 408 ======== ======== =========
The retroactive application of the changes in accounting policies described above also had the effect of reducing the deficit at January 1, 1994 from $692,527 to $404,294. F-12 122 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 4. ACQUISITIONS 1996 On January 18, 1996, the Company acquired 100% of the shares of Canadian Springs and on May 19, 1996 the Company acquired 100% of the shares of Water Jug, companies located in British Columbia, Canada. The acquisitions have been accounted for under the purchase method of accounting and accordingly the results of operations since the dates of acquisition have been included in the consolidated statement of (loss) income. The following summarizes the transactions (in thousands):
CANADIAN SPRINGS WATER JUG ---------------- --------- Net working capital............................. $ 778 $ 29 Fixed assets.................................... 2,996 341 Customer deposits............................... (459) (86) Assumption of debt obligations.................. (694) (155) Goodwill........................................ 12,993 972 ------- ------ Total cash consideration........................ $ 15,614 $ 1,101 ======= ======
During 1996, the Company also acquired the non-controlling interest in SSWUK from the minority shareholder for cash consideration of $717,135, including goodwill of $391,024. 1995 On April 26, 1995, SSWUK acquired 100% of the shares of Aquaporte (UK) Limited ("Aquaporte"), a company registered in England and Wales. The acquisition has been accounted for under the purchase method of accounting and accordingly the results of operations since the date of acquisition have been included in the consolidated statement of (loss) income. The following summarizes the transaction (in thousands): Net working capital................................................. $ (179) Fixed assets........................................................ 663 Customer deposits................................................... (262) Goodwill............................................................ 1,710 ------ Total cash consideration............................................ $1,932 ======
1994 On June 7, 1994, a newly formed subsidiary of the Company, SSWUK, acquired the assets of the cooler division of Buxton Mineral Water Company Limited ("Buxton"), a company registered in Hertfordshire, England and a wholly-owned subsidiary of Perrier (UK) Limited. The acquisition has been accounted for under the purchase method of accounting and accordingly the results of operations since the date of acquisition have been included in the consolidated statement of (loss) income. F-13 123 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 The following summarizes the transaction (in thousands): Net working capital................................................. $ 481 Fixed assets........................................................ 3,907 Customer deposits................................................... (743) Goodwill............................................................ 2,677 ------ Total acquisition................................................... $6,322 ======
The following unaudited pro forma information presents a summary of consolidated results of operations as if the acquisitions of Canadian Springs, Water Jug and the non-controlling interest in SSWUK had occurred at January 1, 1995 and the acquisitions of Aquaporte and Buxton had occurred at January 1, 1994.
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------- 1994 1995 1996 ------------ ------------ ------------ Total revenue........................... $ 13,128,851 $ 23,715,444 $ 27,986,741 Net (loss) income....................... 141,974 1,644,798 (696,642) Extraordinary item...................... (143,732) (391,626) (819,314) Primary (loss) earnings per share....... $ 0.115 $ 1.17 $ (0.407)
5. ALLOWANCE FOR DOUBTFUL ACCOUNTS Balance January 1, 1994........................................ $ 19,672 Additions...................................................... 320,713 Write-offs..................................................... (24,270) ------------ Balance December 31, 1994...................................... 316,115 Additions...................................................... 175,924 Write-offs..................................................... (20,215) ------------ Balance December 31, 1995...................................... 471,824 Additions...................................................... 116,444 Write-offs..................................................... (378,210) ------------ Balance December 31, 1996...................................... 210,058
6. INVENTORIES
1995 1996 -------- -------- Packaging -- materials............................... $388,664 $480,537 Goods for resale..................................... 103,472 215,306 Cooler parts......................................... 26,007 77,897 Advertising materials................................ 36,366 74,459 Other................................................ 34,802 92,321 ------- ------- $589,311 $940,520 ======= =======
F-14 124 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 7. FIXED ASSETS
1995 1996 ---------------------------- ---------------------------- ACCUMULATED ACCUMULATED COST DEPRECIATION COST DEPRECIATION ----------- ------------ ----------- ------------ Land and well................ $ 68,130 $ 3,533 $ 489,670 $ 42,349 Buildings and roadways....... 897,521 135,399 745,695 142,193 Coolers...................... 5,872,847 1,600,496 10,931,290 4,631,002 Machinery and equipment...... 1,260,055 501,692 4,395,170 1,598,854 Equipment and computer hardware under capital lease...................... 977,514 298,916 1,525,163 836,621 Motor vehicles............... 618,082 300,404 911,010 705,555 Motor vehicles under capital lease...................... 733,824 252,325 2,906,758 746,227 Leasehold improvements....... 141,419 66,361 646,211 220,794 Returnable bottles........... 1,381,945 246,808 2,852,141 656,282 ---------- --------- ---------- --------- 11,951,337 $3,405,934 25,403,108 $9,579,877 Accumulated depreciation..... 3,405,934 9,579,877 ---------- ---------- Net book value............... $ 8,545,403 $15,823,231 ========== ==========
8. GOODWILL AND DEFERRED CHARGES
1995 1996 --------------------------- ---------------------------- ACCUMULATED ACCUMULATED COST DEPRECIATION COST DEPRECIATION ---------- ------------ ----------- ------------ Goodwill...................... $4,900,882 $312,251 $19,588,100 $945,502 Deferred financing costs...... -- -- 116,201 41,693 Other......................... 10,321 -- 83,429 -- --------- ------- ---------- ------- 4,911,203 $312,251 19,787,730 $987,195 Accumulated amortization...... 312,251 987,195 --------- ---------- Net book value................ $4,598,952 $18,800,535 ========= ==========
9. DEBT DUE WITHIN ONE YEAR
1995 1996 ----------- ----------- Current portion of obligations under capital leases [note 9]...................................................... $ 580,096 $ 1,104,315 Current portion of loans payable [note 10]................ 1,656,720 476,721 --------- --------- $ 2,236,816 $ 1,581,036 ========= =========
F-15 125 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 10. OBLIGATIONS UNDER CAPITAL LEASES The obligations under capital leases are recorded net of the related imputed interest calculated at an average rate of 10%. Total minimum annual lease commitments are as follows: 1997............................................... $ 1,363,727 1998............................................... 808,614 1999............................................... 595,889 2000............................................... 474,125 2001............................................... 373,771 Thereafter in aggregate............................ 450,608 ---------- 4,066,734 Less imputed interest.............................. 1,036,094 ---------- 3,030,640 Less current portion............................... 1,104,315 ---------- $ 1,926,325 ==========
11. LOANS PAYABLE
1995 1996 ----------- ------------ Term loans ($17,747,328 Cdn. and L8,204,760) bearing interest at prime plus 1 1/4%............................................. $7,136,588 $26,866,624 Term loans bearing interest at prime plus 2% repayable in monthly installments of principal and interest of $2,093 maturing in varying amounts to 2004........................... -- 112,812 Unsecured loan (L273,400) bearing interest at 7%, interest and principal repayable upon maturity on June 8, 1997............. 424,973 463,778 --------- ---------- 7,561,561 27,443,214 Less portion due within one year................................ 1,656,720 476,721 --------- ---------- $5,904,841 $26,966,493 ========= ==========
On January 28, 1997, the Company replaced its $27 million term loans with a revolving credit facility of $51.1 million available in multiple currencies at Libor plus 2.75% and, or prime rate plus 1.25%. In addition to refinancing the term loans, funds were used to finance acquisitions. Terms of the January 28, 1997 revolving credit facility provide for the drawn portion of the loan to convert into a term loan after two years and to mature on December 31, 2002. A general assignment of book debts and a floating charge demand debenture in the amount of $36.5 million over essentially all of the Company's other assets have been pledged as collateral for the term loans. F-16 126 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 The following repayment schedule represents the required annual principal repayments of long-term debt for each of the next five years based upon debt payment terms negotiated subsequent to year end: 1997.................................................... $ 476,721 1998.................................................... 14,494 1999.................................................... 4,314,891 2000.................................................... 6,466,167 2001.................................................... 6,464,288 Thereafter in aggregate................................. 9,706,653
12. SUBORDINATED NOTES PAYABLE
1995 1996 ---------- ---- Unsecured redeemable subordinated notes payable bearing interest at 8%, interest payable semi-annually........................................ $3,300,000 $-- Less unamortized discount value......................................... (946,932) -- --------- --- $2,353,068 $-- ========= ===
The subordinated noteholders held as additional consideration common share warrants which were assigned a value of $1,136,730 as described in note 13. During 1996, the Company redeemed its subordinated notes payable and all attached common share warrants for cash consideration of $4.7 million. The $1,253,552 excess of this payment over the book value of the debt and warrants has been expensed in these financial statements as described in note 14. 13. CAPITAL STOCK During 1994, the Company issued 165,767 common share purchase warrants to the holders of subordinated notes payable. The warrants were exercisable at $1 upon repayment of the notes or in the event of default of interest payments required on these notes. The warrants were assigned a value of $1,136,730 representing the estimated fair value of the warrants at the date of issuance. During 1996 the subordinated notes were redeemed together with the related common share purchase warrants (note 12). The Company maintains a stock option plan for management and directors where options to acquire Class E common shares are issued with strike prices approximating the estimated value of the shares at the date of issuance. F-17 127 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 At December 31, 1996 the following options, all of which expire October 30, 2001, were outstanding under the above plan:
YEAR OF ISSUE # OF SHARES STRIKE PRICE --------------------------------------------------- ----------- ------------ 1993............................................... 96,192 $ 1.82 Cdn. 1994............................................... 5,000 $ 5.50 Cdn. 1994 and 1995...................................... 244,701 $ 4.326 1996............................................... 5,000 $ 10.27 1996............................................... 5,000 $ 14.00 1996............................................... 43,500 $ 20.00 ------- 399,393 =======
The Company accounts for the issuance of these options in accordance with APB 25. In October, 1995 SFAS 123 "Accounting, for Stock Based Compensation" was issued requiring companies to recognize a compensation expense for grants of stock options or other equity investments based on their fair value or provide pro-forma disclosure of the effect on net income in the notes to the financial statements. The following proforma information presents a summary of the results of operations had the company followed the recommendations in SFAS 123, using the minimum value approach for valuation as permitted by SFAS 123 for non-public companies:
1994 1995 1996 --------- -------- --------- Net (loss) income as reported........... $(237,715) $ 19,062 $(652,874) Compensation expense on issuance of stock options......................... (256,847) (14,071) (215,496) -------- ------- -------- Pro forma net (loss) income............. (494,562) 4,991 (868,370) -------- ------- -------- Pro forma primary (loss) earnings per share............................. $ (.428) $ .003 $ (.591) ======== ======= ========
14. EXTRAORDINARY ITEM The Company restructured its long-term financing agreements in each of the last three years. Costs incurred related to new loan financing arrangements have been deferred in accordance with the Company's accounting policy for deferred financing costs. Costs, in the amount of $819,314 (1995 -- $391,626; 1994 -- $143,732) related to debt that was restructured have been expensed in the year, net of applicable income tax recoveries of $434,238 (1995 -- $204,915; 1994 -- $67,920). F-18 128 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 15. STATEMENT OF CASH FLOW
1994 1995 1996 ----------- ----------- ----------- (Increase) decrease in Accounts receivable........... $(1,419,369) $ (875,321) $(1,672,299) Inventories................... (139,275) (173,756) (351,209) Prepaid expenses.............. (269,993) (198,454) (721,467) ---------- ---------- ---------- (1,828,637) (1,247,531) (2,744,975) ---------- ---------- ---------- Increase (decrease) in Accounts payable and accrued liabilities................ 1,367,091 317,510 1,637,324 Unearned revenue.............. (16,479) 316,146 (223,376) Income taxes payable.......... -- -- 76,890 ---------- ---------- ---------- 1,350,612 633,656 1,490,838 ---------- ---------- ---------- Net change in non-cash working capital balances.............. (478,025) (613,875) (1,254,137) Less net working capital acquired on acquisitions [note 4]............................ 480,983 (179,446) 803,344 Effect of translation........... (33,651) 26,915 (9,339) ---------- ---------- ---------- $ (30,693) $ (766,406) $ (460,132) ========== ========== ==========
16. LEASE COMMITMENTS The Company is committed under operating leases extending for various periods to 2008. Future minimum lease payments are as follows: 1997............................................ $ 697,746 1998............................................ 592,826 1999............................................ 525,457 2000............................................ 494,002 2001............................................ 390,195 Thereafter in aggregate......................... 1,398,445
17. INCOME TAXES A reconciliation of the provision for income taxes based on the combined federal and provincial income tax rates of 45% (1995 -- 45%; 1994 -- 44%) is as follows:
1994 1995 1996 --------- --------- --------- Provision for (recovery of) income taxes at statutory rates........... $ (44,409) $ 319,408 $ 254,144 Non deductible amortization.......... -- -- 132,910 Difference in foreign tax rates...... 27,026 (5,640) 14,414 Other................................ 10,440 (14,661) (3,143) ------- ------- ------- $ (6,943) $ 299,107 $ 398,325 ======= ======= =======
F-19 129 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996
1994 1995 1996 --------- --------- --------- The provision for (recovery of) income taxes includes: Current income taxes -- Canada....... $ -- $ -- $ 90,000 ------- ------- ------- Deferred income taxes -- Canada...... 67,378 269,107 357,325 -- Foreign..... (74,321) 30,000 (49,000) ------- ------- ------- (6,943) 299,107 308,325 ------- ------- ------- $ (6,943) $ 299,107 $ 398,325 ======= ======= =======
The deferred tax asset is comprised of the following timing differences:
1994 1995 1996 --------- --------- --------- Excess accounting expenses over tax................................ $ 151,060 $ 106,792 $ 561,774 Non capital loss carryforwards....... 176,475 169,341 185,657 Excess of tax over book depreciation....................... -- (42,743) (204,149) Other differences.................... 1,285 9,757 (6,745) ------- ------- ------- $ 328,820 $ 243,147 $ 536,537 ======= ======= =======
The non capital loss carryforwards at December 31, 1996 have no expiry. 18. RELATED PARTY TRANSACTIONS During the year the Company paid approximately $529,400 (1995 -- $386,000; 1994 -- $215,460) to an affiliated company for management and related services. 19. SUMMARY OF BUSINESS SEGMENTS
1994 1995 1996 ----------- ----------- ----------- Revenue Canada.......................... $ 4,478,547 $ 5,061,581 $15,363,998 United Kingdom.................. 4,246,757 10,287,533 11,962,351 ---------- ---------- ---------- 8,725,306 15,349,114 27,326,349 ========== ========== ========== Net income (loss) before income taxes, Non-controlling interest and extraordinary item Canada.......................... 124,292 622,549 726,937 United Kingdom.................. (228,576) 64,250 (155,278) ---------- ---------- ---------- (104,284) 686,799 571,659 ========== ========== ========== Identifiable Assets Canada.......................... 5,475,904 5,664,794 27,177,107 United Kingdom.................. 8,358,856 12,856,161 17,232,061 ---------- ---------- ---------- $13,834,760 $18,520,955 $44,409,168 ========== ========== ==========
F-20 130 SPARKLING SPRING WATER GROUP LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1996 20. COMPARATIVE FIGURES Certain of the comparative figures have been reclassified to conform with the presentation adopted in the current year. 21. SUBSEQUENT EVENTS (a) Subsequent to year end, the Company completed the following acquisitions:
ACQUISITION ACQUISITION INTEREST COST COMPANY LOCATION DATE ACQUIRED (000'S) - --------------------------- --------------------- --------------- -------- ----------- D&D and Company, Inc....... Portland, Oregon January, 1997 100% $ 4,012 High Valley Water Limited.................. Kelowna, BC January, 1997 100% 1,824 Withey's Water Softening and Purification Limited.................. Prince George, BC January, 1997 100% 1,386 Marlborough Employment Limited.................. Glasgow, Scotland February, 1997 100% 8,230 Soja Enterprises, Inc...... Portland, Oregon June, 1997 100% 150 Crystal Spring Bottled Water Co. Inc............ Portland, Oregon June, 1997 100% 4,501 Cullyspring Water Co., Inc. .................... Seattle, Washington October, 1997 100% 7,600
The transactions were funded from working capital and approximately $25 million of proceeds from the issuance of long-term debt. The acquisitions will be accounted for under the purchase method of accounting. (b) On November 19, 1997, the Company completed a $100,000,000 private placement of 11 1/2% Senior Subordinated Notes due 2007 (the "Private Notes"). The Company used the net proceeds of this offering to repay $60.1 million of its existing credit facility and capitalized leases and to pay $13.9 million to certain Company shareholders (see note 2). The Company offered to each holder of Private Notes equivalent exchange notes (the "Exchange Notes"). The Exchange Notes are identical in form and terms to the Private Notes, except that upon the effectiveness of a registration statement filed with the United States Securities and Exchange Commission covering the Exchange Notes, the holders of Exchange Notes may offer the Notes for sale to the general public. F-21 131 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30 (UNAUDITED) PRO FORMA (WITH COMPARATIVE FIGURES SHAREHOLDERS AS AT DECEMBER 31) EQUITY AS AT -------------------------- SEPTEMBER 30, 1996 1997 1997 ----------- ----------- ------------- [NOTE 2] ASSETS Current Cash and cash equivalents.......................... $ 2,230,735 $ 897,869 Accounts receivable................................ 4,799,080 9,169,788 Inventories........................................ 940,520 1,408,681 Prepaid expenses................................... 1,278,530 1,511,572 Current portion of deferred taxes.................. 95,681 -- ------------ ------------ Total current assets.......................... 9,344,546 12,987,910 Deferred taxes..................................... 440,856 231,963 Fixed assets....................................... 15,823,231 21,524,242 Goodwill and deferred charges...................... 18,800,535 35,338,105 ------------ ------------ Total assets.................................. $44,409,168 $70,082,220 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities........... $ 4,073,847 $ 4,874,588 Income tax payable................................. 76,890 988,353 Unearned revenue................................... 161,790 327,389 Debt due within one year........................... 1,581,036 957,942 ------------ ------------ Total current liabilities..................... 5,893,563 7,148,272 ------------ ------------ Customer deposits.................................. 2,620,495 3,483,330 Obligations under capital leases................... 1,926,325 2,580,013 Loans payable...................................... 26,966,493 47,245,425 Seller note........................................ -- 1,500,000 ------------ ------------ Total long-term liabilities................... 31,513,313 54,808,768 ------------ ------------ Shareholders' equity Capital stock...................................... 8,641,048 8,601,286 7,145,594 Deficit............................................ (1,275,821) (42,122) (13,245,143) Cumulative translation adjustment.................. (362,935) (433,984) (433,984) ------------ ------------ Total shareholders' equity............... 7,002,292 8,125,180 (6,533,533) ------------ ------------ Total liabilities and shareholders' equity................................. $44,409,168 $70,082,220 ============ ============
See accompanying notes F-22 132 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED) 1996 1997 $ $ ----------- ----------- Revenue: Water........................................................ $13,391,893 $19,536,818 Rental....................................................... 5,604,317 7,776,599 Other........................................................ 2,067,630 4,484,361 ----------- ----------- Total revenue................................................ 21,063,840 31,797,778 Cost of sales................................................ 3,403,176 5,863,637 ----------- ----------- Gross profit................................................. 17,660,664 25,934,141 Expenses: Operating.................................................... 12,635,503 16,817,876 Depreciation and amortization................................ 2,751,599 3,918,398 ----------- ----------- Operating profit............................................. 2,273,562 5,197,867 Interest expense............................................. 1,702,781 2,900,528 ----------- ----------- Income before the following.................................. 570,781 2,297,339 Provision for income taxes................................... 347,634 1,063,640 ----------- ----------- Net income before non-controlling interest and extraordinary item....................................................... 223,147 1,233,699 Non-controlling interest..................................... (6,912) -- ----------- ----------- Net income before extraordinary item......................... 216,235 1,233,699 Extraordinary item........................................... (815,181) -- ----------- ----------- Net income (loss)............................................ (598,946) 1,233,699 Deficit, beginning of period................................. (622,947) (1,275,821) ----------- ----------- Deficit, end of period....................................... $(1,221,893) $ (42,122) ----------- ----------- Primary earnings per share before extraordinary item......... $ .13 $ .63 ----------- ----------- Fully diluted earnings per share before extraordinary item... $ .13 $ .61 ----------- ----------- Primary earnings (loss) per share............................ $ (.35) $ .63 ----------- ----------- Fully diluted earnings (loss) per share...................... $ (.35) $ .61 ----------- -----------
See accompanying notes F-23 133 SPARKLING SPRING WATER GROUP LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED) ---------------------------- 1996 1997 ------------ ------------ OPERATING ACTIVITIES Net income (loss)............................................. $ (598,946) $ 1,233,699 Items not requiring cash Depreciation and amortization............................... 2,751,599 3,918,398 Deferred taxes.............................................. (146,974) 301,794 Minority interest........................................... 6,912 -- ----------- ----------- 2,012,591 5,453,891 Net change in non-cash working capital balances............... 325,507 (2,515,403) ----------- ----------- Cash provided by operating activities......................... 2,338,098 2,938,488 ----------- ----------- INVESTING ACTIVITIES Purchase of fixed assets...................................... (5,909,161) (5,935,130) Sale of fixed assets, net..................................... 434,612 185,369 Acquisitions (Increase)....................................... (17,478,311) (19,835,497) (Increase) decrease in deferred charges....................... 61,810 (1,174,907) ----------- ----------- Cash used in investing activities............................. (22,891,050) (26,760,165) ----------- ----------- FINANCING ACTIVITIES Increase in customer deposits................................. 181,590 601,531 Increase in long-term debt.................................... 20,021,054 24,048,786 Repayment of long-term debt................................... (1,023,835) (1,998,069) Issuance of common shares..................................... 4,529,056 19,153 Redemption of subordinated notes payable...................... (2,159,777) -- Redemption of common share warrants........................... (1,136,730) -- Effect of translation on cash................................. (141,344) (182,590) ----------- ----------- Cash provided by financing activities......................... 20,270,014 22,488,811 ----------- ----------- Decrease in cash and cash equivalents during the period....... (282,938) (1,332,866) Cash and cash equivalents, beginning of period................ 860,298 2,230,735 ----------- ----------- Cash and cash equivalents, end of period...................... $ 577,360 $ 897,869 =========== ===========
See accompanying notes F-24 134 SPARKLING SPRING WATER GROUP LIMITED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION Sparkling Spring Water Group Limited ("Sparkling Spring") provides containered water to home and office markets in British Columbia and the Maritime Provinces at Canada, England, Scotland and the Pacific Northwestern United States. 2. BASIS OF PRESENTATION On November 19, 1997, the Shareholders of Sparkling Spring and Sparkling Spring Water Limited ("SSWL") approved a reorganization whereby the former shareholders of SSWL transferred their shares of SSWL to Sparkling Spring. As part of the reorganization, certain shareholders have reduced their interest in Sparkling Spring by exchanging their shares of common stock of SSWL for Common Stock of Sparkling Spring and cash or for cash only. Other shareholders exchanged their shares of common stock of SSWL for common stock of Sparkling Spring on a one-for-one basis. Subsequent to the reorganization, Sparkling Spring owns 100% of the issued and outstanding shares of SSWL. The reorganization has been accounted for using the continuity of interests method of accounting whereby the consolidated financial statements reflect the consolidated historical carrying value of the assets, liabilities and shareholders' equity and the consolidated historical operating results of SSWL for each of the periods presented. Sparkling Spring was incorporated on October 22, 1997 and, accordingly, had no assets, liabilities or shareholders' equity or historical operating results for the periods presented. The pro forma shareholders' equity at September 30, 1997 gives effect to the maximum reduction in shareholders equity resulting from the decrease by certain shareholders in their interest in Sparkling Spring discussed above. 3. SIGNIFICANT ACCOUNTING POLICIES These consolidated financial statements include the accounts of Sparkling Spring and its subsidiaries, SSWL, Sparkling Spring Water U.K. Limited, Canadian Springs Water Company Ltd., Water Jug Enterprises Limited and Spring Water Inc. and the subsidiaries referred to in note 4 (collectively referred to as the "Company"), in accordance with accounting principles generally accepted in the United States. These unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The adjustments are of a normal recurring nature. 4. ACQUISITIONS (a) During 1996 and 1997 the Company completed a number of acquisitions. The acquisitions have been accounted for under the purchase method of accounting and accordingly the results of F-25 135 operations since the dates of acquisition have been included in the consolidated statement of income (loss) and deficit.
BUSINESS ACQUIRED LOCATION DATE OF ACQUISITION - ---------------------------------- ----------------- -------------------- Canadian Springs Water Company Ltd............................. Vancouver, BC January 1996 Water Jug Enterprises Limited..... Kamloops, BC May 1996 Sparkling Spring U.K. Limited(remaining 10%).......... London, England March 1996 D&D and Company, Inc.............. Portland, Oregon January 1997 High Valley Water Limited......... Kelowna, BC January 1997 Withey's Water Softening and Purification Limited............ Prince George, BC January 1997 Marlborough Employment Limited.... Glasgow, Scotland February 1997 Soja Enterprises, Inc............. Portland, Oregon June 1997 Crystal Springs Bottled Water Co., Inc............................. Portland, Oregon June 1997
The following summarizes the transactions:
1996 1997 ----------- ----------- Net working capital............................... $ 809,606 $ 706,472 Fixed assets...................................... 3,672,515 3,655,741 Customer deposit.................................. (546,358) (281,714) Assumption of debt obligations.................... (851,365) (849,619) Goodwill.......................................... 14,393,913 16,604,617 ---------- ---------- Total cash consideration.......................... $17,478,311 $19,835,497 ========== ==========
The following unaudited pro forma information presents a summary of consolidated results of operations as if the above acquisitions had occurred on January 1, 1996.
FOR THE NINE MONTHS ENDED (IN THOUSANDS) ----------------------------------------- SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 ------------------ ------------------ Revenue................................. $ 34,098 $ 37,271 Net income before extraordinary item.... $ 971 $ 1,856
5. EXTRAORDINARY ITEM The Company restructured its long-term financing agreements during the nine months ended September 30, 1996. Costs incurred related to new loan financing arrangements have been deferred in accordance with the Company's accounting policy for deferred financing costs. Costs, in the amount of $815,181 related to debt that was restructured have been expensed during the period, net of applicable income tax recoveries of $434,238. 6. SUBSEQUENT EVENT On November 19, 1997, the Company completed a $100,000,000 private placement of 11 1/2% Senior Subordinated Notes due 2007 (the "Private Notes"). The Company used the net proceeds of this offering to repay $60.1 million of its existing credit facility and capitalized leases and to pay $13.9 million to certain Company shareholders (see note 2). The Company offered to each holder of Private Notes equivalent exchange notes (the "Exchange Notes"). The Exchange Notes are identical in form and terms to the Private Notes, except that upon the effectiveness of a registration statement filed with the United States Securities and Exchange Commission covering the Exchange Notes, the holders of Exchange Notes may offer the Notes for sale to the general public. F-26 136 FINANCIAL STATEMENTS CANADIAN SPRINGS WATER COMPANY LTD. JANUARY 17, 1996 AND MARCH 31, 1995 F-27 137 AUDITORS' REPORT To the Directors of Sparkling Spring Water Limited We have audited the balance sheet of Canadian Springs Water Company Ltd. as at January 17, 1996 and March 31, 1995 and the statements of income and retained earnings and cash flows for the 292 days ended January 17, 1996 and the year ended March 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at January 17, 1996 and March 31, 1995 and the results of its operations and the changes in its financial position for the periods then ended in accordance with accounting principles generally accepted in Canada. Halifax, Canada ERNST & YOUNG July 11, 1997 Chartered Accountants F-28 138 CANADIAN SPRINGS WATER COMPANY LTD. INCORPORATED UNDER THE LAWS OF BRITISH COLUMBIA BALANCE SHEET
AS AT JANUARY 17, 1996 (WITH COMPARATIVE FIGURES AS AT MARCH 31, 1995) (IN CDN DOLLARS) ------------------------- 1995 1996 ---------- ---------- ASSETS [Note 3] Current Accounts receivable............................................... $1,475,228 $1,708,888 Inventory......................................................... 227,480 325,861 Prepaid expenses.................................................. 212,883 191,406 --------- --------- Total current assets.................................... 1,915,591 2,226,155 Deferred income taxes............................................. 11,340 17,340 Fixed assets [note 2]............................................. 3,298,167 2,872,967 --------- --------- Total assets............................................ $5,225,098 $5,116,462 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Bank indebtedness................................................. $ 288,278 $ 838,143 Accounts payable and accrued liabilities.......................... 1,482,464 1,195,979 Income taxes payable.............................................. 11,456 14,036 Deposits payable.................................................. -- 11,361 Dividends payable................................................. -- 923,500 Debt due within one year [note 3]................................. 624,542 202,305 Due to shareholders and related parties [note 4].................. 1,681,907 1,735,979 --------- --------- Total current liabilities............................... 4,088,647 4,921,303 --------- --------- Long-term debt [note 3]........................................... 307,242 146,212 --------- --------- Shareholders' equity Share capital [note 5]............................................ 18 18 Retained earnings................................................. 829,191 48,929 --------- --------- Total shareholders' equity.............................. 829,209 48,947 --------- --------- Total liabilities and shareholders' equity.............. $5,225,098 $5,116,462 ========= ========= Commitments [Note 8 and 9]
See accompanying notes F-29 139 CANADIAN SPRINGS WATER COMPANY LTD. STATEMENTS OF INCOME AND RETAINED EARNINGS
292 DAYS ENDED JANUARY 17, 1996 (WITH COMPARATIVE FIGURES FOR THE YEAR ENDED MARCH 31) (IN CDN DOLLARS) --------------------------- 1995 1996 ----------- ----------- Revenue........................................................ $10,401,440 $10,154,150 Cost of sales.................................................. 4,880,620 5,272,844 ----------- ----------- Gross profit................................................... 5,520,820 4,881,306 ----------- ----------- Expenses Wages and benefits............................................. 2,711,797 1,882,134 Advertising and selling........................................ 489,864 693,779 Depreciation................................................... 727,986 572,519 Professional fees.............................................. 70,105 368,673 Office supplies and stationery................................. 284,105 285,935 Promotion, travel and entertainment............................ 242,786 212,838 Interest on long-term debt..................................... 258,787 152,577 Postage........................................................ 158,640 136,252 Bank charges and interest on short-term debt................... 96,655 130,567 Bad debts and collection fees.................................. 77,184 111,408 Telephone...................................................... 98,311 95,899 Rent and property taxes........................................ 44,540 40,462 Corporation capital tax........................................ 9,900 9,025 ----------- ----------- 5,270,660 4,692,068 ----------- ----------- Net income before income taxes................................. 250,160 189,238 ----------- ----------- Income taxes Current...................................................... 45,500 52,000 Deferred..................................................... 20,360 (6,000) ----------- ----------- 65,860 46,000 ----------- ----------- Net income..................................................... 184,300 143,238 Dividends...................................................... -- (923,500) Retained earnings, beginning of year........................... 644,891 829,191 ----------- ----------- Retained earnings, end of year................................. $ 829,191 $ 48,929 =========== ===========
See accompanying notes F-30 140 CANADIAN SPRINGS WATER COMPANY LTD. STATEMENT OF CASH FLOWS
292 DAYS ENDED JANUARY 17, 1996 (WITH COMPARATIVE FIGURES FOR THE YEAR ENDED MARCH 31) (IN CDN DOLLARS) ------------------------- 1995 1996 ----------- --------- OPERATING ACTIVITIES Net income....................................................... $ 184,300 $ 143,238 Add items not involving a flow of cash Depreciation................................................... 727,986 572,519 Deferred income taxes.......................................... 20,360 (6,000) Net change in non-cash working capital balances [note 6]......... 148,002 (583,108) ----------- --------- Cash provided by operating activities............................ 1,080,648 126,649 ----------- --------- INVESTING ACTIVITIES Additions to fixed assets (net).................................. (1,281,567) (147,319) ----------- --------- Cash used in investing activities................................ (1,281,567) (147,319) ----------- --------- FINANCING ACTIVITIES Issuance of long-term debt....................................... 894,327 -- Repayment of long-term debt...................................... (536,145) (583,267) Increase (decrease) in due to shareholders and related parties... (45,739) 54,072 ----------- --------- Cash (used in) provided by financing activities.................. 312,443 (529,195) ----------- --------- (Decrease) increase in cash...................................... 111,524 (549,865) Bank indebtedness, beginning of year............................. (399,802) (288,278) ----------- --------- Bank indebtedness, end of year................................... $ (288,278) $(838,143) =========== =========
See accompanying notes F-31 141 CANADIAN SPRINGS WATER COMPANY LTD. NOTES TO FINANCIAL STATEMENTS JANUARY 17, 1996 (WITH COMPARATIVE FIGURES AS AT MARCH 31, 1995) (IN CDN DOLLARS) 1. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada, the more significant of which are as follows: FIXED ASSETS Fixed assets are valued at cost. Depreciation is provided on the declining balance basis over the expected useful lives of the assets at the following rates: Rental equipment -- dispensers........................................... 20% Furniture, fixtures and equipment........................................ 20% Purification equipment................................................... 50% Vehicles................................................................. 30% Buildings................................................................ 4% Computer................................................................. 30%-100%
Leasehold improvements are amortized on a straight line basis over the term of the related lease. Depreciation is reduced to one-half the normal rate in the year of acquisition for the respective assets. INVENTORY Inventory is value at the lower of cost determined on a first-in, first-out basis, and net realizable value. LEASES Leases which transfer substantially all of the benefits and risks of ownership are recorded as acquisition of assets and incurrence of obligations. Under this method of accounting, assets are amortized over their expected useful lives and interest arising from the obligations is expensed over the life of the lease. Rents on operating leases are expensed as incurred. INCOME TAXES In accounting for income taxes, the company follows the tax allocation method. The major timing differences relate to fixed assets and lease obligations. F-32 142 CANADIAN SPRINGS WATER COMPANY LTD. NOTES TO FINANCIAL STATEMENTS -- CONTINUED JANUARY 17, 1996 (WITH COMPARATIVE FIGURES AS AT MARCH 31, 1995) (IN CDN DOLLARS) 2. FIXED ASSETS
1995 1996 --------------------------- --------------------------- ACCUMULATED ACCUMULATED COST DEPRECIATION COST DEPRECIATION ----------- ----------- ----------- ----------- Rental equipment -- dispensers................ $ 4,234,322 $1,987,590 $ 4,648,585 $2,568,516 Purification equipment...... 845,178 609,291 147,146 135,913 Vehicles.................... 737,764 581,920 731,476 618,468 Furniture, fixtures and equipment................. 385,962 130,893 653,889 428,483 Computer.................... 360,494 234,863 505,817 340,175 Leasehold improvements...... 241,655 101,806 265,781 126,046 Buildings................... 42,222 2,067 42,222 3,348 Land........................ 99,000 -- 99,000 -- --------- --------- --------- --------- 6,946,597 3,648,430 7,093,916 4,220,949 Accumulated depreciation.... 3,648,430 4,220,949 --------- --------- Net book value.............. $ 3,298,167 $ 2,872,967 ========= =========
3. LONG-TERM DEBT
1995 1996 -------- ----------- Demand term loan.......................................... $ 26,644 $ -- Demand term loan.......................................... 270,015 -- Capital lease obligations [note 8]........................ 635,125 348,517 ------- ------- 931,784.. 348,517 Less portion due within one year.......................... 624,542 202,305 ------- ------- $307,242 $ 146,212 ======= =======
The following has been pledged as collateral for bank indebtedness and the term loans: a) General security agreement over all existing and subsequently acquired assets; b) General assignment of book debts; and c) Postponement of shareholder loans. F-33 143 CANADIAN SPRINGS WATER COMPANY LTD. NOTES TO FINANCIAL STATEMENTS -- CONTINUED JANUARY 17, 1996 (WITH COMPARATIVE FIGURES AS AT MARCH 31, 1995) (IN CDN DOLLARS) 4. DUE TO SHAREHOLDERS AND RELATED PARTIES
1995 1996 ---------- ---------- Due to shareholders, no interest or specific terms of repayment............................................... $ 756,907 $1,699,679 Due to related parties, interest only payable at prime plus 2% per annum with no specific terms of repayment... 100,000 36,300 Due to shareholder, interest only payable at $5,000 per month with no specific terms of repayment............... 430,000 -- Due to shareholder, interest only payable at $8,667 per month with no specific terms of repayment............... 395,000 -- --------- --------- $1,681,907 $1,735,979 ========= =========
5. SHARE CAPITAL
1995 1996 ---- ---- Authorized 10,000 Class A voting shares without par value 100 Class B non-voting shares without par value 100 Class C voting shares without par value 1,000 Class D non-voting redeemable and retractable shares without par value Issued and outstanding 6 Class B shares................................................. $ 6 $ 6 6 Class C shares................................................. 6 6 996 Class D shares.................................................. 6 6 -- -- $18 $18 == ==
F-34 144 CANADIAN SPRINGS WATER COMPANY LTD. NOTES TO FINANCIAL STATEMENTS -- CONTINUED JANUARY 17, 1996 (WITH COMPARATIVE FIGURES AS AT MARCH 31, 1995) (IN CDN DOLLARS) 6. STATEMENT OF CASH FLOW
1995 1996 --------- --------- (Increase) decrease in Accounts receivable...................................... $(334,110) $(233,660) Inventory................................................ (70,456) (98,381) Prepaid expenses......................................... (37,268) 21,477 --------- --------- (441,834) (310,564) --------- --------- Increase (decrease) in Accounts payable and accrued liabilities................. 564,710 (286,485) Income taxes payable..................................... 25,126 2,580 Deposits payable......................................... -- 11,361 --------- --------- 589,836 (272,544) --------- --------- Net change in non-cash working capital balances............ $ 148,002 $(583,108) ========= =========
7. RELATED PARTY TRANSACTIONS During the year, the company had the following transactions with related parties: a) Interest of $98,644 (1995 -- $154,750) was paid to shareholders. b) Interest of nil (1995 -- $14,584) was paid to related parties. c) Management and consulting fees of $183,622 (1995 -- nil) were paid to related parties. 8. CAPITAL LEASE OBLIGATIONS The company has lease commitments with respect to capital lease obligations as follows: 1997...................................................................... $214,800 1998...................................................................... 150,570 -------- Total minimum lease payments.............................................. 365,370 Less imputed interest..................................................... 16,853 -------- Present value of minimum lease payments................................... 348,517 Less current portion...................................................... 202,305 -------- $146,212 ========
F-35 145 CANADIAN SPRINGS WATER COMPANY LTD. NOTES TO FINANCIAL STATEMENTS -- CONTINUED JANUARY 17, 1996 (WITH COMPARATIVE FIGURES AS AT MARCH 31, 1995) (IN CDN DOLLARS) 9. COMMITMENTS The company has certain minimum operating lease commitments with respect to premises and delivery trucks over the next five years as follows: 1996................................................ $ 276,000 1997................................................ 199,000 1998................................................ 193,000 1999................................................ 124,000 2000................................................ 100,000
10. UNITED STATES ACCOUNTING PRINCIPLES These financial statements are expressed in Canadian dollars and are prepared in accordance with generally accepted accounting principles in Canada ("Canadian GAAP") which, for the purposes of these financial statements, conform in all material respects with those in the United States ("U.S. GAAP"), with the exception of the statement of cash flow where bank indebtedness is treated as a cash equivalent. Under US GAAP this would be treated as a financing activity which would increase cash provided by financing activities for the 292 days ended January 17, 1996 by $549,865 and decrease cash provided by financing activities for the year ended March 31, 1995 by $111,524. 11. COMPARATIVE FIGURES Certain of the 1995 financial statement figures have been reclassified to conform with the 1996 presentation. F-36 146 FINANCIAL STATEMENTS CULLYSPRING WATER CO., INC. DECEMBER 31, 1996 AND 1995 F-37 147 AUDITORS' REPORT To the Directors of Sparkling Spring Water Limited We have audited the balance sheets of Cullyspring Water Co., Inc. as of December 31, 1996 and 1995 and the statements of income, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1996 and 1995 and the results of its operations and the changes in its financial position for the years then ended in accordance with accounting principles generally accepted in the United States. Halifax, Canada Ernst & Young October 10, 1997 Chartered Accountants F-38 148 CULLYSPRING WATER CO., INC. BALANCE SHEETS
AS AT DECEMBER 31 --------------------------- 1995 1996 ----------- ----------- ASSETS Current Cash and cash equivalents........................................ $ 681,970 $ 769,185 Accounts receivable.............................................. 323,263 300,258 Inventories...................................................... 64,534 90,648 Refundable deposits.............................................. 575 575 --------- --------- Total current assets........................................ 1,070,342 1,160,666 Fixed assets [note 3]............................................ 866,046 982,230 --------- --------- Total assets................................................ 1,936,388 2,142,896 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities......................... 100,073 65,236 Debt due within one year [note 4]................................ 20,518 38,351 Current portion of obligations under capital leases [note 5]..... 24,521 -- --------- --------- Total current liabilities................................... 145,112 103,587 --------- --------- Long-term debt [note 4].......................................... 21,516 38,226 Obligations under capital lease [note 5]......................... 18,060 -- Customer deposits................................................ 175,079 176,644 --------- --------- Total long-term liabilities................................. 214,655 214,870 --------- --------- Shareholders' equity Common stock (no par value, 50,000 shares authorized, 1,000 shares issued and outstanding)................................. 50,000 50,000 Contributed surplus.............................................. 37,866 37,866 Retained earnings................................................ 1,488,755 1,736,573 --------- --------- Total shareholders equity................................... 1,576,621 1,824,439 --------- --------- Total liabilities and shareholders' equity.................. $ 1,936,388 $ 2,142,896 ========= =========
See accompanying notes F-39 149 CULLYSPRING WATER CO., INC. STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31 ---------------------------- 1995 1996 ----------- ----------- Revenue.......................................................... $ 3,753,611 $ 4,029,591 Cost of sales.................................................... 2,019,019 2,104,283 --------- --------- Gross profit..................................................... 1,734,592 1,925,308 --------- --------- Expenses Corporate and administrative..................................... 1,045,172 1,084,148 Depreciation and amortization.................................... 341,800 375,942 Interest and bank charges........................................ 17,052 7,140 --------- --------- 1,404,024 1,467,230 --------- --------- Income before the following...................................... 330,568 458,078 Interest income.................................................. 15,388 18,700 Gain on sale of fixed assets..................................... 15,000 2,150 --------- --------- Net income before income taxes................................... 360,956 478,928 Income tax expense............................................... 33,451 -- --------- --------- Net income....................................................... $ 327,505 $ 478,928 ========= =========
See accompanying notes F-40 150 CULLYSPRING WATER CO., INC. STATEMENTS OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31 ------------------------------------------------------ COMMON STOCK --------------------- CONTRIBUTED RETAINED SHARES AMOUNT SURPLUS EARNINGS -------- ------- ----------- ---------- Balance December 31, 1994................ 50,000 $50,000 $37,866 $1,165,750 Shares surrendered....................... (50,000) Issuance of shares....................... 1,000 Net income............................... 327,505 Dividends................................ (4,500) ------- ------ ------ --------- Balance December 31, 1995................ 1,000 50,000 37,866 1,488,755 Net income............................... 478,928 Dividends................................ (231,110) ------- ------ ------ --------- Balance December 31, 1996................ 1,000 $50,000 $37,866 $1,736,573 ======= ====== ====== =========
See accompanying notes F-41 151 CULLYSPRING WATER CO., INC. STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 -------------------------- 1995 1996 ---------- ---------- OPERATING ACTIVITIES Net income........................................................ $ 327,505 $ 478,928 Items not requiring cash Depreciation and amortization................................... 341,800 375,942 Gain on sale of fixed assets.................................... (15,000) (2,150) Net change in non-cash working capital balances [note 6].......... (61,490) (37,946) -------- -------- Cash provided by operating activities............................. 592,815 814,774 -------- -------- INVESTING ACTIVITIES Purchase of fixed assets.......................................... (370,455) (531,973) Sale of fixed assets.............................................. 15,000 41,997 -------- -------- Cash used in investing activities................................. (355,455) (489,976) -------- -------- FINANCING ACTIVITIES Dividends......................................................... (4,500) (231,110) Issuance of long-term debt........................................ 24,597 55,061 Repayment of long-term debt....................................... (129,691) (20,518) Repayment of obligations under capital lease...................... (22,629) (42,581) Increase in customer deposits..................................... 13,651 1,565 -------- -------- Cash used in financing activities................................. (118,572) (237,583) -------- -------- Increase in cash during the year.................................. 118,788 87,215 Cash and cash equivalents, beginning of year...................... 563,182 681,970 -------- -------- Cash and cash equivalents, end of year............................ $ 681,970 $ 769,185 ======== ========
See accompanying notes F-42 152 CULLYSPRING WATER CO., INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. NATURE OF OPERATIONS Cullyspring Water Co., Inc. operates a bottling plant in Seattle, Washington producing drinking and distilled water. Water is purified in a multistage process before it is bottled in five gallon refillable containers or nonrefillable plastic bottles. The five gallon bottles are distributed to commercial or residential customers who rent free-standing dispensers on a monthly basis. The non refillable containers are generally distributed through grocery outlets. 2. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States, the more significant of which are as follows: INVENTORIES Inventories consisting principally of bottling materials and supplies are valued at the lower of cost determined on a first-in, first-out basis and net realizable value. FIXED ASSETS Fixed assets are recorded at cost less accumulated depreciation based on lives of 3 through 7 years. Declining balance depreciation methods are used. Leasehold improvements are amortized evenly over 7 to 31.5 years. FINANCIAL INSTRUMENTS The Company's primary financial instruments consist of accounts receivable, accounts payable, customer deposits, debt due within one year and long-term debt. The difference between the carrying values and the fair market values of the primary financial instruments are not material due to the short term maturities and or the credit terms of those instruments. The Company has at any one time a significant number of commitments to extend credit. The accounts receivable are owed from a large number of customers on normal credit terms and therefore there is a minimal customer concentration and credit risk. At year end the Company did not have any exposure relating to derivative instruments. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. INCOME TAXES The company has elected S corporation status effective July 1, 1995. Under this status net income flows through to the stockholders and is taxable to them. Accordingly, the Company has not incurred any provision for income tax obligations. F-43 153 CULLYSPRING WATER CO., INC. NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 1996 3. FIXED ASSETS
1995 1996 --------------------------- --------------------------- ACCUMULATED ACCUMULATED COST DEPRECIATION COST DEPRECIATION ---------- ----------- ---------- ----------- Machinery and equipment..... $1,710,472 $1,309,184 $2,030,166 $1,500,016 Equipment under capital lease..................... 173,613 123,804 65,422 65,422 Motor vehicles.............. 586,879 514,530 633,148 521,808 Leasehold improvements...... 346,208 72,556 375,397 88,129 Returnable bottles.......... 442,060 373,112 457,935 404,463 --------- --------- --------- --------- 3,259,232 2,393,186 3,562,068 2,579,838 Accumulated depreciation.... 2,393,186 2,579,838 --------- --------- Net book value.............. $ 866,046 $ 982,230 ========= =========
4. LONG-TERM DEBT
1995 1996 ------- ------- Loan payable bearing interest at 9% repayable in monthly instalments of principal and interest of $814 to February 1999....................................................... $ -- $18,495 Loan payable bearing interest at 9.25% repayable in monthly instalments of principal and interest of $406 to July 1999....................................................... -- 10,849 Loan payable bearing interest at 10.3% repayable in monthly instalments of principal and interest of $875 to November 1999....................................................... -- 25,717 Loan payable bearing interest at 8% repayable in monthly instalments of principal and interest of $1,336 to August 1997....................................................... 22,436 8,939 Loan payable bearing interest at 10.5% repayable in monthly instalments of principal and interest of $799 to June 1998....................................................... 19,598 12,577 ------ ------ 42,034 76,577 Less: portion due within one year............................ 20,518 38,351 ------ ------ $21,516 $38,226 ====== ======
The Company has pledged as collateral for the loans payable a first fixed charge on the vehicles associated with the loans. Principal repayments required in each of the next three years are as follows: 1997................................................. $ 38,351 1998................................................. 26,693 1999................................................. 11,533
5. OBLIGATIONS UNDER CAPITAL LEASES During 1996 the Company paid out the capital leases in full. F-44 154 CULLYSPRING WATER CO., INC. NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 1996 6. STATEMENT OF CASH FLOW
1995 1996 -------- -------- (Increase) decrease in Accounts receivable............................................... $(40,978) $ 23,005 Inventories....................................................... (19,853) (26,114) ------- ------- (60,831) (3,109) Decrease in accounts payable and accrued liabilities................ (659) (34,837) ------- ------- Net change in non-cash working capital balances..................... $(61,490) $(37,946) ======= =======
7. RELATED PARTY TRANSACTIONS During the year the Company paid approximately $132,000 (1995 -- $144,000) to an affiliated company for building rent. F-45 155 CULLYSPRING WATER CO., INC. BALANCE SHEET
AS AT SEPTEMBER 30 (WITH COMPARATIVE FIGURES AS AT DECEMBER 31) ---------------------------- 1996 1997 ----------- ----------- (UNAUDITED) ASSETS Current Cash and cash equivalents........................................ $ 769,185 $ 892,186 Accounts receivable.............................................. 300,258 371,602 Inventories...................................................... 90,648 90,345 Refundable deposits.............................................. 575 575 --------- --------- Total current assets........................................ 1,160,666 1,354,708 Fixed assets..................................................... 982,230 936,033 --------- --------- Total assets................................................ 2,142,896 2,290,741 --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities......................... 65,236 61,037 Debt due within one year......................................... 38,351 38,351 --------- --------- Total current liabilities................................... 103,587 99,388 --------- --------- Long-term debt................................................... 38,226 55,074 Customer deposits................................................ 176,644 188,838 --------- --------- Total long-term liabilities................................. 214,870 243,912 --------- --------- Shareholders' equity Common stock (no par value, 50,000 shares authorized, 1,000 shares issued and outstanding)................................. 50,000 50,000 Contributed surplus.............................................. 37,866 37,866 Retained earnings................................................ 1,736,573 1,859,575 --------- --------- Total shareholders' equity.................................. 1,824,439 1,947,441 --------- --------- Total liabilities and shareholders' equity.................. $ 2,142,896 $ 2,290,741 ========= =========
F-46 156 CULLYSPRING WATER CO., INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30 ---------------------------- 1996 1997 ----------- ----------- (UNAUDITED) Revenue.......................................................... $ 3,077,358 $ 3,183,296 Cost of sales.................................................... 1,619,001 1,606,833 --------- --------- Gross profit..................................................... 1,458,357 1,576,463 --------- --------- Expenses Corporate and administrative..................................... 752,524 893,092 Depreciation and amortization.................................... 262,055 263,491 Interest and bank charges........................................ 5,377 5,692 --------- --------- 1,019,956 1,162,275 --------- --------- Income before the following...................................... 438,401 414,188 Interest income.................................................. 13,787 13,992 Gain on sale of fixed assets..................................... 2,150 -- --------- --------- Net income....................................................... 454,338 428,180 Retained earnings, beginning of year............................. 1,488,755 1,736,573 Dividends........................................................ (216,109) (305,178) --------- --------- Retained earnings, end of year................................... $ 1,726,984 $ 1,859,575 ========= =========
F-47 157 CULLYSPRING WATER CO., INC. STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30 ------------------------- 1996 1997 ---------- ---------- (UNAUDITED) OPERATING ACTIVITIES Net income........................................................ $ 454,338 $ 428,180 Items not requiring cash Depreciation and amortization................................... 262,055 263,491 -------- -------- Gain on sale of fixed assets.................................... (2,150) -- Net change in non-cash working capital balances................... 77,984 (63,046) -------- -------- Cash provided by operating activities............................. 792,227 628,625 INVESTING ACTIVITIES Purchase of fixed assets.......................................... (416,273) (168,491) Sale of fixed assets.............................................. 2,150 -- -------- -------- Cash used in investing activities................................. (414,123) (168,491) -------- -------- FINANCING ACTIVITIES Dividends......................................................... (216,109) (302,665) Repayment of long-term debt....................................... (31,749) (34,468) Repayment of obligations under capital lease...................... (16,004) -- -------- -------- Cash used in financing activities................................. (263,862) (337,133) -------- -------- Increase in cash during the period................................ 114,242 123,001 Cash and cash equivalents, beginning of period.................... 681,970 769,185 -------- -------- Cash and cash equivalents, end of period.......................... $ 796,212 $ 892,186 ======== ========
F-48 158 CULLYSPRING WATER CO., INC. NOTES TO FINANCIAL STATEMENTS The unaudited interim consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The adjustments are of a normal recurring nature. F-49 159 FINANCIAL STATEMENTS D&D AND COMPANY, INC. (OPERATING AS MOUNTAIN FRESH BOTTLED WATER) DECEMBER 31, 1996 F-50 160 AUDITORS' REPORT To the Directors of Sparkling Spring Water Limited We have audited the balance sheet of D&D And Company, Inc. as at December 31, 1996 and the statements of income, shareholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1996 and the results of its operations and the changes in its financial position for the year then ended in accordance with accounting principles generally accepted in the United States. The financial statements for the year ended December 31, 1995 are unaudited. Halifax, Canada ERNST & YOUNG October 10, 1997 Chartered Accountants F-51 161 D&D AND COMPANY, INC. BALANCE SHEET
AS AT DECEMBER 31 ------------------------ 1996 1995 -------- ----------- (UNAUDITED) ASSETS Current Cash and cash equivalents.......................................... $ 14,102 $ 17,641 Accounts receivable................................................ 132,900 170,695 Inventories........................................................ 40,298 46,089 -------- -------- Total current assets.......................................... 187,300 234,425 Other assets....................................................... 12,824 9,795 Note receivable.................................................... 5,548 5,548 Fixed assets [note 3].............................................. 649,996 535,874 -------- -------- Total assets.................................................. 855,668 785,642 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities........................... 62,066 51,090 Income tax payable................................................. 564 564 Debt due within one year [note 4].................................. 185,910 178,897 -------- -------- Total current liabilities..................................... 248,540 230,551 -------- -------- Long term debt [note 4]............................................ 384,091 295,080 Other liabilities.................................................. 5,793 4,394 -------- -------- Total long-term liabilities................................... 389,884 299,474 -------- -------- Shareholders' equity Common stock (no par value, 5,000 shares authorized, 2,000 shares issued and outstanding).......................................... 20,630 20,630 Retained earnings.................................................. 196,614 234,987 -------- -------- Total shareholders' equity.................................... 217,244 255,617 -------- -------- Total liabilities and shareholders' equity.................... $ 855,668 $785,642 ======== ======== Commitments (Note 6)
See accompanying notes F-52 162 D&D AND COMPANY, INC. STATEMENT OF INCOME
YEAR ENDED DECEMBER 31 ------------------------- 1996 1995 ----------- ---------- (UNAUDITED) Revenue............................................................ $1,892,461 $2,233,062 Cost of sales...................................................... 370,687 425,003 ---------- ---------- Gross profit....................................................... 1,521,774 1,808,059 ---------- ---------- Expenses Corporate and administrative....................................... 1,150,709 1,303,337 Depreciation and amortization...................................... 221,210 236,527 Interest and bank charges.......................................... 57,375 59,764 ---------- ---------- 1,429,294 1,599,628 ---------- ---------- Net income before the following.................................... 92,480 208,431 Gain on sale of fixed assets....................................... 9,215 -- ---------- ---------- Net income......................................................... $ 101,695 $ 208,431 ========== ==========
See accompanying notes F-53 163 D&D AND COMPANY, INC. STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31 ------------------------------ COMMON STOCK ----------------- RETAINED SHARES AMOUNT EARNING ------ ------- --------- Balance December 31, 1994 [unaudited]......................... 2,000 $20,630 $ 214,749 Net income [unaudited]........................................ 101,695 Dividends [unaudited]......................................... (119,830) ----- ----- ------- Balance December 31, 1995..................................... 2,000 20,630 196,614 Net income.................................................... 208,431 Dividends..................................................... (170,058) ----- ----- ------- Balance December 31, 1996..................................... 2,000 $20,630 $ 234,987 ===== ===== =======
See accompanying notes F-54 164 D&D AND COMPANY, INC. STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31 -------------------------- 1996 1995 --------- ----------- (UNAUDITED) OPERATING ACTIVITIES Net income....................................................... $ 101,695 $ 208,431 Items not requiring cash Depreciation and amortization............................... 221,210 236,527 Gain on sale of fixed assets................................ (9,215) -- -------- -------- 313,690 444,958 Net change in non-cash working capital balances [note 5]......... (49,115) (54,562) -------- -------- Cash provided by operating activities............................ 264,575 390,396 -------- -------- INVESTING ACTIVITIES Purchase of fixed assets......................................... (20,196) (122,405) Sale of fixed assets, net........................................ 8,000 -- Decrease in other assets......................................... 2,858 3,029 -------- -------- Cash used in investing activities................................ (9,338) (119,376) -------- -------- FINANCING ACTIVITIES Decrease in other liabilities.................................... -- (1,399) Increase in long-term debt....................................... 47,192 88,743 Repayment of long-term debt...................................... (169,344) (184,767) Reduction in note receivable..................................... 556 -- Dividends........................................................ (119,830) (170,058) -------- -------- Cash used in financing activities................................ (241,426) (267,481) -------- -------- Increase in cash and cash equivalents during the year............ 13,811 3,539 Cash and cash equivalents, beginning of year..................... 291 14,102 -------- -------- Cash and cash equivalents, end of year........................... $ 14,102 $ 17,641 ======== ========
See accompanying notes F-55 165 D&D AND COMPANY, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 1. NATURE OF OPERATIONS D&D And Company, Inc. operates a bottling plant producing drinking and distilled water. Water is purified in a multistage process before it is bottled in five gallon refillable containers or non-refillable plastic bottles. The five gallon bottles are distributed to commercial or residential customers who rent free-standing dispensers on a monthly basis. The non-refillable containers are generally distributed through grocery outlets. The Company also distributes coffee and coffee products to commercial and residential customers. Coffee brewers are rented to customers on a monthly basis. 2. SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States, the more significant of which are as follows: INVENTORIES Inventories consisting principally of bottling materials are valued at the lower of cost determined on a last in, first out basis and net realizable value. FIXED ASSETS Fixed assets are recorded at cost less accumulated depreciation based on lives of 3 through 7 years. Declining balance depreciation methods are used. Straight line depreciation is used for assets purchased before 1993. Leasehold improvements are amortized evenly over the remaining terms of the leases. FINANCIAL INSTRUMENTS The Company's primary financial instruments consist of accounts receivable, note receivable, accounts payable, debt due within one year and long-term debt. The difference between the carrying values and the fair market values of the primary financial instruments are not material due to the short term maturities and, or the credit terms of those instruments. The Company has at any one time a significant number of commitments to extend credit. The accounts receivable are owed from a large number of customers on normal credit terms and therefore there is a minimal customer concentration and credit risk. At year end the Company did not have any exposure relating to derivative instruments. INCOME TAXES The company has elected S corporation status. Upper this status net income flows through to the stockholders and is taxable to them. Accordingly, the company has not incurred any provision for income tax obligations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities an disclosure of contingent assets and liabilities at the date of the financial F-56 166 D&D AND COMPANY, INC. NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 1996 statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. 3. FIXED ASSETS
1995 1996 --------------------------- -------------------------- ACCUMULATED ACCUMULATED COST DEPRECIATION COST DEPRECIATION ----------- ----------- ---------- ----------- (UNAUDITED) (UNAUDITED) Coolers...................... $ 772,071 $ 398,571 $ 849,644 $ 542,803 Machinery and equipment...... 465,564 241,900 483,799 317,916 Motor vehicles............... 127,458 84,359 147,917 94,244 Leasehold improvements....... 10,000 267 10,000 523 ---------- -------- ---------- -------- 1,375,093 725,097 1,491,360 955,486 Accumulated depreciation..... 725,097 955,486 ---------- ---------- Net book value............... $ 649,996 $ 535,874 ========== ==========
4. LONG-TERM DEBT
1995 1996 --------- ----------- (UNAUDITED) Note payable bearing interest at 9%, repayable in monthly principal and interest instalments of $1,520, maturing August 1998............................................ $ 43,090 $ 28,125 Note payable bearing interest at 9%, repayable in monthly principal and interest instalments of $447, maturing February 2001.......................................... -- 18,590 Note payable bearing interest at 11%, repayable in monthly principal and interest instalments of $4,894, maturing August 2000................................... 214,926 178,020 Note payable bearing interest at 10.75%, repayable in monthly principal and interest instalments of $1,735, maturing March 1998.................................... 41,445 24,250 Note payable bearing interest at 11%, repayable in monthly principal and interest instalments of $1,305, maturing September 2000................................ 57,716 47,929 Note payable bearing interest at 9%, repayable in monthly principal and interest instalments of $595, maturing September 2000......................................... 27,511 22,649 Note payable bearing interest at 9.82%, repayable in monthly principal and interest instalments of $2,446, maturing August 1999................................... -- 68,618 Note payable bearing interest at 10%, repayable in monthly principal and interest instalments of $261, maturing July 1998..................................... 7,101 4,566
F-57 167 D&D AND COMPANY, INC. NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 1996
1995 1996 -------- -------- (UNAUDITED) Note payable bearing interest at 12%, repayable in monthly principal and interest instalments of $462, maturing August 1997................................... -- 3,535 Note payable bearing interest at 9%, repayable in monthly principal and interest instalments of $589, maturing July 2000.............................................. 26,438 21,555 Note payable bearing interest at 10.75%, repayable in monthly principal and interest instalments of $854, maturing December 1998................................. 26,167 18,360 Note payable bearing interest at 8.58%, repayable in monthly principal and interest instalments of$2,537, maturing October 1997.................................. 51,609 24,552 Note payable bearing interest at 8.47%, repayable in monthly principal and interest instalments of $2,259, maturing June 1997..................................... 38,062 13,228 Note payable bearing interest at 10.75%, repayable in monthly principal and interest instalments of $397..... 837 -- Note payable bearing interest at 8.75%, repayable in monthly principal and interest instalments of $1,821................................................. 20,846 -- Note payable bearing interest at 9%, repayable in monthly principal and interest instalments of $785............. 3,084 -- Note payable bearing interest at 9%, repayable in monthly principal and interest instalments of $895............. 6,926 -- Note payable bearing interest at 9.5%, repayable in monthly principal and interest instalments of $490..... 4,243 -- -------- -------- 570,001 473,977 Less portion due within one year......................... 185,910 178,897 -------- -------- $ 384,091 $ 295,080 ======== ========
The Company has pledged as collateral for the notes payable a first fixed and floating charge on the fixed assets. Principal repayments required in each of the next five years are as follows: 1997................................................ $178,897 1998................................................ 126,964 1999................................................ 100,995 2000................................................ 66,233 2001................................................ 888
F-58 168 D&D AND COMPANY, INC. NOTES TO FINANCIAL STATEMENTS -- CONTINUED DECEMBER 31, 1996 5. STATEMENT OF CASH FLOW
1995 1996 -------- ----------- (UNAUDITED) (Increase) decrease in Accounts receivable....................................... $(10,433) $ (37,795) Inventories............................................... (5,109) (5,791) Prepaid expenses.......................................... 300 -- -------- -------- (15,242) (43,586) Decrease in accounts payable and accrued liabilities........ (33,873) (10,976) -------- -------- Net change in non-cash working capital balances............. $(49,115) $ (54,562) ======== ========
6. LEASE COMMITMENTS The Company is committed under operating leases extending for various periods to 2000. Future minimum lease payments are as follows: 1997................................................. $ 66,907 1998................................................. 56,185 1999................................................. 33,037 2000................................................. 4,982
F-59 169 FINANCIAL STATEMENTS MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES (OPERATING AS WATER AT WORK LIMITED) 31 JANUARY 1997 AND 1996 KIDSONS IMPEY CHARTERED ACCOUNTANTS GLASGOW F-60 170 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 JANUARY 1997 AND 1996 CONTENTS
PAGE ---- Company information................................................................... F-62 Director's report..................................................................... F-63 Statement of director's responsibilities.............................................. F-64 Auditors' report...................................................................... F-65 Profit and loss account............................................................... F-66 Balance sheet......................................................................... F-67 Cash flow statement................................................................... F-68 Notes................................................................................. F-69
F-61 171 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES COMPANY INFORMATION 31 JANUARY 1997 AND 1996 DIRECTOR........... S. Larson SECRETARY.......... C. M. M. Hurley REGISTERED Breckenridge House OFFICE........... 274 Sauchiehall Street Glasgow G2 3EH AUDITORS........... Kidsons Impey Chartered Accountants Breckenridge House 274 Sauchiehall Street Glasgow G2 3EH
F-62 172 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES DIRECTOR'S REPORT 31 JANUARY 1997 The director presents his report and the audited financial statements for the year ended 31 January 1997. PRINCIPAL ACTIVITY The principal activities of the group were the provision of management services to a subsidiary company; the supply of mineral water cooling systems and mineral water and; arranging distributors of drinks as an agent for the holding company. DIRECTOR The director of the company during the year and his interest in the shares of the company as recorded in the register of directors' interests was as follows
31 JANUARY 1997 1 FEBRUARY 1996 ORDINARY ORDINARY SHARES SHARES --------------- --------------- J. Duffy................................... 19,999 19,999
On 6 February 1997, J. Duffy and E. Duffy resigned as director and secretary respectively. On the same date, S. Larson and C. M. M. Hurley were appointed as director and secretary respectively. J. Duffy transferred his shares to Sparkling Spring Water UK Limited on 6 February 1997. AUDITORS Kidsons Impey have agreed to offer themselves for re-appointment as auditors. SMALL COMPANY EXEMPTIONS This report is prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to small companies. On behalf of the board S. Larson Director 28 October, 1997 Breckenridge House 274 Sauchiehall Street Glasgow G2 3EH F-63 173 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES STATEMENT OF DIRECTOR'S RESPONSIBILITIES Company law requires the director to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing those financial statements, the director is required to - select suitable accounting policies and apply them consistently; - make judgements and estimates that are reasonable and prudent; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The director is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable him to ensure that the financial statements comply with the Companies Act 1985. He is also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. On behalf of the board S. Larson Director 28 October, 1997 F-64 174 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES AUDITORS' REPORT AUDITORS' REPORT TO THE MEMBERS OF MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES We have audited the financial statements on pages F-65 to F-74 which have been prepared under the historical cost convention and the accounting policies set out on pages F-68 and F-69. RESPECTIVE RESPONSIBILITIES OF THE DIRECTOR AND AUDITORS As described on page F-63, the company's director is responsible for the preparation of financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the director in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error or other irregularity. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. OPINION In our opinion the financial statements give a true and fair view of the state of the group's affairs as at 31 January 1997 and 1996 and of its profit for the years then ended and have been properly prepared in accordance with the Companies Act 1985. Kidsons Impey Glasgow Registered Auditors Chartered Accountants Glasgow 28 October, 1997 F-65 175 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES PROFIT AND LOSS ACCOUNT FOR THE YEARS ENDED 31 JANUARY 1997 AND 1996
1996 1997 NOTE L L ---- ---------- ---------- Turnover.................................................. 2 1,751,035 2,305,308 Cost of sales............................................. (447,314) (568,628) ---------- Gross profit.............................................. 1,303,721 1,736,680 Net operating expenses Administrative expenses................................... (1,179,889) (1,346,427) Other operating income.................................... 4,000 4,665 ---------- Operating profit.......................................... 3 127,832 394,918 Interest payable.......................................... 5 (43,442) (40,182) ---------- Profit on ordinary activities before taxation............. 84,390 354,736 Taxation.................................................. (15,866) (99,755) ---------- Profit on ordinary activities after taxation.............. 68,524 254,981 Dividends................................................. 6 (10,000) -- ---------- Retained profit for the year.............................. 15 58,524 254,981 ==========
Movements in reserves are shown in the notes to the financial statements. None of the company's activities were acquired or discontinued during the above two financial years. There are no recognised gains and losses in 1997 or 1996 other than the profit for the year. F-66 176 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES BALANCE SHEET AT 31 JANUARY 1997 AND 1996
1996 1997 --------------------- --------------------- NOTE L L L L ---- -------- -------- --------- ------- Fixed assets Tangible assets...................... 7 110,367 165,229 Current assets Stocks............................... 8 494,033 442,996 Debtors.............................. 9 319,043 566,264 Cash at bank and in hand............. 50,778 58,416 -------- --------- 863,854 1,067,676 Creditors: amounts falling due within one year........................... 10 (698,651) (772,969) -------- --------- Net current assets................... 165,203 294,707 -------- ------- Total assets less current liabilities.............. 275,570 459,936 Creditors: amounts falling due after more than one year................. 11 (145,468) (74,853) -------- ------- 130,102 385,083 ======== ======= Capital and reserves Called up share capital.............. 13 20,000 20,000 Other reserves....................... 14 23,002 23,002 Profit and loss account.............. 15 87,100 342,081 -------- ------- Total shareholders' funds.................... 12 130,102 385,083 ======== =======
These financial statements are prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to small companies. The financial statements on pages 5 to 16 were approved by the director on 28 October, 1997. S. Larson Director F-67 177 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES CASH FLOW STATEMENT FOR THE YEARS ENDED 31 JANUARY 1997 AND 1996
1996 1997 ------------------- --------------------- NOTE L L L L ---- ------- ------- -------- -------- Net cash inflow from operating activities.............................. 17 152,922 268,221 Returns on investments and servicing of finance Interest paid............................. (27,393) (24,389) Interest element of finance lease rental payments................................ (16,049) (15,793) ------- -------- (43,442) (40,182) Taxation Corporation tax paid...................... (7,386) (17,337) Capital expenditure and financial investment Purchase of tangible fixed assets......... (33,217) (125,411) Sale of tangible fixed assets............. 47,527 46,410 ------- -------- 14,310 (79,001) ------- -------- 116,404 131,701 Equity dividends paid..................... (10,000) -- ------- -------- 106,404 131,701 Financing Debt due within a year: Bank loan repayments.................... (24,800) (31,738) Debt due beyond a year: Bank loan (repayments)/advances......... 91,076 (1,433) Capital element of finance lease rentals................................. (84,101) (90,892) ------- -------- (17,825) (124,063) ------- Increase in cash.......................... 88,579 7,638 ======= ========
F-68 178 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS 31 JANUARY 1997 AND 1996 1 ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost accounting rules. TURNOVER Turnover represents the amount derived from the provision of goods and services falling within the company's activities after deduction of trade discounts and value added tax. DEPRECIATION Depreciation of fixed assets is calculated to write off their cost or valuation less any residual value over their estimated useful lives as follows: Leasehold property....................... straight line over term of lease Improvements to property................. 12.5% straight line/over term of lease Computer equipment/plant and machinery... 33.3% straight line/20% reducing balance Motor vehicles........................... 25% reducing balance Fixtures and fittings.................... 12.5% straight line/20% reducing balance
LEASES AND HIRE PURCHASE CONTRACTS Tangible fixed assets acquired under finance leases and hire purchase contracts are capitalised at the estimated fair value at the date of inception of each lease or contract. The total finance charges are allocated over the period of the lease in such a way as to give a reasonably constant charge on the outstanding liability. Rentals paid under operating leases are charged to income as incurred. STOCKS Stocks are valued at the lower of cost and net realisable value. Cost is computed on a first in first out basis. Net realisable value is based on estimated selling price less the estimated cost of disposal. DEFERRED TAXATION Deferred taxation is provided on the liability method in respect of the taxation effect of all timing differences to the extent that tax liabilities are likely to crystallise in the foreseeable future. PENSIONS DEFINED CONTRIBUTION SCHEME Contributions are charged to the profit and loss account as they become payable in accordance with the rules of the scheme. F-69 179 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) CONSOLIDATION These financial statements have been prepared by consolidating the following financial statements: Your Label Water Company Limited Natural Water Company Limited Water at Work Limited The financial statements represent the results of the group as a whole and do not show the individual company position. 2 TURNOVER In the opinion of the directors, none of the turnover of the company is attributable to geographical markets outside the UK. (1996 nil) 3 OPERATING PROFIT
1996 1997 L L ------ ------ Operating profit is stated after crediting Rent receivable........................................ 4,000 4,000 Interest receivable.................................... -- 665 ------ ------ and after charging Auditors' remuneration................................. 6,200 6,750 Loss on sale of assets................................. 25,742 11,390 ------ ------ Depreciation of tangible fixed assets (note 7) owned assets........................................... 10,617 32,985 leased assets.......................................... 18,608 10,739 ------ ------ 29,225 43,724 ====== ====== The total amount charged against profits in respect of finance leases and hire purchase contracts is.......... 34,657 26,532 ====== ====== (of which part is shown as depreciation and the balance is shown as interest payable in note 5)
4 DIRECTORS
1996 1997 L L ------- ------- Directors' emoluments.................................... 21,781 33,001 ====== ======
DEFINED CONTRIBUTION PENSION SCHEME The company operates a defined contribution scheme. The assets of the scheme are held separately from those of the company in an independently administered fund. The pension cost charge represents contributions payable by the company to the fund and amounted to L10,601 (1996 L7,381). Contributions totalling L0 (1996 L0) were payable to the fund at 31 January 1997 and are included in creditors. These contributions are payable in respect of both the director and the employees of the company. F-70 180 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) 5 INTEREST PAYABLE
1996 1997 L L ------- ------- Finance lease and hire purchase contracts................ 16,049 15,793 Other interest payable................................... 27,393 24,389 ------ ------ 43,442 40,182 ====== ======
6 DIVIDENDS
1996 1997 L L ------- ------- Equity -- ordinary/final................................. 10,000 -- ====== ======
7 TANGIBLE FIXED ASSETS
PLANT FIXTURES LEASEHOLD MOTOR AND AND PROPERTY/ VEHICLES MACHINERY FITTINGS IMPROVEMENTS TOTAL L L L L L -------- --------- -------- ------------ ------- COST 1 February 1996................. 60,908 73,412 25,869 15,872 176,061 Additions....................... 44,775 110,589 1,022 -- 156,386 Disposals....................... (28,921) (47,265) (5,054) (1,446) (82,686) ------- ------- ------ ------ ------- 31 January 1997................. 76,762 136,736 21,837 14,426 249,761 ------- ------- ------ ------ ------- DEPRECIATION 1 February 1996................. 22,572 28,324 11,911 2,887 65,694 Charge for year................. 16,141 24,272 2,429 882 43,724 Disposals....................... (10,373) (11,875) (2,638) -- (24,886) ------- ------- ------ ------ ------- 31 January 1997................. 28,340 40,721 11,702 3,769 84,532 ------- ------- ------ ------ ------- NET BOOK AMOUNT 31 January 1997................. 48,422 96,015 10,135 10,657 165,229 ======= ======= ====== ====== ======= 1 February 1996................. 38,336 45,088 13,958 12,985 110,367 ======= ======= ====== ====== =======
The net book amount of fixed assets includes L30,141 (1996 L61,651) in respect of assets held under finance leases and hire purchase contracts, the depreciation of which is shown in note 3. INTANGIBLE FIXED ASSETS In addition to the above tangible fixed assets, the group has an intangible fixed asset in the form of a lease over the site and the spring which has 13 years to run, with an option to extend it for a further 20 years. The company also owns 3 boreholes, each of which has an abundant supply of water. These assets have not been incorporated into the financial statements, but the former director was of the opinion that they could realise the sum of L150,000. 8 STOCKS
1996 1997 L L ------- ------- Stocks................................................. 494,033 442,996 ======= =======
F-71 181 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) 9 DEBTORS
1996 1997 L L ------- ------- AMOUNTS FALLING DUE WITHIN ONE YEAR Trade debtors.......................................... 289,704 402,241 Other debtors.......................................... 29,339 164,023 ------- ------- 319,043 566,264 ======= =======
'Other debtors' includes balances in respect of directors' overdrawn current accounts totalling L139,548 (1996 L0). This was repaid on 6 February 1997. 10 CREDITORS: amounts falling due within one year
1996 1997 L L ------- ------- Bank loans and overdrafts.............................. 31,738 66,643 Trade creditors........................................ 108,729 117,602 Obligations under finance leases and hire purchase contracts -- note 11................................. 62,081 40,386 Corporation tax........................................ 27,076 109,494 Other taxation and social security..................... 168,967 88,511 Other creditors........................................ 300,060 350,333 ------- ------- 698,651 772,969 ======= =======
F-72 182 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) 11 CREDITORS: amounts falling due after more than one year
1996 1997 L L ------- ------- Bank loans............................................. 68,076 -- Other creditors........................................ 77,392 74,853 ------- ------- 145,468 74,853 ======= ======= MATURITY OF DEBT INCLUDED ABOVE In one year or less, or on demand...................... 31,738 66,643 Between one and two years.............................. 35,500 -- Between two and five years............................. 32,576 -- ------- ------- 99,814 66,643 ======= ======= CREDITORS OTHER THAN FINANCE LEASE AND HIRE PURCHASE CONTRACTS SECURED CREDITORS Bank loans and overdrafts.............................. 99,814 66,643 OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS Amounts included above are repayable over varying periods by monthly instalments as follows: In the next year....................................... 62,081 40,386 In the second to fifth years........................... 38,222 -- ------- ------- 100,303 40,386 ======= =======
12 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1996 1997 L L ------- ------- Profit for the financial year.......................... 68,524 254,981 Dividends.............................................. (10,000) -- ------- ------- Net addition to shareholders' funds.................... 58,524 254,981 Opening shareholders' funds............................ 71,578 130,102 ------- ------- Closing shareholders' funds............................ 130,102 385,083 ======= =======
13 CALLED UP SHARE CAPITAL
1996 1997 -------------------- -------------------- NUMBER OF NUMBER OF SHARES L SHARES L --------- ------ --------- ------ AUTHORISED Ordinary shares of L1 each...................... 50,000 50,000 50,000 50,000 ====== ====== ====== ====== ALLOTTED CALLED UP AND FULLY PAID Ordinary shares of L1 each...................... 20,000 20,000 20,000 20,000 ====== ====== ====== ======
F-73 183 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) 14 OTHER RESERVES
1997 L ------- Negative goodwill................................................. 23,002 ======
15 PROFIT AND LOSS ACCOUNT
1997 L ------- 1 February 1996................................................... 87,100 Retained profit for the year...................................... 254,981 ------- 31 January 1997................................................... 342,081 =======
16 ULTIMATE PARENT UNDERTAKING During the year the company did not have a holding company. On 6 February 1997, the whole of the company's issued share capital was acquired by Sparkling Spring Water UK Limited, a company incorporated in England. 17 NOTES TO THE CASH FLOW STATEMENT RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
1996 1997 L L -------- --------- Operating profit.................................... 127,832 394,918 Depreciation charges................................ 29,225 43,724 Loss on sale of fixed assets........................ 25,742 11,390 Decrease/(increase) in stocks....................... (110,830) 51,037 Increase in debtors................................. (46,850) (247,221) Increase in creditors............................... 127,803 14,373 -------- -------- Net cash inflow from operating activities........... 152,922 268,221 ======== ========
ANALYSIS OF CHANGES IN NET DEBT
AT START CASH OTHER AT END OF YEAR FLOWS CHANGES OF YEAR L L L L -------- ------- ------- ------- Cash in hand, at bank.......................... 50,778 7,638 -- 58,416 Overdrafts..................................... -- -- -- -- -------- 7,638 -------- Debt due within 1 year......................... (31,738) 31,738 (66,643) (66,643) Debt due after 1 year.......................... (68,076) 1,433 66,643 -- Finance leases................................. (100,303) 90,892 (30,975) (40,386) -------- 124,063 -------- -------- ------- ------- Total................................ (149,339) 131,701 (30,975) (48,613) ======== ======== ======= =======
F-74 184 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
1996 1997 L L -------- -------- Increase in cash in the year......................... 88,579 7,638 Cash outflow from decrease in debt and lease financing.......................................... 17,825 124,063 -------- -------- Change in net debt resulting from cash flows......... 106,404 131,701 New finance leases................................... (22,366) (30,975) -------- -------- Movement in net debt in the year..................... 84,038 100,726 Net debt at 1 February 1996.......................... (233,377) (149,339) -------- -------- Net debt at 31 January 1997.......................... (149,339) (48,613) ======== ========
19 DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES These financial statements have been prepared in accordance with accounting principles generally accepted in the United Kingdom, which conform, in all material respects, with accounting principles generally accepted in the United States except as explained below. If Marlborough Employment Limited had followed the US basis, the net effect on consolidated profits would be:
1996 1997 L L ------ -------- Retained profits, UK basis............................. 58,524 254,981 Reallocation to reserves -- dividends.................. 10,000 -- -------- -------- Retained profits, US basis............................. 68,524 254,981 ======== ========
F-75 185 MARLBOROUGH EMPLOYMENT LIMITED AND SUBSIDIARIES NOTES ON FINANCIAL STATEMENTS -- (CONTINUED) ====================================================== No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer contained herein and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than those to which it relates nor does it constitute an offer to sell, or a solicitation of an offer to buy, to any person in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor the exchange proposed to be made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof or that the information contained herein is correct as of any time subsequent to the date hereof. ------------------ TABLE OF CONTENTS
PAGE ------ Summary............................... 1 Risk Factors.......................... 12 Use of Proceeds....................... 20 The Offering.......................... 20 Capitalization........................ 21 Unaudited Pro Forma Consolidated Financial Data...................... 22 Selected Historical Consolidated Financial Data...................... 30 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 31 The Exchange Offer.................... 35 The Company........................... 47 Management............................ 62 Certain Relationships and Related Transactions........................ 65 Security Ownership of Certain Beneficial Owners and Management.... 67 Description of the Credit Agreement... 68 Certain Federal Income Tax Considerations...................... 69 Description of the Notes.............. 70 Book Entry; Delivery and Form......... 100 Plan of Distribution.................. 101 Legal Matters......................... 102 Independent Auditors.................. 102 Additional Information................ 103 Index to Consolidated Financial Statements.......................... F-1
====================================================== ====================================================== ------------------- PROSPECTUS ------------------- $100,000,000 LOGO SPARKLING SPRING WATER GROUP LIMITED OFFER TO EXCHANGE 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 , 1997 ====================================================== 186 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law contains detailed provisions for indemnification of directors and officers of Delaware corporations against expenses, judgments, fines and settlements in connection with litigation. Article Tenth of the Certificate of Incorporation of each of Spring Water, Inc., a wholly-owned subsidiary of Sparkling Spring ("Spring Water"), Mountain Fresh Acquisition Corp., a wholly-owned subsidiary of Sparkling Spring ("MFA"), and Crystal Spring Acquisition, Inc., a wholly-owned subsidiary of Sparkling Spring ("CSA"), provides that each company shall indemnify its officers and directors to the fullest extent permitted by law and further provides that to the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of the company shall not be liable to the company or its stockholders for monetary damages for breach of fiduciary duty as a director. Section 145 of the Delaware General Corporation Law further permits each of Spring Water, MFA and CSA to insure itself for such indemnification. Sections 23B.08.500 through 23B.08.600 of the Washington Business Corporation Act contains detailed provisions for indemnification of directors and officers of Washington corporations against expenses, judgments, fines and settlements in connection with litigation. Section 23B.08.580 Washington Business Corporation Act further permits Cullypring to insure itself for such indemnification. Each of Spring Water, MFA, CSA and Cullyspring maintains insurance coverage for its directors and officers with respect to certain liabilities incurred in their capacities as such and for each company with respect to any payments which it becomes obligated to make to such persons under the foregoing statutory provisions. Each of Sparkling Spring, SSWL, Water Jug, Canadian Springs, 3003969 Nova Scotia Limited (a wholly-owned subsidiary of Sparkling Spring), High Valley, Aqua Care Water Softening & Purification Inc. (a wholly-owned subsidiary of Sparkling Spring) and Withey's Water have similar articles of association which provide that every director or officer or former director or officer who acts at the company's request as a director or officer of the company shall be indemnified by the company against, and it shall be the duty of the directors out of the funds of the company to pay, all costs, losses and expenses including any amount paid to settle an action or a claim that such director or officer may incur or become liable to pay in respect of any claim against such person by reason of being or having been a director or officer of the company. In addition, Sparkling Spring and SSWL have entered into a specific indemnity agreement with a certain officer by which they have agreed on behalf of themselves and each of their Canadian subsidiary companies to indemnify and hold such officer harmless from and against any damage which he may suffer as a result of having acted as an officer or director of Sparkling Spring or any of its subsidiary companies. SSWL maintains insurance coverage for its directors and officers with respect to certain liabilities which may be incurred in their capacities as officers and directors and which the companies become obligated to make to such persons under the foregoing provisions of the companies constating documents. Sparkling Spring is in the process of obtaining similar insurance. Section 310 of the Companies Act 1985 (the "CA") makes void any provision, whether contained in the articles of the company or any contract with the company or otherwise, for exempting any officer of the company or any person (whether an officer or not) employed by the company as auditor from, or indemnifying him against, any liability which by virtue of any rule of law would otherwise attach to him in respect of any negligence, default or breach of duty or breach of trust of which he may be guilty of in relation to the company. II-1 187 However, Section 137 of the Companies Act 1989 substituted a new Subsection 3 for Section 310 of the CA which provides that a company may purchase and maintain for any officer or auditor insurance against the liabilities which may attach to such person in respect of any negligence, default, breach of duty or breach of trust. Furthermore, Section 310(3)(b) of the CA allows a company to indemnity an officer or auditor who is a successful defendant in civil or criminal proceedings or who successfully applies for relief under Section 144(3) of the CA (acquisition of shares by innocent nominee) or Section 727 of the CA (general power to grant relief in cases of honest and reasonable conduct) in which relief is granted to him by the court. The articles of association of SSWUK provide that every director, auditor, secretary or other officer of SSWUK shall be entitled to be indemnified by SSWUK against all costs, charges, claims, expenses and liabilities incurred by him in the execution and/or discharge of his duty and all the exercise of his powers and/or otherwise in relation to or in connection with his duties, including any liability incurred by him in defending criminal or civil proceedings in which judgment is given in his favor or in which he is acquitted or in connection with any application under any statute for relief from liability in which relief is granted to him by the court. The articles of association of Aquaporte UK provide that every director, secretary, auditor or other officer of Aquaporte UK shall be entitled to be indemnified by Aquaporte UK against all losses and liabilities incurred by him in the exercise of his duties, including any liability incurred in defending any civil or criminal proceedings in which judgment is given in his favor or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability in respect of the act or omission done. The articles of association of Natural Water Limited, a wholly-owned subsidiary of Sparkling Spring, provide that each director and officer of Natural Water Limited shall be entitled to be indemnified against costs, charges, losses and expenses incurred in defending any proceedings civil or criminal in which judgment is given in his favor in which he is acquitted or in connection with any application under Section 144(3) or (4) or Section 77 of the CA in which the court relieves him from liability. There is no specific provision included in the articles of association of Marlborough Employment Limited, a wholly-owned subsidiary of Sparkling Spring, dealing with directors indemnities. The Articles of Table A of the Companies Act 1948 apply to Marlborough Employment Limited. The relevant provision dictates that each director and other officer shall be indemnified out of the assets of the company against any liability incurred in defending any proceedings (whether criminal or civil) in which judgment is given in his favor or in which he is acquitted or in connection with any application under Section 448 of the Companies Act 1948 in which relief is granted by the court. In addition to the indemnity contained in Article 118 of Table A of the CA, the articles of association of Water at Work provide that every director, officer or official shall be indemnified for all costs, charges, losses, expenses and liability incurred in the execution of his duties. Article 118 of Table A of the CA provides that each director and officer of the company shall be indemnified out of the assets of the company against any liability incurred in defending any proceedings, civil or criminal, in which judgment is given in his favor or in which he is acquitted or in connection with any application in which relief is granted to him by the court from liability from negligence, default, breach of duty or breach of trust in relation to the affairs of the company. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (A) EXHIBITS. 3.1 Memorandum of Association of Sparkling Spring Water Group Limited, as amended. 3.2 Articles of Association of Sparkling Spring Water Group Limited. 3.3 Memorandum of Association of Sparkling Spring Water Limited. 3.4 Articles of Association of Sparkling Spring Water Limited. 3.5 Certificate of Incorporation of Spring Water, Inc.
II-2 188 3.6 By-laws of Spring Water, Inc. 3.7 Articles of Incorporation of Cullyspring Water Co., Inc. 3.8 By-laws of Cullyspring Water Co., Inc., as amended. 3.9 Certificate of Incorporation of Crystal Spring Acquisition, Inc. 3.10 By-laws of Crystal Spring Acquisition, Inc. 3.11 Certificate of Incorporation of Mountain Fresh Acquisition Corp. 3.12 By-laws of Mountain Fresh Acquisition Corp. 3.13 Memorandum of Association of Water Jug Enterprises Limited. 3.14 Articles of Association of Water Jug Enterprises Limited. 3.15 Memorandum of Association of Withey's Water Softening & Purification Ltd. 3.16 Articles of Association of Withey's Water Softening & Purification Ltd. 3.17 Memorandum of Association of Aqua Care Water Softening & Purification Inc. 3.18 Articles of Association of Aqua Care Water Softening & Purification Inc. 3.19 Memorandum of Association of High Valley Water Limited. 3.20 Articles of Association of High Valley Water Limited. 3.21 Memorandum of Association of 3003969 Nova Scotia Limited. 3.22 Articles of Association of 3003969 Nova Scotia Limited. 3.23 Memorandum of Association of Canadian Springs Water Company Limited. 3.24 Articles of Association of Canadian Springs Water Company Limited. 3.25 Memorandum of Association of Sparkling Spring Water (UK) Limited. 3.26 Articles of Association of Sparkling Spring Water (UK) Limited. 3.27 Memorandum of Association of Aquaporte (UK) Limited. 3.28 Articles of Association of Aquaporte (UK) Limited. 3.29 Memorandum of Association of Marlborough Employment Limited. 3.30 Articles of Association of Marlborough Employment Limited. 3.31 Memorandum of Association of Water at Work Limited. 3.32 Articles of Association of Water at Work Limited. 3.33 Memorandum of Association of Natural Water Limited. 3.34 Articles of Association of Natural Water Limited. 4 Indenture, dated as of November 19, 1997, among Sparkling Spring Water Group Limited, as Issuer, Bankers Trust Company, as Trustee, and the Subsidiary Guarantors named therein. 5.1 Opinion of Robinson & Cole LLP. 5.2 Opinion of Lane Powell Spears Lubersky LLP. 5.3 Opinion of Stewart McKelvey Stirling Scales. 5.4 Opinion of Norton Rose. 5.5 Opinion of Dundas & Wilson. 10.1 Purchase Agreement, dated November 14, 1997, among Sparkling Spring Water Group Limited, BT Alex. Brown Incorporated, NatWest Capital Markets Limited and the Guarantors named therein. 10.2 Registration Rights Agreement, dated as of November 19, 1997, among Sparkling Spring Water Group Limited and the Guarantors named therein, as Issuers, and BT Alex. Brown Incorporated and NatWest Capital Markets Limited as Initial Purchasers. 10.3 Employment Agreement, dated October 2, 1997, between Sparkling Spring Water Limited and Stewart E. Allen. 10.4 Shareholder Agreement, dated as of October 22, 1997, among Sparkling Spring Water Group Limited, Sparkling Spring Water Limited, and the Shareholders named therein. 10.5 Management Agreement, as amended and restated January 12, 1996, among Sparkling Spring Water Limited, C.F. Capital Corporation, G. John Krediet and Stephen L. Larson. 10.6 Amendment Agreement, dated October 22, 1997, among Sparkling Spring Water Limited, C.F. Capital Corporation, G. John Krediet, Stephen L. Larson and Sparkling Spring Water Group Limited.
II-3 189 10.7 Form of Exchange Agent Agreement between Sparkling Spring Water Group Limited and Bankers Trust Company, as Exchange Agent. 21 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young. 23.2 Consent of Kidsons Impey. 23.3 Consent of Robinson & Cole LLP (included in Exhibit 5.1). 23.4 Consent of Lane Powell Spears Lubersky LLP (included in Exhibit 5.2). 23.5 Consent of Stewart McKelvey Stirling Scales (included in Exhibit 5.3). 23.6 Consent of Norton Rose (included in Exhibit 5.4). 23.7 Consent of Dundas & Wilson (included in Exhibit 5.5). 24.1 Power of Attorney for Sparkling Spring Water Group Limited (included in signature page of Sparkling Spring Water Group Limited on page II-6). 24.2 Power of Attorney for Sparkling Spring Water Limited (included in signature page of Sparkling Spring Water Limited on page II-7). 24.3 Power of Attorney for Spring Water, Inc. (included in signature page of Spring Water, Inc. on page II-8). 24.4 Power of Attorney for Cullyspring Water Co., Inc. (included in signature page of Cullyspring Water Co., Inc. on page II-9). 24.5 Power of Attorney for Crystal Spring Acquisition, Inc. (included in signature page of Crystal Spring Acquisition, Inc. on page II-10). 24.6 Power of Attorney for Mountain Fresh Acquisition Corp (included in signature page of Mountain Fresh Acquisition Corp on page II-11). 24.7 Power of Attorney for Water Jug Enterprises Limited (included in signature page of Water Jug Enterprises Limited on page II-12). 24.8 Power of Attorney for Withey's Water Softening & Purification Ltd. (included in signature page of Withey's Water Softening & Purification Ltd. on page II-13). 24.9 Power of Attorney for Aqua Care Water Softening & Purification Inc. (included in signature page of Aqua Care Water Softening & Purification Inc. on page II-14). 24.10 Power of Attorney for High Valley Water Limited (included in signature page of High Valley Water Limited on page II-15). 24.11 Power of Attorney for 3003969 Nova Scotia Limited (included in signature page of 3003969 Nova Scotia Limited on page II-16). 24.12 Power of Attorney for Canadian Springs Water Company Limited (included in signature page of Canadian Springs Water Company Limited on page II-17). 24.13 Power of Attorney for Sparkling Spring Water (UK) Limited (included in signature page of Sparkling Spring Water (UK) Limited on page II-18). 24.14 Power of Attorney for Aquaporte (UK) Limited (included in signature page of Aquaporte (UK) Limited on page II-19). 24.15 Power of Attorney for Marlborough Employment Limited (included in signature page of Marlborough Employment Limited on page II-20). 24.16 Power of Attorney for Water at Work Limited (included in signature page of Water at Work Limited on page II-21). 24.17 Power of Attorney for Natural Water Limited (included in signature page of Natural Water Limited on page II-22). 25 Statement of Eligibility on Form T-1 of Trustee under the Indenture. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery.
(B) FINANCIAL STATEMENT SCHEDULES. All schedules for which provision is made in Regulation S-X of the Securities and Exchange Commission are not required under the related instructions or are inapplicable or the required information is included in the financial statements or notes thereto and, therefore, have been omitted. II-4 190 ITEM 22. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) The undersigned registrant hereby undertakes: (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means; and (ii) to arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (i) above includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (e) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 191 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. SPARKLING SPRING WATER GROUP LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen L. Larson and Richard A. Krantz his true and lawful attorneys-in-fact and agents, each acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ G. JOHN KREDIET Principal Executive Officer and Director - --------------------------------------------- G. John Krediet /s/ STEPHEN L. LARSON Principal Financial and Accounting Officer, - --------------------------------------------- Authorized Representative in the United Stephen L. Larson States and Director /s/ MICHAEL BREGMAN Director - --------------------------------------------- Michael Bregman /s/ C. SEAN DAY Director - --------------------------------------------- C. Sean Day /s/ KENNETH B. ROTMAN Director - --------------------------------------------- Kenneth B. Rotman
II-6 192 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. SPARKLING SPRING WATER LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen L. Larson and Richard A. Krantz his true and lawful attorneys-in-fact and agents, each acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ G. JOHN KREDIET Principal Executive Officer and Director - --------------------------------------------- G. John Krediet /s/ STEPHEN L. LARSON Principal Financial and Accounting Officer, - --------------------------------------------- Authorized Representative in the United Stephen L. Larson States and Director /s/ MICHAEL BREGMAN Director - --------------------------------------------- Michael Bregman /s/ C. SEAN DAY Director - --------------------------------------------- C. Sean Day /s/ KENNETH B. ROTMAN Director - --------------------------------------------- Kenneth B. Rotman
II-7 193 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. SPRING WATER, INC. By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- --------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Stephen L. - --------------------------------------------- Larson Principal Financial and Accounting Stephen L. Larson Officer and Director
II-8 194 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. CULLYSPRING WATER CO., INC. By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- --------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Stephen L. - --------------------------------------------- Larson Principal Financial and Accounting Stephen L. Larson Officer and Director
II-9 195 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. CRYSTAL SPRING ACQUISITION, INC. By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer and Stephen L. Larson Director
II-10 196 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. MOUNTAIN FRESH ACQUISITION CORP. By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer and Stephen L. Larson Director
II-11 197 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. WATER JUG ENTERPRISES LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-12 198 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. WITHEY'S WATER SOFTENING & PURIFICATION LTD. By: /s/ STEPHEN L. LARSON ----------------------------------------- Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Stephen L. Larson - --------------------------------------------- Principal Financial and Accounting Officer, Stephen L. Larson Authorized Representative in the United States and Director
II-13 199 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. AQUA CARE WATER SOFTENING & PURIFICATION INC. By: /s/ STEPHEN L. LARSON ----------------------------------------- Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Stephen L. Larson - --------------------------------------------- Principal Financial and Accounting Officer, Stephen L. Larson Authorized Representative in the United States and Director
II-14 200 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. HIGH VALLEY WATER LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-15 201 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. 3003969 NOVA SCOTIA LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-16 202 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. CANADIAN SPRINGS WATER COMPANY LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------- Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-17 203 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. SPARKLING SPRING WATER (UK) LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-18 204 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. AQUAPORTE (UK) LIMITED By: /s/ STEPHEN L. LARSON ------------------------------------ Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - --------------------------------------------- ---------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - --------------------------------------------- Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-19 205 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. MARLBOROUGH EMPLOYMENT LIMITED By: /s/ STEPHEN L. LARSON -------------------------------- Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - ------------------------------------------ ----------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - ------------------------------------------ Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-20 206 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. WATER AT WORK LIMITED By: /s/ STEPHEN L. LARSON -------------------------------- Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - ------------------------------------------ ----------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - ------------------------------------------ Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-21 207 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on this 22nd day of December 1997. NATURAL WATER LIMITED By: /s/ STEPHEN L. LARSON -------------------------------- Stephen L. Larson Vice Chairman of the Board and Chief Financial Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Krantz his true and lawful attorney-in-fact and agent, acting alone, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, acting alone, full power and authority to do and perform to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, acting alone, or his substitute or substitutes may lawfully do and cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons on December 22, 1997 in the capacities indicated.
SIGNATURE TITLE - ------------------------------------------ ----------------------------------------------- /s/ STEPHEN L. LARSON Principal Executive Officer, Principal - ------------------------------------------ Financial and Accounting Officer, Authorized Stephen L. Larson Representative in the United States and Director
II-22 208
SEQUENTIAL EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ ------------------------------------------------------------------------- ---------- 3.1 Memorandum of Association of Sparkling Spring Water Group Limited, as amended. 3.2 Articles of Association of Sparkling Spring Water Group Limited. 3.3 Memorandum of Association of Sparkling Spring Water Limited. 3.4 Articles of Association of Sparkling Spring Water Limited. 3.5 Certificate of Incorporation of Spring Water, Inc. 3.6 By-laws of Spring Water, Inc. 3.7 Articles of Incorporation of Cullyspring Water Co., Inc. 3.8 By-laws of Cullyspring Water Co., Inc., as amended. 3.9 Certificate of Incorporation of Crystal Spring Acquisition, Inc. 3.10 By-laws of Crystal Spring Acquisition, Inc. 3.11 Certificate of Incorporation of Mountain Fresh Acquisition Corp. 3.12 By-laws of Mountain Fresh Acquisition Corp. 3.13 Memorandum of Association of Water Jug Enterprises Limited. 3.14 Articles of Association of Water Jug Enterprises Limited. 3.15 Memorandum of Association of Withey's Water Softening & Purification Ltd. 3.16 Articles of Association of Withey's Water Softening & Purification Ltd. 3.17 Memorandum of Association of Aqua Care Water Softening & Purification Inc. 3.18 Articles of Association of Aqua Care Water Softening & Purification Inc. 3.19 Memorandum of Association of High Valley Water Limited. 3.20 Articles of Association of High Valley Water Limited. 3.21 Memorandum of Association of 3003969 Nova Scotia Limited. 3.22 Articles of Association of 3003969 Nova Scotia Limited. 3.23 Memorandum of Association of Canadian Springs Water Company Limited. 3.24 Articles of Association of Canadian Springs Water Company Limited. 3.25 Memorandum of Association of Sparkling Spring Water (UK) Limited. 3.26 Articles of Association of Sparkling Spring Water (UK) Limited. 3.27 Memorandum of Association of Aquaporte (UK) Limited. 3.28 Articles of Association of Aquaporte (UK) Limited. 3.29 Memorandum of Association of Marlborough Employment Limited. 3.30 Articles of Association of Marlborough Employment Limited. 3.31 Memorandum of Association of Water at Work Limited. 3.32 Articles of Association of Water at Work Limited. 3.33 Memorandum of Association of Natural Water Limited. 3.34 Articles of Association of Natural Water Limited. 4 Indenture, dated as of November 19, 1997, among Sparkling Spring Water Group Limited, as Issuer, Bankers Trust Company, as Trustee, and the Subsidiary Guarantors named therein. 5.1 Opinion of Robinson & Cole LLP. 5.2 Opinion of Lane Powell Spears Lubersky LLP. 5.3 Opinion of Stewart McKelvey Stirling Scales. 5.4 Opinion of Norton Rose. 5.5 Opinion of Dundas & Wilson. 10.1 Purchase Agreement, dated November 14, 1997, among Sparkling Spring Water Group Limited, BT Alex. Brown Incorporated, NatWest Capital Markets Limited and the Guarantors named therein.
II-23 209
SEQUENTIAL EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ ------------------------------------------------------------------------- ---------- 10.2 Registration Rights Agreement, dated as of November 19, 1997, among Sparkling Spring Water Group Limited and the Guarantors named therein, as Issuers, and BT Alex. Brown Incorporated and NatWest Capital Markets Limited as Initial Purchasers. 10.3 Employment Agreement, dated October 2, 1997, between Sparkling Spring Water Limited and Stewart E. Allen. 10.4 Shareholder Agreement, dated as of October 22, 1997, among Sparkling Spring Water Group Limited, Sparkling Spring Water Limited, and the Shareholders named therein. 10.5 Management Agreement, as amended and restated January 12, 1996, among Sparkling Spring Water Limited, C.F. Capital Corporation, G. John Krediet and Stephen L. Larson. 10.6 Amendment Agreement, dated October 22, 1997, among Sparkling Spring Water Limited, C.F. Capital Corporation, G. John Krediet, Stephen L. Larson and Sparkling Spring Water Group Limited. 10.7 Form of Exchange Agent Agreement between Sparkling Spring Water Group Limited and Bankers Trust Company, as Exchange Agent. 21 Subsidiaries of the Registrant. 23.1 Consent of Ernst & Young. 23.2 Consent of Kidsons Impey. 23.3 Consent of Robinson & Cole LLP (included in Exhibit 5.1). 23.4 Consent of Lane Powell Spears Lubersky LLP (included in Exhibit 5.2). 23.5 Consent of Stewart McKelvey Stirling Scales (included in Exhibit 5.3). 23.6 Consent of Norton Rose (included in Exhibit 5.4). 23.7 Consent of Dundas & Wilson (included in Exhibit 5.5). 24.1 Power of Attorney for Sparkling Spring Water Group Limited (included in signature page of Sparkling Spring Water Group Limited on page II-6). 24.2 Power of Attorney for Sparkling Spring Water Limited (included in signature page of Sparkling Spring Water Limited on page II-7). 24.3 Power of Attorney for Spring Water, Inc. (included in signature page of Spring Water, Inc. on page II-8). 24.4 Power of Attorney for Cullyspring Water Co., Inc. (included in signature page of Cullyspring Water Co., Inc. on page II-9). 24.5 Power of Attorney for Crystal Spring Acquisition, Inc. (included in signature page of Crystal Spring Acquisition, Inc. on page II-10). 24.6 Power of Attorney for Mountain Fresh Acquisition Corp (included in signature page of Mountain Fresh Acquisition Corp on page II-11). 24.7 Power of Attorney for Water Jug Enterprises Limited (included in signature page of Water Jug Enterprises Limited on page II-12). 24.8 Power of Attorney for Withey's Water Softening & Purification Ltd. (included in signature page of Withey's Water Softening & Purification Ltd. on page II-13). 24.9 Power of Attorney for Aqua Care Water Softening & Purification Inc. (included in signature page of Aqua Care Water Softening & Purification Inc. on page II-14). 24.10 Power of Attorney for High Valley Water Limited (included in signature page of High Valley Water Limited on page II-15). 24.11 Power of Attorney for 3003969 Nova Scotia Limited (included in signature page of 3003969 Nova Scotia Limited on page II-16). 24.12 Power of Attorney for Canadian Springs Water Company Limited (included in signature page of Canadian Springs Water Company Limited on page II-17).
II-24 210
SEQUENTIAL EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------ ------------------------------------------------------------------------- ---------- 24.13 Power of Attorney for Sparkling Spring Water (UK) Limited (included in signature page of Sparkling Spring Water (UK) Limited on page II-18). 24.14 Power of Attorney for Aquaporte (UK) Limited (included in signature page of Aquaporte (UK) Limited on page II-19). 24.15 Power of Attorney for Marlborough Employment Limited (included in signature page of Marlborough Employment Limited on page II-20). 24.16 Power of Attorney for Water at Work Limited (included in signature page of Water at Work Limited on page II-21). 24.17 Power of Attorney for Natural Water Limited (included in signature page of Natural Water Limited on page II-22). 25 Statement of Eligibility on Form T-1 of Trustee under the Indenture. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery.
II-25 EX-3.1 2 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.1 MEMORANDUM OF ASSOCIATION OF 3012919 NOVA SCOTIA LIMITED 1. The name of the Company is 3012919 NOVA SCOTIA LIMITED. 2. There are no restrictions on the objects and powers of the Company and the Company shall expressly have the following powers: (1) to sell or dispose of its undertaking, or a substantial part thereof; (2) to distribute any of its property in specie among its members; and (3) to amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The Company proposes to issue: (a) 1,000,000 Class A Voting Common Shares with a par value of $0.0001 each; (b) 1,000,000 Class B Voting Common Shares with a par value of $6.7790 each; (c) 1,000,000 Class C Voting Common Shares with a par value of $1.8406 each; (d) 10,000,000 Class D Voting Common Shares without nominal or par value; (e) 10,000,000 Class E Non-Voting common shares without a nominal or par value; and (f) 10,000,000 Special Preferred Shares with a par value of $1.00 each, issuable in series; each having the rights, conditions, restrictions and limitations set out in Exhibit A-1 hereto, with power to divide the shares in the capital for the time being into classes or series and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including restrictions on voting rights and including redemption, purchase and other acquisition of such shares, subject, however, to the provisions of the Companies Act (Nova Scotia). I, the undersigned, whose name, address and occupation are subscribed, am desirous of being formed into a company in pursuance of this Memorandum of Association, and I agree to 2 take the number and kind of shares in the capital stock of the Company written opposite my name. NAME, ADDRESS & OCCUPATION NO. & KIND OF SARES TAKEN OF SUBSCRIBER BY THE SUBSCRIBER - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL SHARES TAKEN: one common share DATED this 22nd day of October, 1997. Witness to the above signature: -------------------------------- Name of Witness 900-1959 Upper Water St., Halifax, Nova Scotia, B3J 2X2 -------------------------------- Address -------------------------------- Occupation 3 EXHIBIT A-1 3012919 NOVA SCOTIA LIMITED Class A Common Shares, Class B Common Shares, Class C Common Shares, Class D Common Shares and Class E Common Shares Conditions attaching to Class A Common Shares, Class B Common Shares, Class C Common Shares, Class D Common Shares and Class E Common Shares: 1. The Class A Common Shares, the Class B Common Shares, the Class C Common Shares, the Class D Common Shares and the Class E Common Shares shall rank equal, pari passu, share for share, with each other and entitle the respective holders thereof to the same rights and benefits except as otherwise provided for by these conditions. 2. The Class A Common Shares, the Class B Common Shares, the Class C Common Shares, and the Class D Common Shares shall carry the right to one vote per share at all meetings of the shareholders of the Company. 3. The holders of the Class E Common Shares shall not be entitled to receive notice of any meeting of the shareholders of the Company or to attend any such meeting or to vote thereat. Special Preferred Shares Rights, privileges, restrictions and conditions applicable to Special Preferred Shares: 1. Issuable in Series (a) The Special Preferred Shares may at any time and from time to time be issued in one or more series as determined by the Board of Directors of the Company (the "Directors"). 2. Directors' Authority to Issue in One or More Series (a) Before any shares of a particular series are issued, the Directors by resolution shall fix the number of shares in such series and shall determine, subject to any limitations set out in the articles, the designation, rights, privileges, restrictions and conditions to attach to the shares of such series including, without limiting or restricting the generality of the foregoing, the rate or- rates, amount or method or methods of calculation of preferential dividends, whether cumulative, non-cumulative or partially cumulative, and whether such rate(s), amount or method(s) of calculation shall be subject to change or adjustment in the future, the currency or currencies of payment, the date or dates and place or places of payment thereof and the date or dates from which such preferential dividends shall accrue, the redemption price and terms and conditions of redemption (if any), the rights of retraction (if any), and the prices and other terms and conditions of any rights of retraction and whether any additional 4 rights of retraction may be provided to such holders in the future, voting rights and conversion or exchange rights (if any) and any sinking fund, purchase fund or other provisions attaching thereto. Such resolution shall be the only authorization required to fix such designation, priorities, preferences, rights, privileges, restrictions and conditions and to authorize such issuance and no approval, sanction or confirmation of such resolution by the shareholders of the Company or otherwise shall be required. 3. Ranking of Special Preferred Shares (a) Dissolution The Special Preferred Shares of each series shall rank on a parity with the Special Preferred Shares of every other series with respect to priority in the distribution of assets of the Company in the event of the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs. (b) Dividends Subject to any priorities with respect to dividends which may be attached to any series of Special Preferred Shares over any other series of Special Preferred Shares, the Special Preferred Shares of each series shall participate rateably with the Special Preferred Shares of every other series with respect to dividends. (c) Redemption or Repurchase Subject to any redemption or repurchase rights which may from time to time be attached to any series of Special Preferred Shares, the Special Preferred Shares of each series shall participate rateably with the Special Preferred Shares of every other series with respect to redemption or repurchase rights. (d) Voting Rights Except as hereinafter referred to or as otherwise provided by law or in accordance with any voting rights which may from time to time be attached to any series of Special Preferred Shares, the holders of the Special Preferred Shares as a class shall not be entitled as such to receive notice of, to attend or to vote at any meeting of the shareholders of the Company. (e) Other Preferences The Special Preferred Shares of any series may also be given such other preferences not inconsistent with the provisions hereof over all classes of common shares in the capital stock of the Company and over any other shares ranking junior to the Special Preferred Shares as may be determined in the case of such series of Special Preferred Shares. 2 5 4. Approval of Holders of Special Preferred Shares (a) The rights, privileges, restrictions and conditions attaching to the Special Preferred Shares as a class may be added to, changed or removed but only with the approval of the holders of the Special Preferred Shares given as hereinafter specified. (b) The approval of the holders of Special Preferred Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Special Preferred Shares as a class or to any other matter requiring the consent of the holders of the Special Preferred Shares as a class may be given in such manner as may then be required by law, subject to a minimum requirement that such approval shall be given by resolution passed by the affirmative vote of at least three-quarters of the votes cast at a meeting of the holders of Special Preferred Shares duly called for that purpose. The formalities to be observed in respect of the giving of notice of any such meeting or any adjourned meeting and the conduct thereof shall be those from time to time required by the Companies Act (Nova Scotia) and prescribed in the Articles of the Company with respect to meetings of shareholders and modification of rights of shareholders. On every poll taken at a meeting of holders of Special Preferred Shares as a class, each holder entitled to vote thereat shall have one vote in respect of each $1 of the issue price of each Special Preferred Share held. 3 EX-3.2 3 ARTICLES OF ASSOCIATION 1 Exhibit 3.2 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once 2 SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 3 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 4 25. Shareholder advances on unpaid shares 4 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 5 2 -ii- LIEN ON SHARES 34. Lien on shares for debts of shareholder 5 35. Sale of shares not paid up to enforce lien 5 36. Application of proceeds of shares by Company 5 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 6 42. Fee on transfer 6 43. Transfer instrument to remain with Company 6 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 6 45. Right of executor of sole shareholder 6 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 7 51. Terms of issue of new shares 7 52. New shares may be offered to existing shareholders 7 53. New capital within control of directors 7 54. Reduction of capital 7 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 8 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 8 3 -iii- CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 9 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 9 63. Securities assignable free from equities 9 64. Securities at discount, premium, with preference 9 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 10 68. Notice of meeting - Waiver of notice 10 69. Notice of two meetings for special resolution 10 70. Accidental omission of notice 10 RECORD DATES 71. Setting record dates - when no record date set 10 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 10 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 11 76. If quorum not present - dissolution or adjournment 11 77. Resolution by show of hands - demand of poll 11 78. Conduct of poll 11 79. Casting vote 11 80. Adjournment of meeting 11 81. Poll on question of adjournment, election of chairman 11 82. Effect of demand of poll on continuance of meeting 11 VOTES OF SHAREHOLDERS 83. Voting generally 11 84. Votes on transmission by death, bankruptcy, etc. 12 85. Votes of joint registered shareholders 12 86. Voting in person, by proxy, by corporate representative 12 87. Proxy requirements generally 12 88. Votes of shareholders of unsound mind 12 89. Depositing proxies before meeting 12 90. Votes by proxy after authority revoked 12 91. Form of proxy 12 92. Votes when call due on shares 12 4 -iv- 93. Resolution of directors ratified by shareholders 13 94. Resolution in writing without meeting 13 DIRECTORS 95. Number of directors - maximum and minimum 13 96. First directors 13 97. Remuneration of directors 13 98. Directors may act notwithstanding vacancy 13 99. Directors may also be officers 13 100. Vacation of office on bankruptcy, etc. 13 101. Directors' conflicts of interest 13 ELECTION OF DIRECTORS 102. Election of directors at general meeting 14 103. Retiring directors remain in office until succeeded 14 104. Number of directors elected, qualification 14 105. Removal of director 14 106. When directors may be appointed by other directors 14 MANAGING DIRECTOR 107. Authority to appoint managing director 14 108. Resignation and removal of managing director 14 109. Remuneration of managing director 14 110. Powers and duties of managing director 14 CHAIRMAN OF THE BOARD 111. Chairman of the Board 14 PRESIDENT AND VICE-PRESIDENTS 112. President 15 113. Vice-Presidents 15 SECRETARY AND TREASURER 114. Secretary 15 115. Treasurer 15 OFFICERS 116. Other officers 15 117. Same person may hold more than one office 15 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 15 119. Participation at meeting by telephone 15 120. Place of meetings - When notice required 15 121. Summoning of meetings 16 122. Questions decided by majority - casting vote - proxies 16 5 -v- 123. Chairman of directors' meetings 16 124. Authority of meeting when quorum present 16 125. Committees of directors 16 126. Proceedings of committees of directors 16 127. Effect on meeting of defectively appointed director 16 128. Resolution of directors in writing without meeting 16 129. Remuneration of directors for extra services 16 REGISTERS 130. Registers and branch registers 17 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 17 POWERS OF DIRECTORS 132. General powers of directors 17 133. Specifically enumerated powers of directors 17 SOLICITORS 134. Solicitors 19 THE SEAL 135. Use of common seal 19 136. Facsimiles of common seal 19 137. Facsimile seal for use outside Nova Scotia 19 DIVIDENDS 138. Declaration of dividends 19 139. Dividends payable from profits, etc. 19 140. Declaration of amount of profits, etc., conclusive 19 141. Interim dividends 19 142. Dividends differentiated by paid-up capital 20 143. Right to set off debts against dividends 20 144. Where lien on dividends 20 145. Dividends on shares of deceased, etc. 20 146. Setting off calls and dividends 20 147. Cash dividend, dividend in kind, stock dividend, etc. 20 148. Power of directors to settle issues re dividends 20 149. Dividends on jointly registered shares 20 150. Satisfaction of dividend 20 ACCOUNTS 151. Directors' duty to keep accounts 20 152. Where books to be kept 21 153. Inspection of books by shareholders 21 154. Reports on accounts to general meeting 21 6 -vi- AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 21 156. First auditors 21 157. Directors may fill casual vacancy 21 158. Persons qualified for appointment as auditors 21 159. Removal of auditor 21 160. Remuneration 21 161. Duties of auditors 21 NOTICES 162. How notice given 21 163. Notice to shareholder without registered address 21 164. Holders of share warrants not entitled to notice 21 165. Notice to joint holders 22 166. When notice deemed given - proof of notice 22 167. Transferees bound by prior notice 22 168. Notice valid though shareholder deceased 22 169. How notice to be signed 22 170. How time to be counted 22 INDEMNITY 171. Indemnity of directors, officers, etc. 22 172. Individual liability of directors, officers, etc. 22 REMINDERS 173. Reminders to directors of obligations under Act 23 7 ARTICLES OF ASSOCIATION OF 3012919 NOVA SCOTIA LIMITED INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 -2- 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 9 -3- CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other 10 -4- rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 11 -5- 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 12 -6- (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or 13 -7- (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue, or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 14 -8- subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 15 -9- 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 16 -10- 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 17 -11- 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 18 -12- 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 19 -13- 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than 10. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply 20 -14- to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. 21 -15- PRESIDENT AND VICE-PRESIDENTS 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. 22 -16- (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. 23 -17- REGISTERS 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 24 -18- (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 25 -19- (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 26 -20- 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 27 -21- 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 28 -22- 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 29 -23- insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). 30 -24- Name(s) of Subscriber(s) Dated at Halifax, Nova Scotia the day of , 199 . Witness to above signature(s): _______________________________________________ Halifax, Nova Scotia 31 -25- CERTIFICATE OF NAME CHANGE Companies Act Registry Number 3012919 Name of Company 3012919 NOVA SCOTIA LIMITED I hereby certify that the above-mentioned company has with approval of the Registrar of Joint Stocks changed its name to: SPARKLING SPRING WATER GROUP LIMITED _________________________________________ __________________________________ Deputy Registrar of Joint Stock Companies Date of Name Change EX-3.3 4 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.3 COMPANIES ACT CHAPTER 81, R.S.N.S. 1989 ARTICLES OF CONTINUANCE OF SPARKLING SPRING WATER LIMITED 1. The name of the Company is SPARKLING SPRING WATER LIMITED. 2. There are no restrictions on the objects and powers of the Company. 3. Pursuant to subsection (11) of Section 26 of the Companies Act, to the intent that subsection (9) of Section 26 not apply to the Company, the following powers are hereby expressly conferred upon the Company: The Company shall have power to: (a) sell or dispose of its undertaking or a substantial part thereof; (b) subject to the provisions of the Act with respect to reduction of capital, distribute any of its property in specie among its members; and (c) amalgamate with any company or other body or persons. 4. The liability of the members is limited. 5. The Company is authorized to issue Ten Million ($10,000,000) common shares without nominal or par value and One Million (1,000,000) Class A preferred shares without nominal or par value, both common and Class A preferred shares subject to the terms and conditions set forth in Schedule "A" annexed hereto, with power to divide the shares in the capital for the time being into several classes and/or to attach thereto respectively any preferential, common, deferred, or qualified rights, privileges or conditions, including restrictions on voting and including redemption on purchase of such shares, subject, however, to the provisions of the Companies Act and amendments thereto. 2 SPARKLING SPRING WATER LIMITED SCHEDULE "A" TO ARTICLES OF AMENDMENT TERMS AND CONDITIONS OF SHARES The Corporation is authorized to issue Ten Million (10,000,000) Common without nominal or par value and One Million (1,000,000) Class A Preferred shares of nominal or par value. COMMON SHARES The holders of the Common shares shall be entitled to notice of and to One (1) vote in respect of each Common share held at all meetings of the Shareholders of the Corporation. The holders of the Common shares shall be entitled to receive and the Corporation shall pay thereon, such dividends as may be declared by the Board of Directors of the Corporation from time to time from the monies of the Corporation properly applicable to the payment of dividends. In the event of the liquidation, dissolution or winding up of the Corporation, or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holders of the Common shares shall be entitled to receive the assets and property of the Corporation available for distribution. ____ SHARES A holder of a fractional share of a class of shares (the "particular class") is entitled, in respect to his fractional shares, to that fraction of the votes, if any, that attach to and that fraction of the amount, if any, of the dividends, distributions or redemption price, as the case may be, that is to be paid or made on or in respect of whole shares of the particular class. CLASS A PREFERRED SHARES 1. The holders of the Class A Preferred shares shall not be entitled to vote at any meeting of the shareholders of the Corporation unless and except to the extent expressly granted the rights to vote by law. 2. The holders of the Class A Preferred shares, in priority to the Common shares, shall be entitled to receive pro rata, and the Corporation shall pay thereon, as and when declared by the Board of Directors of the Corporation, cumulative, preferential cash dividends at the rate of eight (8%) percent of the stated capital of the Class A Preferred shares per annum, payable on such dates as the Board of Directors of the Corporation may from time to time determine. such dividends shall accrue from the date of issue. If on any dividend payment date the dividend payable on such date is not paid in full on all of the Class A Preferred shares then issued and outstanding, such dividend or the unpaid part thereof 3 shall be paid on a subsequent date or dates determined by the Board of Directors of the Corporation on which the Corporation shall have sufficient monies properly applicable to the payment of the same before any dividend is paid on the Common shares. 3. The holders of the Class A Preferred shares shall be entitled on the liquidation, dissolution or wind-up of the Corporation, or other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, to receive from the assets and property of the Corporation for each Class A Preferred Share held by them respectively a sum equivalent to the result obtained when the amount of the stated capital account for the Class A Preferred shares is divided by the number of issued and outstanding Class A Preferred shares, together with all accrued and unpaid preferential cumulative cash dividends thereon before any amount shall be paid or any property or assets distributed to the holders of the Common shares; after payment to the holders of the Class A Preferred shares of the amounts above provided, they shall not be entitled to share in any further distribution of the property or assets of the Corporation on dissolution. 4. The Corporation may any time, upon giving notice as hereinafter provided, redeem the whole or from time to time any part of the then outstanding Class A Preferred shares on payment for each share to be redeemed of a sum equivalent to the result obtained when the amount in the stated capital account for the Class A Preferred Shares is divided by the number of issued and outstanding Class A Preferred shares, together with all accrued and unpaid preferential cumulative cash dividend thereon (herein referred to as the "redemption price"). In case a part only of the then outstanding Class A Preferred shares is at any time redeemed, the shares so to be redeemed shall be selected pro rata according to the number of Class A Preferred shares held by each holder of record as at the date of notice of redemption or in such other manner as the Board of Directors of the Corporation, in its sole discretion, shall decide. 5. In any case of redemption of Class A Preferred shares under the provisions of the last preceding paragraph hereof, the Corporation shall at least thirty (30) days before the date specified for redemption mail to each person who at the date of mailing is a registered holder of Class A Preferred shares to be redeemed a notice in writing of the intention of the Corporation to redeem such Class A Preferred shares. Such notice shall be mailed in a prepaid letter addressed to each such shareholder at his address as it appears on the books of the Corporation or in the event of the address of any such shareholder not so appearing then to the last known address of such shareholder, provided, however, that accidental failure to give any such notice to one 91) or more of such shareholders shall not affect the validity of such redemption as to the other holders. Such -2- 4 notice shall set our the redemption price and the date on which redemption is to take place and if part only of the shares held by the person to whom it is addressed is to be redeemed the number thereof so to be redeemed. On and after the date so specified for redemption the Corporation shall pay or cause to be paid to or to the order of the registered holders of the Class A Preferred shares to be redeemed the redemption price thereon on presentation and surrender at the head office of the Corporation or any other place designated in such notice of the certificates for the Class A Preferred shares called for redemption. Such Class A Preferred shares shall thereupon be and be deemed to be redeemed and shall be cancelled. If a part only of the shares represented by any certificate be redeemed, a new certificate for the balance shall be issued at the expense of the Corporation. From and after the date specified in any such notice the Class A Preferred shares called for redemption shall cease to be entitled to dividends and the holders thereof shall not be entitled to exercise any of the rights of shareholders in respect thereof unless payment of the redemption price shall not be made upon presentation of certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected. The Corporation shall have the right at any time after the mailing of notice of its intention to redeem any Class A Preferred shares as aforesaid to deposit the redemption price of the shares so called for redemption or of such of the said shares represented by certificates which have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption to a special account in any chartered bank or any trust company in Canada named in such notice to be paid without interest to or to the order of the respective holders such Class A Preferred shares called for redemption upon presentation and surrender to such bank or trust company of the certificates representing the same and upon such deposit being made or upon the date specified for redemption in such notice, whichever is the latter, the Class A Preferred shares in respect whereof such deposit shall have been made shall be deemed to be redeemed and shall be cancelled and the rights of the holders thereof after such deposit or such redemption date, as the case may be, shall be limited to receiving without interest their proportionate part of the total redemption price no deposited agent presentation and surrender of the said certificates held by them respectively. 6. No class of shares may be created or issued ranking as to capital or dividends in priority to or on a parity with the Class A Preferred shares nor shall the authorized amount of the Class A Preferred shares be increased without the approval of the holders of the Class A Preferred shares increased without the approval of the holders of the Class A Preferred shares in addition to any approval required by the Canada Business Corporations Act. -3- EX-3.4 5 ARTICLES OF ASSOCIATION 1 Exhibit 3.4 ARTICLES OF ASSOCIATION OF SPARKLING SPRING WATER LIMITED STEWART McKELVEY STIRLING SCALES BARRISTERS & SOLICITORS Halifax, Nova Scotia 2 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 2 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 3 25. Shareholder advances on unpaid shares 3 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 4 3 -ii- LIEN ON SHARES 34. Lien on shares for debts of shareholder 4 35. Sale of shares not paid up to enforce lien 4 36. Application of proceeds of shares by Company 4 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 5 42. Fee on transfer 5 43. Transfer instrument to remain with Company 5 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 5 45. Right of executor of sole shareholder 5 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 6 51. Terms of issue of new shares 6 52. New shares may be offered to existing shareholders 6 53. New capital within control of directors 6 54. Reduction of capital 6 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 7 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 7 4 -iii- CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 8 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 8 63. Securities assignable free from equities 8 64. Securities at discount, premium, with preference 8 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 9 68. Notice of meeting - Waiver of notice 9 69. Notice of two meetings for special resolution 9 70. Accidental omission of notice 9 RECORD DATES 71. Setting record dates - when no record date set 9 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 9 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 10 76. If quorum not present - dissolution or adjournment 10 77. Resolution by show of hands - demand of poll 10 78. Conduct of poll 10 79. Casting vote 10 80. Adjournment of meeting 10 81. Poll on question of adjournment, election of chairman 10 82. Effect of demand of poll on continuance of meeting 10 VOTES OF SHAREHOLDERS 83. Voting generally 10 84. Votes on transmission by death, bankruptcy, etc. 11 85. Votes of joint registered shareholders 11 86. Voting in person, by proxy, by corporate representative 11 87. Proxy requirements generally 11 88. Votes of shareholders of unsound mind 11 89. Depositing proxies before meeting 11 90. Votes by proxy after authority revoked 11 91. Form of proxy 11 92. Votes when call due on shares 12 5 -iv- 93. Resolution of directors ratified by shareholders 12 94. Resolution in writing without meeting 12 DIRECTORS 95. Number of directors - maximum and minimum 12 96. First directors 12 97. Remuneration of directors 12 98. Directors may act notwithstanding vacancy 12 99. Directors may also be officers 12 100. Vacation of office on bankruptcy, etc. 12 101. Directors' conflicts of interest 12 ELECTION OF DIRECTORS 102. Election of directors at general meeting 13 103. Retiring directors remain in office until succeeded 13 104. Number of directors elected, qualification 13 105. Removal of director 13 106. When directors may be appointed by other directors 13 MANAGING DIRECTOR 107. Authority to appoint managing director 13 108. Resignation and removal of managing director 13 109. Remuneration of managing director 13 110. Powers and duties of managing director 13 CHAIRMAN OF THE BOARD 111. Chairman of the Board 13 PRESIDENT AND VICE-PRESIDENTS 112. President 13 113. Vice-Presidents 14 SECRETARY AND TREASURER 114. Secretary 14 115. Treasurer 14 OFFICERS 116. Other officers 14 117. Same person may hold more than one office 14 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 14 119. Participation at meeting by telephone 14 120. Place of meetings - When notice required 14 121. Summoning of meetings 14 122. Questions decided by majority - casting vote - proxies 14 6 -v- 123. Chairman of directors' meetings 15 124. Authority of meeting when quorum present 15 125. Committees of directors 15 126. Proceedings of committees of directors 15 127. Effect on meeting of defectively appointed director 15 128. Resolution of directors in writing without meeting 15 129. Remuneration of directors for extra services 15 REGISTERS 130. Registers and branch registers 15 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 15 POWERS OF DIRECTORS 132. General powers of directors 16 133. Specifically enumerated powers of directors 16 SOLICITORS 134. Solicitors 17 THE SEAL 135. Use of common seal 17 136. Facsimiles of common seal 17 137. Facsimile seal for use outside Nova Scotia 18 DIVIDENDS 138. Declaration of dividends 18 139. Dividends payable from profits, etc. 18 140. Declaration of amount of profits, etc., conclusive 18 141. Interim dividends 18 142. Dividends differentiated by paid-up capital 18 143. Right to set off debts against dividends 18 144. Where lien on dividends 18 145. Dividends on shares of deceased, etc. 18 146. Setting off calls and dividends 18 147. Cash dividend, dividend in kind, stock dividend, etc. 18 148. Power of directors to settle issues re dividends 18 149. Dividends on jointly registered shares 19 150. Satisfaction of dividend 19 ACCOUNTS 151. Directors' duty to keep accounts 19 152. Where books to be kept 19 153. Inspection of books by shareholders 19 154. Reports on accounts to general meeting 19 7 -vi- AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 19 156. First auditors 19 157. Directors may fill casual vacancy 19 158. Persons qualified for appointment as auditors 19 159. Removal of auditor 19 160. Remuneration 20 161. Duties of auditors 20 NOTICES 162. How notice given 20 163. Notice to shareholder without registered address 20 164. Holders of share warrants not entitled to notice 20 165. Notice to joint holders 20 166. When notice deemed given - proof of notice 20 167. Transferees bound by prior notice 20 168. Notice valid though shareholder deceased 20 169. How notice to be signed 20 170. How time to be counted 20 INDEMNITY 171. Indemnity of directors, officers, etc. 20 172. Individual liability of directors, officers, etc. 21 REMINDERS 173. Reminders to directors of obligations under Act 21 8 ARTICLES OF ASSOCIATION OF SPARKLING SPRING WATER LIMITED INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution. 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 9 -2- 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 10 -3- CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other 11 -4- rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 12 -5- 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 13 -6- (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or 14 -7- (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 15 -8- subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 16 -9- 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 17 -10- 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 18 -11- 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 19 -12- 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 20 -13- 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply 21 -14- to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. PRESIDENT AND VICE-PRESIDENTS 22 -15- 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. . (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 23 -16- 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. REGISTERS 24 -17- 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 25 -18- (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 26 -19- (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 27 -20- 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 28 -21- 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 29 -22- 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 30 -23- insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). 31 -1- SPARKLING SPRING WATER LIMITED SPECIAL RESOLUTION OF THE SHAREHOLDERS WHEREAS the authorized capital of the Company consists of 10,000,000 common shares without nominal or par value and 1,000,000 Class A preferred shares without nominal or par value; AND WHEREAS it is deemed desirable to increase the capital of the Company; BE IT THEREFORE RESOLVED as a Special Resolution of the Company; 1. THAT the capital of the Company be and is hereby increased from 10,000,000 common shares without nominal or par value and 1,000,000 Class A preferred shares without par value to: 10,000,000 common shares without nominal or par value; 1,000,000 Class A preferred Shares without nominal or par value; 10,000,000 Class B non-voting common shares without nominal or par value; by the creation of 10,000,000 Class B non-voting common shares without nominal or par value, having the rights and subject to the terms and conditions set forth in Schedule "A" annexed hereto; and 2. THAT the Secretary of the Company give notice to the Registrar of Joint Stock Companies of the said increase in capital. ************************************************************************ CERTIFICATE I HEREBY CERTIFY that the above resolution is a true copy of a Special Resolution passed by the Shareholders of the Company in the manner authorized by law and that such Special Resolution is now in full force and effect. WITNESS my hand the corporate seal of the said Corporation this ____ day of ____________, 1994. ------------------------------------ Stephen Larson, Vice Chairman of Sparkling Spring Water Limited 32 -1- SPRARKLING SPRING WATER LIMITED SHARE CONDITIONS - CLASS B NON-VOTING COMMON SHARES The terms and conditions of the 10,000,000 Class B non-voting common shares without nominal or par value (the "Non-Voting Shares") shall be as follows: Non-Voting: 1. The holders of the Non-voting Shares shall not be entitled to receive notice of, to attend or to vote at any meeting of the shareholders of the shareholders of the Company; Dividends: 2. The Non-Voting Shares shall confer upon the holders thereof the right to receive dividends when and as declared by the directors of the Company out of the monies of the Company properly available for dividends on a pro rata share-for-share basis equal to that of the holders of common shares of the Company; Dissolution: 3. In the event of the winding-up or dissolution of the Company, whether voluntary or involuntary, or for reorganization or otherwise, whereupon any distribution of capital, the holders of Non-Voting Shares shall fully participate in the assets of the Company on a pro rata basis, share-for-share with the holders of the common shares of the Company; Rank: 4. Except as otherwise provide for herein, the Non-Voting Shares shall rank equally with the common shares of the Company. 33 SPARKLING SPRING WATER LIMITED SPECIAL SHAREHOLDERS' RESOLUTION BE IT RESOLVED AS A SPECIAL RESOLUTION OF THE SHAREHOLDERS OF THE COMPANY THAT: 1. The Articles of Association of the Company be amended by the deleting of Section 98 thereof and replacing it with the following: "98. The number of the directors of the Company shall not be less than one or greater than twelve persons"; 2. The Secretary of the Company is authorized to file a copy of this Resolution at the Registry of Joint Stock Companies in Halifax, Nova Scotia. DATED at Halifax, Nova Scotia, this 4th day of January, 1996. - -------------------------------------------------------------------------------- CERTIFICATE I HEREBY CERTIFY that the above resolution is a true copy of a Special Resolution signed by all of the Shareholders of the Company in the manner authorized by law and that such Special Resolution is now in full force and effect. WITNESS my hand and the corporate seal of the said Corporation this ____ day of January, 1996. ------------------------------------ STEPHEN L. LARSON, Vice-Chairman SPARKLING SPRING WATER LIMITED EX-3.5 6 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.5 CERTIFICATE OF INCORPORATION OF SPRING WATER, INC. * * * * * FIRST: The name of the Corporation is Spring Water, Inc. SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is ten thousand (10,000) shares of common stock, no par value per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address ---- --------------- Felicia Dedominicis Robinson & Cole 695 East Main Street Stamford, CT 06904 (203) 462-7526 SIXTH: The Corporation is to have perpetual existence. SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter, amend or repeal the bylaws of the Corporation. EIGHTH: Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. NINTH: Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The -1- 2 books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board or directors or in the bylaws of the Corporation. TENTH: The Corporation shall, to the fullest extent permitted by the provisions of the General Corporation Law of the State of Delaware, as now or hereafter in effect, indemnify all persons whom it may indemnify under such provisions. The indemnification provided by this Section shall not limit or exclude any rights, indemnities or limitations of liability to which any person may be entitled, whether as a matter of law, under the by-laws of the Corporation, by agreement, vote of the stockholders or disinterested directors of the Corporation or otherwise. Except as specifically required by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a director. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 16th day of December, 1996. /s/ Felicia Dedominicis --------------------------- Felicia DeDominicis Sole Incorporator -2- EX-3.6 7 BY-LAWS OF SPRING WATER 1 Exhibit 3.6 BY-LAWS OF SPRING WATER, INC. ARTICLE I Stockholders Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. Special Meetings. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Secretary upon the written request, stating the purpose of the meeting, of stockholders who together own of record a majority of the outstanding shares of each class of stock entitled to vote at such meeting. Business transacted at any special meeting shall be limited to the purposes stated in the notice of the special meeting. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are 2 announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5. Quorum. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these by-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, or in the absence of the Secretary by an Assistant Secretary, or in their absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after -2- 3 three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect. With respect to other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided that (except as otherwise required by law or by the certificate of incorporation) the Board of Directors may require a larger vote upon any such matter. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate of incorporation or these by-laws. Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is -3- 4 necessary, shall be the day on which the first written consent is expressed; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the certificate of incorporation, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II Board of Directors Section 2.1. Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise -4- 5 provided by law or in the certificate of incorporation. The Board shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders. Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the annual meeting of stockholders next succeeding his or her election and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; except that, if the certificate of incorporation provides for cumulative voting and less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board, or, if there be classes of directors, at an election of the class of directors of which he or she is a part. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the certificate of incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from -5- 6 time to time determine, and if so determined notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.5. Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of -6- 7 proceedings of the Board or committee. Section 2.9. Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors. ARTICLE III Committees Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending these bylaws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each -7- 8 committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these bylaws. ARTICLE IV Officers Section 4.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person. Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.3. Chairman of the Board. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law. Section 4.4. President. In the absence of the Chairman of -8- 9 the Board, the President shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. The President shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law. Section 4.5. Vice Presidents. The Vice President or Vice Presidents, at the request of the President, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law. Section 4.6. Secretary. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.7. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, -9- 10 whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.8. Other Officers. The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. -10- 11 ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. Waiver of Notice of Meetings of Stockholders. Directors and Committees. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws. Section 6.4. Indemnification of Directors, Officers, and Employees and Agents. The Corporation shall indemnify its directors, officers, employees and agents in accordance with the provisions set forth in its certificate of incorporation. Section 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the -11- 12 committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7. Amendment of By-Laws. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. ADOPTED: December 17, 1996 -12- EX-3.7 8 ARTICLES OF INCORPORATION 1 Exhibit 3.7 ARTICLES OF INCORPORATION OF CULLYSPRING WATER CO., INC. THE UNDERSIGNED, STEFFEN HAUG, being over the age of 21 years, as incorporator of a corporation under the Washington Business Corporation Act, does hereby adopt in triplicate and deliver to the Secretary of State of the State of Washington the following Articles of Incorporation: ARTICLE I The name of the corporation shall be CULLYSPRING WATER CO., INC., and its existence shall be perpetual. ARTICLE II The purpose or purposes for which the corporation is organized are: 1. To buy, sell or trade real or personal property or any interest therein, of whatsoever kind and description, and to buy, sell, trade, grant or accept any evidence of debt or security devices in real or personal property. 2. To engage in the development of real estate. 3. To build and construct residential and commercial buildings, apartments, warehouses and other structures. 4. To enter into any and all fields directly or indirectly related to the purchase or sale of real property or structures or their development or construction. 5. To apply for, obtain, register, purchase, lease, or otherwise acquire, and to hold, own, use, develop, operate, and introduce, and to sell, assign, mortgage, pledge, grant, or 2 otherwise turn to account or dispose of, any copyrights, trademarks, tradenames, brands, labels, concessions or territorial rights or licenses. 6. To have offices, conduct this business, and promote its objects within and without the State of Washington, in other states, the District of Columbia, the territories and colonies of the United States of America, or of any other country or government. 7. To carry on any other business, whether transportation, manufacturing, or otherwise, which may seem to the company capable of being conveniently carried on in connection with its business, or calculated to directly or indirectly enhance or render profitable any of the company's property rights, and to lease, purchase, or otherwise acquire, and to own, sell, encumber, transfer, or otherwise deal in real estate or personal property of any kind or nature whatsoever, in connection with said business. 8. To enter into a partnership, or into any arrangement for sharing of profits, union of interest, joint venture, reciprocal concession, or otherwise, with any person or company carrying on or engaging in any business or transaction which this corporation is authorized to carry on or engage in. 9. To acquire by purchase, exchange or otherwise, all or any part of, or any interest in, the properties, assets, business, and goodwill of any one or more persons, firms, associations, or corporations, now or hereafter engaged in any business for which the corporation may now or hereafter be organized under the Business Corporation Law of the State of Washington; to pay for the same in cash, property, its own or other securities; to hold, operate, reorganize, liquidate, mortgage, grant a security interest in, pledge, sell, exchange, or in any other manner, deal in or with or dispose of the whole or any part thereof; in connection therewith to assume or guaranty performance of any liabilities, obligations, or contracts of such persons, firms,, -associations, or -2- 3 corporations, and to conduct in any lawful manner the whole or any part of any business thus acquired, provided such business is of a kind herein stated. 10. To make contracts and guarantees and incur liabilities, borrow money at such rates of interest as the corporation may determine, from any person, firm or corporation; to issue its notes, bonds, debentures, and/or other obligations of this corporation from time to time for any of the objects of this corporation; and to secure the same by mortgage, pledge, trust, or by any other lawful means. 11. To lend money for its corporate purposes, including loans to officers and directors, and to invest and reinvest its funds and take and hold real and personal property as security for the payment of funds so loaned or invested. 12. To borrow money of any person, firm or corporation; to issue bonds, debentures or obligations of this corporation from time to time for any of the objects of this corporation; and to secure the same by mortgage, pledge, trust, or by any other lawful means. 13. To subscribe or cause to be subscribed for, and to purchase or otherwise acquire, hold for investment, sell, assign, transfer, of the mortgages, deeds of trust, debentures, securities, obligations, notes, or other evidence of indebtedness of any corporation, stock company or association, now or hereafter existing, and whether created by or under the laws of the State of Washington or otherwise, and while owners of any stock of -the said shares of capital stock, or bonds, or other property, to exercise all the rights, powers, and privileges or ownership of every kind and description, including the right to vote thereon, with power to designate some person for that purpose from time to time to the same extent as natural persons might or could do. 14. Without limiting any of the objects and powers of the corporation, it is hereby expressly declared and provided that the corporation shall have power to do all things -3- 4 hereinbefore enumerated; and also to issue or exchange stocks, bonds, or other obligations in payment for property purchased or acquired by it, or for any other object in or about its business; to borrow money; to mortgage or pledge its franchises, real or personal property, income or profit accruing to it, any stocks, bonds, or other obligations, or any property which may be acquired by it issued or incurred. 15. To such extent as a corporation organized under the Business Corporation Law of the State of Washington may now or hereafter lawfully do, to do each and every thing necessary, suitable, convenient, or proper for, or in connection with, or incidental to, the accomplishment of any one or more of the purposes or the exercise of any one or more of the powers herein enumerated, or designed directly or indirectly to promote the interests of the corporation or to enhance the value of its properties; and in general to do any and all things and exercise any and all powers, for which the corporation may now or here-after be organized under the Business Corporation Law of the State of Washington, or under any act, amendatory thereof, supplemental thereto, or substituted therefor. ARTICLE III The registered agent of this corporation, shall be GARY M. ABOLOFIA, Attorney at Law. The address of the initial registered office of the corporation is 17130 Avondale Way N.E., Suite 114, Redmond, Washington, 98052. ARTICLE IV The authorized capital of this corporation shall be $50,000 and the corporation shall issue therefor 50,000 shares of common stock of a par value of $1.00 each. The corporation shall commence Business with the issuance of 500 shares. -4- 5 ARTICLE V The Board of Directors for the corporation shall be authorized to adopt and implement a plan for the issuance of "Section 1244" stock as such term is defined in Section 1244 of the Internal Revenue Code of the United States of America. ARTICLE VI This corporation shall not commence business until at least $500 has been received by it as consideration for the issuance of its shares. ARTICLE VII The owners of shares of stock of this corporation shall not be entitled to preemptive rights to subscribe for or purchase any part of new or additional issues of stock or securities, convertible into stock of any class whatsoever, whether issued for cash, property, services, by way of dividends, or otherwise. ARTICLE VIII Each shareholder entitled to vote in any election of directors shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected, and for whose election he has the right to vote. And no shareholder shall be entitled to accumulate his votes. ARTICLE IX Section 1. The Board of Directors shall have full power to adopt, alter, amend,. or repeal the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of the shareholders to adopt, alter, amend or appeal the Bylaws. -5- 6 Section 2. This corporation reserves the right to amend, alter, change or repeal any of the provisions contained in these Articles of Incorporation now or hereafter prescribed or permitted by statute. All rights of shareholders of this corporation are granted subject to this reservation. Section 3. This corporation may enter into contracts and otherwise transact business as vendor, purchaser, or otherwise, with its directors, officers and shareholders, and with corporations, associations, firms, and entities in which they are or may be or become interested as directors, officers, shareholders, members of otherwise, as freely as though such adverse interest did not exist, even though the vote, action, or presence of such director, officer, or shareholder, may be necessary to obligate the corporation upon such contracts or transactions; and in the absence of fraud, no such contract or transaction shall be voided and no such director, officer, or shareholder shall be held liable to account to the corporation by reason of such adverse interest or by reason of any fiduciary relationship to the corporation arising out of such officer stock ownership, for any profit or benefit realized by him through any such contract or transaction; provided that in the case of directors and officers of the corporation (but not in the case of shareholders who are not directors or officers), the nature of the interest of such director or officer, though not necessarily the details or extent thereof, be disclosed or known to the Board of Directors of this corporation, at the meeting thereof at which such contract or transaction is authorized or confirmed. A general notice that a director or officer of the corporation is interested in any corporation, association, firm or entity, shall be sufficient disclosure as to such director or officer with respect to all contracts and transactions with that corporation, association, firm or entity. ARTICLE X -6- 7 The number, qualifications, terms of office, manner of election, time and place of meetings, the powers and duties of the directors shall be prescribed by the Bylaws, but the number of first directors shall be two (2), a number equal to the number -of shareholders, and they shall serve until the first meeting of shareholders-and until their successors Are elected and qualified, and their names and post office addresses are as follows: STEFFEN HAUG 4601 S.W. 100th Seattle, WA 98146 MARGARET HAUG 4601 S.W. 100th Seattle, WA 98146 The name and address of the incorporator is STEFFEN HAUG, 4601 S.W. 100th, Seattle, Washington, 98146. ______________________________________ STEFFEN HAUG STATE OF WASHINGTON ) ) ss. COUNTY OF KING ) On this day personally appeared before me STEFFEN HAUG, to me known to be the individual described in and who executed the within and foregoing instrument and acknowledged the same as his free and voluntary act and deed for the uses and purposes therein mentioned. GIVEN under my hand and official seal this 29th day of June, 1983. ____________________________________________ NOTARY PUBLIC in and for the State of Washington Residing at___________________. -7- 8 CONSENT TO SERVE AS REGISTERED AGENT GARY M. ABOLOFIA hereby consents to serve as Registered Agent in the State of Washington for the following corporation: CULLYSPRING WATER CO., INC. I understand that as agent for the corporation it will be my responsibility to receive service of process in the name of the corporation; to forward all mail to the corporation, and to immediately notify the office of the Secretary of State in the event of my resignation, or of any changes in the registered office address of the corporation for which I am agent. DATED this 29th day of June, 1983. ______________________________________ GARY M. ABOLOFIA 17130 Avondale Way N.E. Suite 114 Redmond, WA 98052 EX-3.8 9 BY-LAWS 1 Exhibit 3.8 BYLAWS, AS AMENDED OF CULLYSPRING WATER CO., INC. ARTICLE I Meeting of Shareholders Section 1. The annual meeting of the shareholders shall be held in the registered office of the corporation on the ____ day of _______________ of each year. Section 2. Special meetings of shareholders may be held at the principal office, or at any other convenient place, upon the call of the Board of Directors or President, after notice of time, place, and purpose of such meeting shall be delivered to the Secretary of the corporation at least five (5) days prior to the time so appointed, or at any time when all the shareholders are present in person or by proxy and consent thereto; or may be held by consent and agreement, as provided by statute. Section 3. Any adjournment or adjournments of any annual or special meeting may be taken without any notice being given but any meeting at which Directors are to be elected shall be adjourned for no longer than one (1) week intervals until such Directors have been elected. Section 4. The presence in person or by proxy of a majority of the voting power of all shareholders shall constitute a quorum for the transaction of business at a shareholders' meeting. ARTICLE II Board of Directors Section 1. The business of the corporation shall be managed by a board of not less than one (1) nor more than nine (9) Directors, the specific number for any year to be fixed by the shareholders at the annual meeting, or at any other meeting held for the purpose of electing a Director or directors provided, however, during any period in which, as exists at the adoption of these Bylaws, there exists fewer than three (3) shareholders the number of directors shall be equal to the number of shareholders. Each Director shall be elected to serve for a period of three (3) years, from March 15 of the year elected until March 14 three (3) years hence; and until their successors are elected and shall qualify. 2 Section 2. Vacancies in the Board of directors shall be filled by the remaining members of the Board, and each person so elected shall be a Director until his successor is elected by the shareholders, who may make such election at the next annual meeting of the shareholders, or at any special meeting duly called for that purpose and held prior thereto. Section 3. The annual meeting of Directors at which the other officers of the corporation shall be elected shall be held at the registered office of the corporation immediately following the final adjournment of the annual shareholders' meeting. Section 4. Meetings of the Board of Directors other than the annual meeting of Directors may be held at such place whether in this State or elsewhere, as a majority of the Directors may from time to time appoint. Section 5. A meeting of the Board of Directors may be called by the President or Secretary of the corporation at any time, and may be held after the giving of sufficient notice to each Director to enable him to attend; or may be held by consent and agreement, as provided by statute. ARTICLE III Officers Section 1. The officers of this corporation shall be a President, a Vice-President, a Secretary, and a Treasurer, who shall be elected by the Board of Directors at the annual meeting of the board, to serve for a period of one (1) year from he 15th day of March to the 14th day of March of the following year and until their successors are elected and have qualified. Vacancies in any office may be filled by the Board of Directors at any meeting. Section 2. The President shall preside at all Directors' and shareholders' meetings, shall have general management of the affairs of the corporation,, shall sign all stock certificates and written consents of the corporation, shall appoint and discharge all agents and employees, subject always to the approval of the Board of Directors, to remove or discharge the same, and shall perform all such other duties as are incident to his office or as may be required of him by the Board of Directors, and shall have the right to create and appoint an executive committee for specific duties and powers, subject to the right of the Board of Directors to change or approve the same. Section 3. The Vice President shall, in the absence or incapacity of the President, perform the duties of that office. Section 4. The Secretary of the corporation shall keep the minutes of all Directors' and shareholders' meetings. He shall attend to the giving and serving of all notices of the corporation, shall be custodian of the corporate seal, shall attest with his signature and impress 2 3 with the corporate seal all stock certificates and written contracts of the corporation, and shall perform all other duties as are incident to his office or may be required of him by the Board of Directors. Section 5. The Treasurer shall keep regular books of account and shall permit them, together with all of his other records and papers, to the Board of Directors at any meeting when required to so do. He shall, if required to do so by the Board of Directors, give such bond for the faithful performance of his duties as the Board may determine, and shall perform all such other duties as are incident to his office or as may be required by the Board of Directors. Section 6. In addition to the foregoing officers, the Board of Directors may, from time to time, elect such other officers as they may see fit, with such duties as the Board may deem proper. ARTICLE IV Stock Section 1. Certificates of stock, when the shares represented thereby have been fully paid for, shall be issued to each shareholder, evidencing the number of shares of stock held by him, and the same shall be signed by the President or Vice President and the Secretary, and the corporate seal shall be affixed thereto. Section 2. Transfers of stock shall be made only in the books of the corporation, and the old certificate properly endorsed shall be surrendered and canceled before a new certificate is issued. The Board of Directors may fix a time not exceeding twenty (2o) days preceding the date of any meeting of shareholders or the date fixed for the payment of any dividend or distribution as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting or entitled to receive payment of any such dividend or allotment or rights, and in such case only the shareholder of record on the date so fixed shall be entitled to notice of and to vote at such meeting, or to receive payment of such dividend or to the allotment of rights and notwithstanding any transfer if any shares on the books of the corporation after any record date fixed as aforesaid, the Board of Directors may close the books of the corporation against transfers of shares during the whole or any part of such period. Section 3. In the event of the loss or destruction of a certificate of stock, a new certificate shall be issued in lieu thereof upon satisfactory proof of the Secretary of such loss or destruction, and upon the giving of security by bond or otherwise, satisfactory to the Secretary, against loss to the corporation. Any such new certificates shall be plainly marked "duplicate" upon its face. Section 4. The person in whose names the certificates of stock stand upon the books of the corporation shall be the only ones entitled to notice of shareholders' meetings, and such persons or their duly authorized proxies shall be the only ones entitled to vote at any shareholders' meeting. 3 4 Section 5. Shares of stock shall not be sold, assigned, transferred or encumbered by any shareholder to any person or corporation unless the same shall first have been offered for sale to this corporation, said offer to the corporation shall be made in writing, setting forth the asking price by the offering shareholder, and the terms of sale, and the corporation shall have thirty (30) days in which to accept or reject the said offer, in writing; and a failure to act within said thirty (30) days shall constitute a rejection of the offer. If the offer be rejected by the corporation, and the offering shareholder shall thereafter offer said shares at a price or on terms other than those offered to the corporation, the shares so offered shall again be offered to the corporation on the new terms, to be accepted or rejected as hereinabove set forth. Section 6. In the event the corporation shall be unable or unwilling to purchase shares of stock so offered, the stock shall then be offered to the remaining shareholders, with the remaining shareholders or any of them, to have the right to buy the stock offered in proportion to their stockholdings at the time of offer. The remaining shareholders, or any of them, shall have thirty (30) days in which to accept or reject said offer, in writing; and the failure to act within said thirty (30) day period shall constitute a rejection of the offer. In the event both the corporation and the remaining shareholder or shareholders shall fail or refuse to purchase stock so offered then the stock may be offered to any other person or persons, partnership, corporation, or other business entity. If the shares be so offered to any other person or persons, partnership, corporation, or other business entity under terms different from the terms upon which the stock was offered to the remaining shareholder or shareholders of the corporation, the shares so offered shall again be offered to the remaining shareholders of the corporation upon the new terms and conditions to be accepted or rejected as hereinabove set forth. ARTICLE V Amendments Section 1. These Bylaws may be amended by the shareholders of the corporation at any annual meeting, or at any special meeting properly called for that purpose at which a quorum is present, by the affirmative vote of a majority of the outstanding shares actually present and represented in person or by proxy. Section 2. There Bylaws may be amended by the Board of Directors at any annual meeting or at any special meeting properly called for that purpose at which a quorum is present by the affirmative vote of a majority of the Directors present, subject to the power of shareholders to change or repeal such Bylaws. 4 5 ARTICLE VI Seal Section 1. The corporation may by resolution adopt a corporate seal. ARTICLE VII Fiscal Year Section 1. The fiscal year of the corporation shall begin on the 1st day of January, of each year and terminate on the 31st day of December of each year. RATIFIED AND APPROVED this ____ day of _______________, 1983. _________________________________________ STEFFEN HAUG _________________________________________ MARGARET HAUG 5 EX-3.9 10 CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.9 CERTIFICATE OF INCORPORATION OF CRYSTAL SPRING ACQUISITION, INC. * * * * * FIRST: The name of the Corporation is Crystal Spring Acquisition, Inc. SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is ten thousand (10,000) shares of common stock, no par value per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address ---- --------------- Bruce S. Pailet Robinson & Cole LLP Financial Centre 695 East Main Street Stamford, CT 06901 (203) 462-7500 SIXTH: The Corporation is to have perpetual existence. SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter, amend or repeal the bylaws of the Corporation. EIGHTH: Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. 2 NINTH: Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board or directors or in the bylaws of the Corporation. TENTH: The Corporation shall, to the fullest extent permitted by the provisions of the General Corporation Law of the State of Delaware, as now or hereafter in effect, indemnify all persons whom it may indemnify under such provisions. The indemnification provided by this Section shall not limit or exclude any rights, indemnities or limitations of liability to which any person may be entitled, whether as a matter of law, under the by-laws of the Corporation, by agreement, vote of the stockholders or disinterested directors of the Corporation or otherwise. Except as specifically required by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a director. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 12th day of June, 1997. /s/Bruce S. Pailet ------------------ Bruce S. Pailet Sole Incorporator -2- EX-3.10 11 BY-LAWS 1 EXHIBIT 3.10 BY-LAWS OF CRYSTAL SPRING ACQUISITION, INC. ARTICLE I Stockholders Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. Special Meetings. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Secretary upon the written request, stating the purpose of the meeting, of stockholders who together own of record a majority of the outstanding shares of each class of stock entitled to vote at such meeting. Business transacted at any special meeting shall be limited to the purposes stated in the notice of the special meeting. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the 2 meeting. Section 1.5. Quorum. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these by-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, or in the absence of the Secretary by an Assistant Secretary, or in their absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect each director. With respect to other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or -2- 3 represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided that (except as otherwise required by law or by the certificate of incorporation) the Board of Directors may require a larger vote upon any such matter. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate of incorporation or these by-laws. Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the certificate of incorporation, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be -3- 4 necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II Board of Directors Section 2.1. Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders. Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the annual meeting of stockholders next succeeding his or her election and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; except that, if the certificate of incorporation provides for cumulative voting and less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board, or, if there be classes of directors, at an election of the class of directors of which he or she is a part. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the certificate of incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. -4- 5 Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.5. Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.9. Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors. -5- 6 ARTICLE III Committees Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending these bylaws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these bylaws. ARTICLE IV Officers Section 4.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations -6- 7 or alternate titles as it considers desirable. Any number of offices may be held by the same person. Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.3. Chairman of the Board. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law. Section 4.4. President. In the absence of the Chairman of the Board, the President shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. The President shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law. Section 4.5. Vice Presidents. The Vice President or Vice Presidents, at the request of the President, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law. Section 4.6. Secretary. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly -7- 8 authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.7. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.8. Other Officers. The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore -8- 9 issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. Waiver of Notice of Meetings of Stockholders. Directors and Committees. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws. Section 6.4. Indemnification of Directors, Officers, and Employees and Agents. The Corporation shall indemnify its directors, officers, employees and agents in accordance with the provisions set forth in its certificate of incorporation. Section 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith -9- 10 authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7. Amendment of By-Laws. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. ADOPTED: June 12, 1997. -10- EX-3.11 12 CERTIFICATE OF INCORPORATION 1 Exhibit 3.11 CERTIFICATE OF INCORPORATION OF MOUNTAIN FRESH ACQUISITION CORP. * * * * * FIRST: The name of the Corporation is MOUNTAIN FRESH ACQUISITION CORP. SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is ten thousand (10,000) shares of common stock, no par value per share. FIFTH: The name and mailing address of the sole incorporator is as follows: Name Mailing Address William C. Baskin III Robinson & Cole LLP One Commercial Plaza Hartford, CT 06103-3597 (860) 275-8200 SIXTH: The Corporation is to have perpetual existence. SEVENTH: In furtherance and not in limitation of the powers conferred by statute, the board of directors is expressly authorized to make, alter, amend or repeal the bylaws of the Corporation. EIGHTH: Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide. 2 NINTH: Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the board or directors or in the bylaws of the Corporation. TENTH: The Corporation shall, to the fullest extent permitted by the provisions of the General Corporation Law of the State of Delaware, as now or hereafter in effect, indemnify all persons whom it may indemnify under such provisions. The indemnification provided by this Section shall not limit or exclude any rights, indemnities or limitations of liability to which any person may be entitled, whether as a matter of law, under the by-laws of the Corporation, by agreement, vote of the stockholders or disinterested directors of the Corporation or otherwise. Except as specifically required by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a director. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 11th day of June, 1997. /s/ William C. Baskin III ----------------------------------- William C. Baskin III Sole Incorporator -2- EX-3.12 13 BY-LAWS 1 Exhibit 3.12 BY-LAWS OF MOUNTAIN FRESH ACQUISITION CORP. ARTICLE I Stockholders Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. Special Meetings. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. A special meeting of stockholders shall be called by the Secretary upon the written request, stating the purpose of the meeting, of stockholders who together own of record a majority of the outstanding shares of each class of stock entitled to vote at such meeting. Business transacted at any special meeting shall be limited to the purposes stated in the notice of the special meeting. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the 2 meeting. Section 1.5. Quorum. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these by-laws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, or in the absence of the Secretary by an Assistant Secretary, or in their absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the votes cast shall be sufficient to elect each director. With respect to other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares of all classes of stock present in person or -2- 3 represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, provided that (except as otherwise required by law or by the certificate of incorporation) the Board of Directors may require a larger vote upon any such matter. Where a separate vote by class is required, the affirmative vote of the holders of a majority of the shares of each class present in person or represented by proxy at the meeting shall be the act of such class, except as otherwise provided by law or by the certificate of incorporation or these by-laws. Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Section 1.10. Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the certificate of incorporation, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be -3- 4 necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II Board of Directors Section 2.1. Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders. Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the annual meeting of stockholders next succeeding his or her election and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; except that, if the certificate of incorporation provides for cumulative voting and less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board, or, if there be classes of directors, at an election of the class of directors of which he or she is a part. Whenever the holders of any class or series of stock are entitled to elect one or more directors by the provisions of the certificate of incorporation, the provisions of the preceding sentence shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. -4- 5 Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.5. Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.9. Compensation of Directors. The Board of Directors shall have the authority to fix the compensation of directors. -5- 6 ARTICLE III Committees Section 3.1. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending these bylaws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these bylaws. ARTICLE IV Officers Section 4.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations -6- 7 or alternate titles as it considers desirable. Any number of offices may be held by the same person. Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.3. Chairman of the Board. The Chairman of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present and shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board and as may be provided by law. Section 4.4. President. In the absence of the Chairman of the Board, the President shall preside at all meetings of the Board of Directors and of the stockholders at which he or she shall be present. The President shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation and, in general, shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law. Section 4.5. Vice Presidents. The Vice President or Vice Presidents, at the request of the President, shall perform the duties of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board of Directors may determine which one or more of the Vice Presidents shall perform any of such duties; or if such determination is not made by the Board, the President may make such determination; otherwise any of the Vice Presidents may perform any of such duties. The Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may, from time to time, be assigned to him or her or them by the Board or the President or as may be provided by law. Section 4.6. Secretary. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose, shall see that all notices are duly given in accordance with the provisions of these by-laws or as required by law, shall be custodian of the records of the Corporation, may affix the corporate seal to any document the execution of which, on behalf of the Corporation, is duly -7- 8 authorized, and when so affixed may attest the same, and, in general, shall perform all duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.7. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Board of Directors. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his or her duties, with such surety or sureties as the Board may determine. The Treasurer shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Corporation, shall render to the President and to the Board, whenever requested, an account of the financial condition of the Corporation, and, in general, shall perform all the duties incident to the office of treasurer of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the President or as may be provided by law. Section 4.8. Other Officers. The other officers, if any, of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by such holder in the Corporation. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore -8- 9 issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. Waiver of Notice of Meetings of Stockholders. Directors and Committees. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws. Section 6.4. Indemnification of Directors, Officers, and Employees and Agents. The Corporation shall indemnify its directors, officers, employees and agents in accordance with the provisions set forth in its certificate of incorporation. Section 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith -9- 10 authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7. Amendment of By-Laws. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. ADOPTED: June 11, 1997. -10- EX-3.13 14 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.13 MEMORANDUM OF ASSOCIATION OF WATER JUG ENTERPRISES LIMITED 1. The name of the Company is Water Jug Enterprises Limited 2. There are no restrictions on the objects and powers of the Company and the Company shall expressly have the following powers: (a) To sell or dispose of its undertaking, or a substantial part thereof; (b) To distribute any of its property in specie among its members; and (c) To amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The capital of the Company is: (a) 100 Class A Shares; (b) 100 Class B Shares; (c) 1,000,000 Class C Shares; and (d) 1,000,000 Class D Shares. with power to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including restrictions on voting rights and including redemption and purchase of such shares, subject however, to the provisions of the Companies Act of Nova Scotia. The rights, privileges, restrictions and conditions attaching to the Class A, Class B, Class C and Class D shares as am set out in Schedule A attached hereto. 2 SCHEDULE "A" RIGHTS AND RESTRICTIONS ATTACHING TO SHARES 27.1 The rights and restrictions attached to the shares of the Company may be summarized as follows:
Dividend Liquidation Redemption Class Entitlement Voting Rights Entitlement Redeemable Retractable Amount - ---------------------------------------------------------------------------------------- A Participating Voting 3rd No No N/A B Participating Not-Voting 3rd No No N/A C Non-Participat Voting 2nd No No N/A D Participating Non-Voting 1st Yes Yes Set By (Conditionally) Directors
27.2 The shares of the Company have the following special rights and restrictions with respect to receipt of dividends: (a) in each year at the discretion of the directors, dividends may be paid on the Class "A" or Class "B" shares out of all profits or surpluses available for distribution; (b) if in any year, the company ceases to be a "small business corporation" as that term is defined in the Income Tax Act (Canada) so that the holder of the Class "D" shares would otherwise be deemed to receive an interest benefit under Section 74.4 of that Act, then at-,the discretion of the directors dividends may be paid on the Class "D" shares out of all profits or surpluses available for distribution but such dividends may not exceed 4/5 of the amount equal to the deemed interest benefit that would otherwise arise under Section 74.4; (c) dividends must not be paid on the Class "A" or Class "B" shares if to do so would reduce the value of the net assets of the Company to less than the aggregate of the redemption amount of the issued Class "D" shares; (d) dividends may be paid on one class of shares entitled to dividends to the exclusion of any other class of shares entitled to dividends: and (e) the holders of the Class "C" shares are not entitled to any payment of dividends on such shares. 27.3 The shares of the Company have the following special rights and restrictions with respect to voting rights: -2- 3 (a) at all meetings of the members of the Company the holders of the Class "A" and Class "C" share are entitled to one vote for each such share held; and (b) the holders of the Class "B" and Class "D" shares are not entitled to vote at any meeting of the members of the Company and they are not entitled to receive notice of or attend any meetings of the members of the Company. 27.4 In the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon distribution of the assets of the Company among its members for the purpose of winding-up its affairs or upon a reduction or return of its capital the holders of the following classes of shares shall be entitled to receive the following amounts in the following order of priority: Class of Shares Priority Entitlement - --------------- -------- ----------- Class "D" 1 Redemption amount only Class "C" 2 Paid-up capital only Classes "A" and 3 All remaining profits and "B" assets of the Company 27.5 The shares of the Company have the following special rights and restrictions with respect to redemption: (a) the Class "A", Class "B" and Class "C" shares are not redeemable; (b) the Class "D" Shares are redeemable; (c) the company may redeem the whole or any number of the issued Class "D" shares on payment for each share to be redeemed of the redemption amount and no more provided however that not less than 21 days notice in writing of such redemption is given by mailing such notice to the registered holders of the shares to be redeemed specifying a date and place or places of redemption unless the holders of the shares to be redeemed waive any notice required to be given under this paragraph which waiver, whether given before or after redemption will cure any default in giving such notice and if notice as required of any redemption be given by the Company and an amount sufficient to redeem the shares be deposited with any trust company or chartered bank of Canada as specified in any notice given, on or before the date fixed for redemption, the holders thereof will thereafter have no rights against the Company in respect of such shares except upon the surrender of certificates for such shares to receive payment for them out of the monies so deposited; -3- 4 (d) notwithstanding anything in these Articles to the contrary, if not all of the outstanding shares of the class are to be redeemed, the shares to be redeemed may be selected in such manner as the directors determine and need not be selected either in proportion to the number of shares registered in the name of each member or from every or any particular holder of Class "Do' shares; and (e) if a part only of the shares of any class represented by any certificate are to be redeemed then a new certificate representing the shares which are not to be redeemed shall be issued at the expense of the Company. 27.6 The shares of the Company have the following special rights and restrictions with respect to retraction: (a) the Class "A", Class "B" and Class "C" shares are not retractable; (b) the Class "D" shares are retractable; (c) subject to the provisions of the Companies Act , the company will, upon receiving notice from a member holding Class "D" shares, redeem the number of Class "D" shares registered in the name of the members which are specified in the notice by paying to such member for each Class "D" share to be redeemed the redemption amount of the share and no more provided however that not less than twenty-one (21) days notice in writing of such redemption must be given to the Company by the member seeking to have the Class "D" shares redeemed, such notice to be delivered by mailing to the registered office of the Company a notice specifying the number of Class "D" shares to be redeemed and surrendering the necessary number of share certificates for cancellation unless the Company waives any notice required to be given under this paragraph which waiver, whether given before or after the redemption, cures any default in giving such notice: and (d) notwithstanding anything in the Articles to the contrary, any redemption of shares by the Company upon receipt of a retraction notice from any member holding Class "D" shares need not be made on a pro rata basis among every member who holds Class "D" shares. 27.7 The Class "D" shares have the following additional special rights and restrictions: (a) the Class "D" shares will only be issued as consideration for the acquisition of property by the Company in circumstances where the transferor of such property and the Company have agreed to elect to effect the transfer of such property pursuant to the provisions of Section 85 of the Income Tax Act (Canada); (b) the aggregate redemption a mount of the Class "D" shares issued in connection with a purchase and sale transaction to which Section 85 applies will be the amount by which: -4- 5 (i) the aggregate fair market value of all the property acquired by the Company in the transaction to which Section 85 applies and in respect of which the Class "D" shares were issued, exceeds (ii) the aggregate fair market value of all the consideration (other than any Class "D" shares in the Company or a right to receive such shares) received from the Company by the transferor of such property, as determined by the directors of the Company at the time of the issuance of the Class "D" shares, provided that the directors may, in accordance- with the terms of any agreement between the Company and the holders of Class "D" shares, amend from time-to-time their determination of the aggregate redemption amount of the Class "D" shares after the time of the issuance of such shares; (c) the redemption amount of each Class "D" share issued in connection with a purchase and sale transaction to which Section 85 applies will be determined by dividing the aggregate redemption amount for the class by the number of shares of the class issued in respect of such transaction; and (d) Class "D" shares shall only be issued in respect of a purchase and sale transaction to which Section 85 applies if no other Class "D" shares are outstanding in respect of any other purchase and sale transaction to which Section 85 applies. -5- EX-3.14 15 ARTICLES OF ASSOCIATION 1 Exhibit 3.14 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once 2 SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 3 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 4 25. Shareholder advances on unpaid shares 4 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 5 2 -ii- LIEN ON SHARES 34. Lien on shares for debts of shareholder 5 35. Sale of shares not paid up to enforce lien 5 36. Application of proceeds of shares by Company 5 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 6 42. Fee on transfer 6 43. Transfer instrument to remain with Company 6 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 6 45. Right of executor of sole shareholder 6 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 7 51. Terms of issue of new shares 7 52. New shares may be offered to existing shareholders 7 53. New capital within control of directors 7 54. Reduction of capital 7 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 8 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 8 3 -iii- CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 9 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 9 63. Securities assignable free from equities 9 64. Securities at discount, premium, with preference 9 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 10 68. Notice of meeting - Waiver of notice 10 69. Notice of two meetings for special resolution 10 70. Accidental omission of notice 10 RECORD DATES 71. Setting record dates - when no record date set 10 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 10 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 11 76. If quorum not present - dissolution or adjournment 11 77. Resolution by show of hands - demand of poll 11 78. Conduct of poll 11 79. Casting vote 11 80. Adjournment of meeting 11 81. Poll on question of adjournment, election of chairman 11 82. Effect of demand of poll on continuance of meeting 11 VOTES OF SHAREHOLDERS 83. Voting generally 11 84. Votes on transmission by death, bankruptcy, etc. 12 85. Votes of joint registered shareholders 12 86. Voting in person, by proxy, by corporate representative 12 87. Proxy requirements generally 12 88. Votes of shareholders of unsound mind 12 89. Depositing proxies before meeting 12 90. Votes by proxy after authority revoked 12 91. Form of proxy 12 92. Votes when call due on shares 12 4 -iv- 93. Resolution of directors ratified by shareholders 13 94. Resolution in writing without meeting 13 DIRECTORS 95. Number of directors - maximum and minimum 13 96. First directors 13 97. Remuneration of directors 13 98. Directors may act notwithstanding vacancy 13 99. Directors may also be officers 13 100. Vacation of office on bankruptcy, etc. 13 101. Directors' conflicts of interest 13 ELECTION OF DIRECTORS 102. Election of directors at general meeting 14 103. Retiring directors remain in office until succeeded 14 104. Number of directors elected, qualification 14 105. Removal of director 14 106. When directors may be appointed by other directors 14 MANAGING DIRECTOR 107. Authority to appoint managing director 14 108. Resignation and removal of managing director 14 109. Remuneration of managing director 14 110. Powers and duties of managing director 14 CHAIRMAN OF THE BOARD 111. Chairman of the Board 14 PRESIDENT AND VICE-PRESIDENTS 112. President 15 113. Vice-Presidents 15 SECRETARY AND TREASURER 114. Secretary 15 115. Treasurer 15 OFFICERS 116. Other officers 15 117. Same person may hold more than one office 15 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 15 119. Participation at meeting by telephone 15 120. Place of meetings - When notice required 15 121. Summoning of meetings 16 122. Questions decided by majority - casting vote - proxies 16 5 -v- 123. Chairman of directors' meetings 16 124. Authority of meeting when quorum present 16 125. Committees of directors 16 126. Proceedings of committees of directors 16 127. Effect on meeting of defectively appointed director 16 128. Resolution of directors in writing without meeting 16 129. Remuneration of directors for extra services 16 REGISTERS 130. Registers and branch registers 17 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 17 POWERS OF DIRECTORS 132. General powers of directors 17 133. Specifically enumerated powers of directors 17 SOLICITORS 134. Solicitors 19 THE SEAL 135. Use of common seal 19 136. Facsimiles of common seal 19 137. Facsimile seal for use outside Nova Scotia 19 DIVIDENDS 138. Declaration of dividends 19 139. Dividends payable from profits, etc. 19 140. Declaration of amount of profits, etc., conclusive 19 141. Interim dividends 19 142. Dividends differentiated by paid-up capital 20 143. Right to set off debts against dividends 20 144. Where lien on dividends 20 145. Dividends on shares of deceased, etc. 20 146. Setting off calls and dividends 20 147. Cash dividend, dividend in kind, stock dividend, etc. 20 148. Power of directors to settle issues re dividends 20 149. Dividends on jointly registered shares 20 150. Satisfaction of dividend 20 ACCOUNTS 151. Directors' duty to keep accounts 20 152. Where books to be kept 21 153. Inspection of books by shareholders 21 154. Reports on accounts to general meeting 21 6 -vi- AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 21 156. First auditors 21 157. Directors may fill casual vacancy 21 158. Persons qualified for appointment as auditors 21 159. Removal of auditor 21 160. Remuneration 21 161. Duties of auditors 21 NOTICES 162. How notice given 21 163. Notice to shareholder without registered address 21 164. Holders of share warrants not entitled to notice 21 165. Notice to joint holders 22 166. When notice deemed given - proof of notice 22 167. Transferees bound by prior notice 22 168. Notice valid though shareholder deceased 22 169. How notice to be signed 22 170. How time to be counted 22 INDEMNITY 171. Indemnity of directors, officers, etc. 22 172. Individual liability of directors, officers, etc. 22 REMINDERS 173. Reminders to directors of obligations under Act 23 7 ARTICLES OF ASSOCIATION OF WATER JUG ENTERPRISES LIMITED INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 -2- 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova 9 -3- Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 10 -4- 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of 11 -5- interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 12 -6- 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which 13 -7- (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: 14 -8- (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 15 -9- 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 16 -10- 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent 17 -11- or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights 18 -12- (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. 19 -13- [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than 10. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 20 -14- 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to 21 -15- the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. PRESIDENT AND VICE-PRESIDENTS 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, 22 -16- the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. . (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the 23 -17- appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. REGISTERS 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; 24 -18- (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; 25 -19- (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 26 -20- 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to 27 -21- whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 28 -22- 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 29 -23- 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). 30 -24- (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). EX-3.15 16 MEMORANDUM OF ASSOCIATION 1 EXHIBIT 3.15 MEMORANDUM OF ASSICIATION OF WITHEY'S WATER SOFTENING & PURIFICATION LIMITED 1. The name of the Company is Withey's Water Softening & Purification Limited. 2. There are no restrictions on the objects and powers of the Company and the Company shall expressly have the following powers: (a) To sell or dispose of its undertaking, or a substantial part thereof; (b) To distribute any of its property in specie among its members; and (c) To amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The authorized capital of the Company is: One Thousand (1,000) Class "A" Non-Participating Common voting shares with a par value of One ($1.00) Dollar each; One Hundred Thousand (100,000) Class :B: Common Non-Voting shares with a part value of One ($1.00) Dollar each; One Hundred Thousand (100,000) Class "D: Common Non-Voting shares with a par value of One ($0.01) Cent each; One Hundred Thousand (100,000) Class "E" Preference shares with a par value of One ($0.01) Cent each; One Hundred Thousand (100,000) Class "F" Preference shares with a par value of One ($0.01) Cent each; 2 One Hundred Thousand (100,00) Class "G" Preference shares with a par value of One Hundred ($100) Dollars each; One Hundred thousand (100,000) Class "H" Preference shares with a par value of One ($0.01) Cent each; One Hundred Thousand (100,000) Class "I" Preference shares with a par value of One ($0.01) Cent each; and One Hundred Thousand (100,000) Class "J" preference shares with a par value of one ($0.01) Cent each. The Class A-J shares having attached thereto the special rights and restrictions set out ion the attached Appendix. With power to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including restrictions on voting rights and including redemption and purchase of such shares, subject, however, to the provisions of the Companies Act of Nova Scotia. 3 APPENDIX "A" SHARE CONDITIONS 1. The name of the Company is "WITHEY'S WATER SOFTENING & PURIFICATION LIMITED". 2. The authorized capital of the Company consists of: 2.1 One Thousand (1,000) Class "A" Non-Participating Common voting shares with a par value of One ($1.00) Dollar each; 2.2 One Hundred Thousand (100,000) Class "B" Common Non-Voting shares without par value; 2.3 Ten Thousand (10,000) Class "C" Common Non-Voting shares with a par value of One ($1.00) Dollar each; 2.4 One Hundred Thousand (100,000) Class "D" Common Non-Voting shares with a par value of One ($0.01) Cent each; 2.5 One Hundred Thousand (100,000) Class "E" Preference shares with a par value of One ($0.01) Cent each; 2.6 One Hundred Thousand (100,000) Class "F" Preference shares with a par value of One ($0.01) Cent each; 2.7 One Hundred Thousand (100,000) Class "G" Preference shares with a par value of One Hundred ($100) Dollars each; 2.8 One Hundred Thousand (100,000) Class "H" Preference shares with a par value of One ($0.01) Cent each; 2.9 One Hundred Thousand (100,000) Class "I" Preference shares with a par value of One ($0.01) Cent each; and 2.10 One Hundred Thousand (100,000) Class "J" Preference shares with a par value of one ($0.01) Cent each. 4 3. The Class A-J shares having the conditions attached hereto as Appendix B. 5 APPENDIX "B" PART 26 26 - SPECIAL RIGHTS AND RESTRICTIONS 26.1 The Class "A" Non-Participating Common Voting shares shall have attached thereto the following special rights and restrictions: 26.1.1 The holders of the Class "A" Non-Participating Common Voting shares must be sent notice of and may attend meetings of the shareholders of the Company, are entitled to vote at any such meetings, and are entitled to one vote for each Class "A" Non-Participating Common Voting share held. 26.1.2 In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of the Class "A" Non-Participating Common Shares shall be entitled to receive, out of the assets of the Company (whether from capital or surplus or both), the sum of ONE ($1.00) DOLLAR per share (or the amount paid up thereon), but the holders of Class "A" Non-Participating common shares shall not be entitled to share any further in the distribution of the property or assets of the Company. 26.1.3 The directors shall not declare dividends on these Class "A" Non-Participating Common Voting shares and the holders are not entitled to any. 26.2 The Class "B" Common Not-Voting shares shall have attached thereto the following rights and restrictions: 26.2.1 The holders of the Class "B" Common Non-Voting shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be permitted by the laws of British Columbia. 26.2.2 The directors may declare dividends on these Class "B" Common Non-Voting shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "B" Common Non-Voting shares. 6 26.3 The Class "C" Common Non-Voting shares shall have attached thereto the following special rights and restrictions: 26.3.1 The holders of Class "C" Common Non-Voting shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 26.3.2 The directors may declare dividends on these Class "C" Common Non-Voting shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "C" Common Non-Voting shares. 26.4 The Class "D" Common Non-voting shares shall have attached thereto the following special rights and restrictions: 26.4.1 The holders of Class "D" Common Non-voting shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 26.4.2 The directors may declare dividends on these Class "D" Common Non-Voting shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "D" Common Non-Voting shares. 26.5 The Class "E" Preference shares shall have attached thereto the following special rights and restrictions: 26.5.1 The holders of Class "E" Preference shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 26.5.2 The holders of the Class "E" Preference shares may, in each year, at the discretion of the directors, be paid, out of any profits or surplus available for dividends, on-cumulative dividends at such interest rate as the directors decide at the time of issue of the Class "E" Preference shares. 26.5.3 The Company may, upon giving notice as provided below, redeem all or any of the Class "E" Preference shares on payment of the redemption/retraction amount set out below for each share to be redeemed (herein called the "Redemption Amount"). Not less than thirty (30) days' notice in writing of 7 such redemption shall be given by mailing such notice to the registered holders of the shares to be redeemed, specifying the date and place of redemption; and if an amount sufficient to redeem the shares is deposited with any trust company or chartered bank of Canada, as specified in the notice, on or before the date fixed for redemption, dividends on the Class "E" Preference shares to be redeemed and the rights of the holders thereof shall cease after the date so fixed for redemption, who shall thereafter have no rights against the Company in respect thereof except, upon the surrender of certificates for such shares, to receive payment therefor out of the moneys so deposited. 26.5.4 Subject to the provisions of the Company Act, the Company shall, upon receiving notice as hereinafter provided from a holder of Class "E" preference shares, redeem the number of the Class "E" Preference shares registered in the name of the shareholder which are specified in the notice by paying to such shareholder for each Class "E" preference share to be redeemed the Redemption Amount set out below. Not less than twenty-one (21) days notice in writing of such redemption shall be given to the Company by the shareholders seeking such redemption; such notice to be delivered by mail to the registered office of the Company and to specify the number of Class "E" Preference shares to be redeemed and to attach the necessary number of shares certificates for cancellation. The Company shall issue new certificates for any shares which are not redeemed but the certificates for which have been surrendered. The Company may waive any notice so required to be given, and such waiver, whether given before or after or after the redemption, shall cure any default in giving such notice. 26.5.5 When issuing any Class "E" Preference Share the directors shall determine the amount payable by the Company to the holder for the redemption of such share (the "Redemption Amount"). If any Class "E" Preference Shares are issued as payment, in whole or in part, for assets transferred to the Company, including shares of the Company, the Redemption Amount of such Shares shall be the fair market value of the assets or the balance of the fair market value thereof, as the case may be, and the Redemption Amount of each such share shall be the quotient of such fair market value, or balance thereof, divided by the number of Class "E" Preference Shares issued as consideration for such assets or shares. If the Department of National Revenue, or other authority having jurisdiction, shall determine that the Redemption Amount is not the fair market value of the assets or shares or of the balance of the price for such assets or shares, as the case may be, the Redemption Amount for such shares as recorded in the proceedings of the directors shall be increased or decreased so that it shall be the same as the fair market value of the said assets or shares or of the balance of the price for such assets or shares, as the case may be, subject always to a final determination of the fair market value by a court of competent jurisdiction upon any appeal of such determination. If any or all of those shares had been redeemed already, then the shareholder who redeemed them 8 shall pay to or receive from the Company an amount per share equaling the decrease or increase in the share price as determined above. 25.5.6 The directors may declare dividends on these Class "E" Preference shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "E" Preference shares. 26.6 The Class "F" Preference shares shall have attached thereto the following special rights and restrictions: 26.6.1 The holders of Class "F" preference shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 26.6.2 The holders of the Class "F" Preference shares may, in each year, at the discretion of the directors, be paid, out of any profits or surplus available for dividends, non-cumulative dividends at such interest rate as the directors decide at the time of issue of the Class "F" Preference shares. 26.6.3 The Company may, upon giving notice as provided below, redeem all or any of the Class "F" preference shares on payment of the redemption/retraction amount set out below for each share to be redeemed (herein called the "Redemption Amount"). Not less than thirty (30) days' notice in writing of such redemption all be given by mailing such notice to the registered holders of the shares to be redeemed, specifying the date and place of redemption; and if an amount sufficient to redeem the shares is deposited with any trust company or chartered bank of Canada, as specified in the notice, on or before the date fixed for redemption, dividends on the Class "F" Preference shares to be redeemed and the rights of the holders thereof shall cease after the date so fixed for redemption, who shall thereafter have no rights against the Company in respect thereof except, upon the surrender of certificates for such shares, to receive payment therefor out of the moneys so deposited. 26.6.4 Subject to the provisions of the Company Act, the Company shall, upon receiving notice as hereinafter provided from a holder of Class "F" Preference shares, redeem the number of the Class "F" Preference shares registered in the name of the shareholder which are specified in the notice by paying to such shareholder for each Class "F" Preference share to be redeemed the Redemption Amount set out below. Not less than twenty-one (21) days notice in writing of such redemption shall be given to the Company by the shareholder seeking such redemption; such notice to be delivered by mail to the registered office of the Company and to specify the number of Class "F" Preference 9 shares to be redeemed and to attach the necessary number of Class "F" preference shares to be redeemed and to attach the necessary number of share certificates for cancellation. The Company shall issue new certificates for any shares which are not redeemed but the certificates for which have been surrendered. The Company may waive any notice so required to be given, and such waiver, whether given before or after the redemption, shall cure any default in giving such notice. 26.6.5 When issuing any Class "F" Preference Share the directors shall determine the amount payable by the Company to the holder for the redemption of such share (the "Redemption Amount"). If any Class "F" Preference Shares are issued as payment, in whole or in part, for assets transferred to the Company, including shares of the Company, the Redemption Amount of such Shares shall be the fair market value of the assets or the balance of the fair market value thereof, as the case may be, and the Redemption Amount of each such share shall be the quotient of such fair market value, or balance thereof, divided by the number of Class "F" Preference Shares issued as consideration for such assets or shares. If the Department of National Revenue, or other authority having jurisdiction, shall determine that the Redemption Amount is not the fair market value of the assets or shares or of the balance of the price for such assets or shares, as the case may be, the Redemption Amount for such shares as recorded in the proceedings of the directors shall be increased or decreased so that it shall be the same as the fair market value of the said assets or shares or of the balance of the price for such assets or shares, as the case may be, subject always to a final determination of the fair market value by a court of competent jurisdiction upon any appeal of such determination. If any or all of those shares had been redeemed already, then the shareholder who redeemed them shall pay to or receive from the Company an amount per share equaling the decrease or increase in the share price as determined above. 26.6.6 The directors may declare dividends on these Class "F" Preference shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "F" Preference Shares. 26.7 The Class "G" Preference shares shall have attached thereto the following special rights and restrictions: 26.7.1 The holders of Class "G" Preference shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 10 26.7.2 The holders of the Class "G" Preference shares may, in each year, at the discretion of the directors, be paid, out of any profits or surplus available for dividends, non-cumulative dividends at such interest rate as the directors decide at the time of issue of the Class "G" Preference shares. 26.7.3 The Company may, upon giving notice as provided below, redeem all or any of the Class "G" Preference shares on payment of ONE HUNDRED ($100.00) DOLLARS for each share to be redeemed (hereinafter called the "Redemption Amount"). Not less than thirty (30) days' notice in writing of such redemption shall be given by mailing such notice to the registered holders of the shares to be redeemed, specifying the date and place of redemption; and if an amount sufficient to redeem the shares is deposited with any trust company or chartered bank of Canada, as specified in the notice, on or before the date fixed for redemption, dividends on the Class "G" Preference shares to be redeemed and the rights of the holders thereof shall cease after the date so fixed for redemption, and the holders thereof shall then have no rights against the Company in respect thereof except, upon the surrender of certificates for such shares, to receive payment therefor out of the moneys so deposited. 26.7.4 Subject to the provisions of the Company Act, the Company shall, upon receiving notice as hereinafter provided from a holder of Class "G" Preference shares, redeem the number of the Class "G" Preference shares registered in the name of the shareholder which are specified in the notice by paying to such shareholder for each Class "G" Preference share to be redeemed the Redemption Amount. Not less than twenty-one (21) days notice in writing of such redemption shall be given to the Company by the shareholder seeking such redemption; such notice to be delivered by mail to the registered office of the Company and to specify the number of Class "G" Preference shares to be redeemed and to attach the necessary number of share certificates for cancellation. The Company shall issue new certificates for any shares which are not redeemed but the certificates for which have been surrendered. The Company may waive any notice so required to be given and such waiver, whether given before or after the redemption shall cure any default in giving such notice. 26.8 The Class "H" Preference shares shall have attached thereto the following special rights and restrictions: 26.8.1 The holders of Class "H" Preference shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 11 26.8.2 The holders of the Class "H" Preference shares may, in each year, at the discretion of the directors, be paid, out of any profits or surplus available for dividends, non-cumulative dividends at such interest rate as the directors decide at the time of issue of the Class "H" Preference shares. 26.8.3 The Company may, upon giving notice as provided below, redeem all or any of the Class "H" Preference shares on payment of ONE HUNDRED ($100.00) DOLLARS for each share to be redeemed (hereinafter called the "Redemption Amount"). Not less than thirty (30) days' notice in writing of such redemption shall be given by mailing such notice to the registered holders of the shares to be redeemed, specifying the date and place of redemption; and if an amount sufficient to redeem the shares is deposited with any trust company or chartered bank of Canada, as specified in the notice, on or before the date fixed for redemption, dividends on the Class "H" Preference shares to be redeemed and the rights of the holders thereof shall cease after the date so fixed for redemption, and the holders thereof shall then have no rights against the Company in respect thereof except, upon the surrender of certificates for such shares, to receive payment therefor out of the moneys so deposited. 26.8.4 Subject to the provisions of the Company Act, the Company shall, upon receiving notice as hereinafter provided form a holder of Class "H" Preference shares, redeem the number of the Class "H" Preference shares registered in the name of the shareholder which are specified in the notice by paying to such shareholder for each Class "H" Preference share to be redeemed the Redemption Amount. Not less than twenty-one (21) days notice in writing of such redemption shall be given to the Company by the shareholder seeking such redemption; such notice to be delivered by mail to the registered office of the Company and to specify the number of class "H" Preference shares to be redeemed and to attach the necessary number of share certificates for cancellation. The Company shall issue new certificates for any shares which are not redeemed but the certificates for which have been surrendered. The Company may waive any notice so required to be given and such waiver, whether given before or after the redemption shall cure any default in giving such notice. 26.8.5 The directors may declare dividends on these Class "H" Preference shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "H" Preference Shares. 26.9 The Class "F" Preference shares shall have attached thereto the following special rights and restrictions: 12 26.9.1 The holders of Class "I" Preference shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 26.9.2 The holders of the Class "I" Preference shares may, in each year, at the discretion of the directors, be paid, out of any profits or surplus available for dividends, non-cumulative dividends at such interest rate as the directors decide at the time of issue of the Class "I" Preference shares. 26.9.3 The Company may, upon giving notice as provided below, redeem all or any of the Class "I" Preference shares on payment of ONE THOUSAND ($1,000.00) DOLLARS for each share to be redeemed (hereinafter called the "Redemption Amount"). Not less than thirty (30) days' notice in writing of such redemption shall be given by mailing such notice to the registered holders of the shares to be redeemed, specifying the date and place of redemption; and if an amount sufficient to redeem the shares is deposited with any trust company or chartered bank of Canada, as specified in the notice, on or before the date fixed for redemption, dividends on the Class "I" Preference shares to be redeemed and the rights of the holders thereof shall cease after the date so fixed for redemption, and the holders thereof shall then have no rights against the Company in respect thereof except, upon the surrender of certificates for such shares, to receive payment therefor out of the moneys so deposited. 26.9.5 The directors may declare dividends on these Class "I" Preference shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "I" Preference Shares. 26.10 The Class "J" Preference shares shall have attached thereto the following special rights and restrictions: 26.10.1 The holders of Class "J" Preference shares are not entitled to notice of or to vote at any meetings for the election of directors or at any meeting of the shareholders except as may be provided by the laws of the Province of British Columbia. 26.10.2 The holders of the Class "J" Preference shares may, in each year, at the discretion of the directors, be paid, out of any profits or surplus available for dividends, non-cumulative dividends at such interest rate as the directors decide at the time of issue of the Class "J" Preference shares. 13 26.10.3 The Company may, upon giving notice as provided below, redeem all or any of the Class "J" Preference share son payment of the redemption/ retraction amount set out below for each share to be redeemed (herein called the "Redemption Amount"). Not less than thirty (30) days' notice in writing of such redemption shall be given by mailing such notice to the registered holders of the shares to be redeemed, specifying the date and place of redemption; and if an amount sufficient to redeem the shares is deposited with any trust company or chartered bank of Canada, as specified in the notice, on or before the date fixed for redemption, dividends on the Class "J" Preference shares to be redeemed and the rights of the holders thereof shall cease after the date so fixed for redemption, who shall thereafter have no rights against the Company in respect thereof except, upon the surrender of certificates for such shares, to receive payment therefor out of the moneys so deposited. 26.10.4 Subject to the provisions of the Company Act, the Company shall, upon receiving notice as hereinafter provided form a holder of Class "J" Preference shares, redeem the number of the Class "J" Preference shares registered in the name of the shareholder which are specified in the notice by paying to such shareholder for each Class "J" Preference share to be redeemed the Redemption Amount set out below. Not less than twenty-one (21) days notice in writing of such redemption shall be given to the Company by the shareholder seeking such redemption; such notice to be delivered by mail to the registered office of the Company and to specify the number of Class "J" Preference shares to be redeemed and t attach the necessary number of share certificates for cancellation. The Company shall issue new certificates for any shares which are not redeemed but the certificates for which have been surrendered. The Company may waive any notice so required to be given, and such waiver, whether given before or after the redemption, shall cure any default in giving such notice. 26.10.5 When issuing any Class "J" Preference Share the directors shall determine the amount payable by the Company to the holder for the redemption of such share (the "Redemption Amount"). If any Class "J" Preference Shares are issued as payment, in whole or in part, for assets transferred to the Company, including shares of the Company, the Redemption Amount of such Shares shall be the fair market value of the assets or the balance of the fair market value thereof, as the case may be, and the Redemption Amount of each such share shall be the quotient of such fair market value, or balance thereof, divided by the number of Class "J" Preference Shares issued as consideration for such assets or shares. If the Department of National Revenue, or other authority having jurisdiction, shall determine that the Redemption Amount is not the fair market value of the assets or shares or of the balance of the price for such assets or shares, as the case may be, the Redemption Amount for such shares as recorded in the proceedings of the directors shall be increased or decreased so that it shall be the same as the fair market value of the said assets or shares or 14 of the balance of the price for such assets or shares, as the case may be, subject always to a final determination of the fair market value by a court of competent jurisdiction upon any appeal of such determination. If any or all of those shares had been redeemed already, then the shareholder who redeemed them shall pay to or receive from the Company an amount per share equaling the decrease or increase in the share price as determined above. 26.10.6 The directors may declare dividends on these Class "J" Preference shares without declaring dividends on shares of any other class, and may declare dividends on shares of any other class without declaring dividends on these Class "J" Preference shares. 26.11 if any voluntary or involuntary liquidation, dissolution or winding up of the Company happens, the following shall be the priorities of the various classes of shares to receive what they are entitled to out of the assets of the Company. 26.11.1 First priority: Shares of Preference Classes "E", "F", "G", "H", "I" and "J" shall all rank pari passu amongst each other, but shall rank in priority above all other shares. 26.11.2 Second priority: The Class "A" Common Non-Participating Voting shares shall rank next in priority behind Preference Classes "E", "F", "G", "H", "I" and "J", but shall rank in priority above all other shares. 26.11.3 Third priority: Shares of Common Stock Non-Voting Classes "B", "C", and "D" shall all rank pari passu amongst each other, but shall rank in priority behind all other shares. EX-3.16 17 ARTICLES OF ASSOCIATION 1 Exhibit 3.16 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once 2 SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 3 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 4 25. Shareholder advances on unpaid shares 4 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 5 2 -ii- LIEN ON SHARES 34. Lien on shares for debts of shareholder 5 35. Sale of shares not paid up to enforce lien 5 36. Application of proceeds of shares by Company 5 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 6 42. Fee on transfer 6 43. Transfer instrument to remain with Company 6 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 6 45. Right of executor of sole shareholder 6 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 7 51. Terms of issue of new shares 7 52. New shares may be offered to existing shareholders 7 53. New capital within control of directors 7 54. Reduction of capital 7 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 8 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 8 3 -iii- CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 9 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 9 63. Securities assignable free from equities 9 64. Securities at discount, premium, with preference 9 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 10 68. Notice of meeting - Waiver of notice 10 69. Notice of two meetings for special resolution 10 70. Accidental omission of notice 10 RECORD DATES 71. Setting record dates - when no record date set 10 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 10 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 11 76. If quorum not present - dissolution or adjournment 11 77. Resolution by show of hands - demand of poll 11 78. Conduct of poll 11 79. Casting vote 11 80. Adjournment of meeting 11 81. Poll on question of adjournment, election of chairman 11 82. Effect of demand of poll on continuance of meeting 11 VOTES OF SHAREHOLDERS 83. Voting generally 11 84. Votes on transmission by death, bankruptcy, etc. 12 85. Votes of joint registered shareholders 12 86. Voting in person, by proxy, by corporate representative 12 87. Proxy requirements generally 12 88. Votes of shareholders of unsound mind 12 89. Depositing proxies before meeting 12 90. Votes by proxy after authority revoked 12 91. Form of proxy 12 92. Votes when call due on shares 12 4 -iv- 93. Resolution of directors ratified by shareholders 13 94. Resolution in writing without meeting 13 DIRECTORS 95. Number of directors - maximum and minimum 13 96. First directors 13 97. Remuneration of directors 13 98. Directors may act notwithstanding vacancy 13 99. Directors may also be officers 13 100. Vacation of office on bankruptcy, etc. 13 101. Directors' conflicts of interest 13 ELECTION OF DIRECTORS 102. Election of directors at general meeting 14 103. Retiring directors remain in office until succeeded 14 104. Number of directors elected, qualification 14 105. Removal of director 14 106. When directors may be appointed by other directors 14 MANAGING DIRECTOR 107. Authority to appoint managing director 14 108. Resignation and removal of managing director 14 109. Remuneration of managing director 14 110. Powers and duties of managing director 14 CHAIRMAN OF THE BOARD 111. Chairman of the Board 14 PRESIDENT AND VICE-PRESIDENTS 112. President 15 113. Vice-Presidents 15 SECRETARY AND TREASURER 114. Secretary 15 115. Treasurer 15 OFFICERS 116. Other officers 15 117. Same person may hold more than one office 15 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 15 119. Participation at meeting by telephone 15 120. Place of meetings - When notice required 15 121. Summoning of meetings 16 122. Questions decided by majority - casting vote - proxies 16 5 -v- 123. Chairman of directors' meetings 16 124. Authority of meeting when quorum present 16 125. Committees of directors 16 126. Proceedings of committees of directors 16 127. Effect on meeting of defectively appointed director 16 128. Resolution of directors in writing without meeting 16 129. Remuneration of directors for extra services 16 REGISTERS 130. Registers and branch registers 17 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 17 POWERS OF DIRECTORS 132. General powers of directors 17 133. Specifically enumerated powers of directors 17 SOLICITORS 134. Solicitors 19 THE SEAL 135. Use of common seal 19 136. Facsimiles of common seal 19 137. Facsimile seal for use outside Nova Scotia 19 DIVIDENDS 138. Declaration of dividends 19 139. Dividends payable from profits, etc. 19 140. Declaration of amount of profits, etc., conclusive 19 141. Interim dividends 19 142. Dividends differentiated by paid-up capital 20 143. Right to set off debts against dividends 20 144. Where lien on dividends 20 145. Dividends on shares of deceased, etc. 20 146. Setting off calls and dividends 20 147. Cash dividend, dividend in kind, stock dividend, etc. 20 148. Power of directors to settle issues re dividends 20 149. Dividends on jointly registered shares 20 150. Satisfaction of dividend 20 ACCOUNTS 151. Directors' duty to keep accounts 20 152. Where books to be kept 21 153. Inspection of books by shareholders 21 154. Reports on accounts to general meeting 21 6 -vi- AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 21 156. First auditors 21 157. Directors may fill casual vacancy 21 158. Persons qualified for appointment as auditors 21 159. Removal of auditor 21 160. Remuneration 21 161. Duties of auditors 21 NOTICES 162. How notice given 21 163. Notice to shareholder without registered address 21 164. Holders of share warrants not entitled to notice 21 165. Notice to joint holders 22 166. When notice deemed given - proof of notice 22 167. Transferees bound by prior notice 22 168. Notice valid though shareholder deceased 22 169. How notice to be signed 22 170. How time to be counted 22 INDEMNITY 171. Indemnity of directors, officers, etc. 22 172. Individual liability of directors, officers, etc. 22 REMINDERS 173. Reminders to directors of obligations under Act 23 7 ARTICLES OF ASSOCIATION OF Withey's Water Softening & Purification Limited INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 -8- 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 9 -9- CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other 10 -10- rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 11 -11- 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 12 -12- (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or 13 -13- (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 14 -14- subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 15 -15- 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 16 -16- 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 17 -17- 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 18 -18- 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 19 -19- 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than 10. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply 20 -20- to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. 21 -21- PRESIDENT AND VICE-PRESIDENTS 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. . 22 -22- (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. 23 -23- REGISTERS 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 24 -24- (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 25 -25- (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 26 -26- 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 27 -27- 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 28 -28- 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 29 -29- insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). 30 -30- Name(s) of Subscriber(s) Dated at Halifax, Nova Scotia the day of , 199 . Witness to above signature(s): - --------------------------------------------- Halifax, Nova Scotia EX-3.17 18 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.17 MEMORANDUM OF ASSOCIATION OF AQUA CARE WATER SOFTENING & PURIFICATION INCORPORATED 1. The name of the Company is Aqua Care Water Softening & Purification Incorporated. 2. There are no restrictions on the objects and powers of the Company and the Company shall expressly have the following powers: (a) To sell or dispose of its undertaking, or a substantial part thereof; (b) To distribute any of its property in specie among its members; and (c) To amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The authorized capital of the Company is Ten Thousand (10,000) common shares with a par value of One ($1.00) Dollar each. with power to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including restrictions on voting rights and including redemption and purchase of such shares, subject, however, to the provisions of the Companies Act of Nova Scotia. EX-3.18 19 ARTICLES OF ASSOCIATION 1 Exhibit 3.18 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once 2 SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 3 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 4 25. Shareholder advances on unpaid shares 4 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 5 2 - ii - LIEN ON SHARES 34. Lien on shares for debts of shareholder 5 35. Sale of shares not paid up to enforce lien 5 36. Application of proceeds of shares by Company 5 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 6 42. Fee on transfer 6 43. Transfer instrument to remain with Company 6 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 6 45. Right of executor of sole shareholder 6 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 7 51. Terms of issue of new shares 7 52. New shares may be offered to existing shareholders 7 53. New capital within control of directors 7 54. Reduction of capital 7 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 8 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 8 3 - iii - CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 9 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 9 63. Securities assignable free from equities 9 64. Securities at discount, premium, with preference 9 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 10 68. Notice of meeting - Waiver of notice 10 69. Notice of two meetings for special resolution 10 70. Accidental omission of notice 10 RECORD DATES 71. Setting record dates - when no record date set 10 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 10 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 11 76. If quorum not present - dissolution or adjournment 11 77. Resolution by show of hands - demand of poll 11 78. Conduct of poll 11 79. Casting vote 11 80. Adjournment of meeting 11 81. Poll on question of adjournment, election of chairman 11 82. Effect of demand of poll on continuance of meeting 11 VOTES OF SHAREHOLDERS 83. Voting generally 11 84. Votes on transmission by death, bankruptcy, etc. 12 85. Votes of joint registered shareholders 12 86. Voting in person, by proxy, by corporate representative 12 87. Proxy requirements generally 12 88. Votes of shareholders of unsound mind 12 89. Depositing proxies before meeting 12 90. Votes by proxy after authority revoked 12 91. Form of proxy 12 92. Votes when call due on shares 12 4 - iv - 93. Resolution of directors ratified by shareholders 13 94. Resolution in writing without meeting 13 DIRECTORS 95. Number of directors - maximum and minimum 13 96. First directors 13 97. Remuneration of directors 13 98. Directors may act notwithstanding vacancy 13 99. Directors may also be officers 13 100. Vacation of office on bankruptcy, etc. 13 101. Directors' conflicts of interest 13 ELECTION OF DIRECTORS 102. Election of directors at general meeting 14 103. Retiring directors remain in office until succeeded 14 104. Number of directors elected, qualification 14 105. Removal of director 14 106. When directors may be appointed by other directors 14 MANAGING DIRECTOR 107. Authority to appoint managing director 14 108. Resignation and removal of managing director 14 109. Remuneration of managing director 14 110. Powers and duties of managing director 14 CHAIRMAN OF THE BOARD 111. Chairman of the Board 14 PRESIDENT AND VICE-PRESIDENTS 112. President 15 113. Vice-Presidents 15 SECRETARY AND TREASURER 114. Secretary 15 115. Treasurer 15 OFFICERS 116. Other officers 15 117. Same person may hold more than one office 15 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 15 119. Participation at meeting by telephone 15 120. Place of meetings - When notice required 15 121. Summoning of meetings 16 122. Questions decided by majority - casting vote - proxies 16 5 - v - 123. Chairman of directors' meetings 16 124. Authority of meeting when quorum present 16 125. Committees of directors 16 126. Proceedings of committees of directors 16 127. Effect on meeting of defectively appointed director 16 128. Resolution of directors in writing without meeting 16 129. Remuneration of directors for extra services 16 REGISTERS 130. Registers and branch registers 17 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 17 POWERS OF DIRECTORS 132. General powers of directors 17 133. Specifically enumerated powers of directors 17 SOLICITORS 134. Solicitors 19 THE SEAL 135. Use of common seal 19 136. Facsimiles of common seal 19 137. Facsimile seal for use outside Nova Scotia 19 DIVIDENDS 138. Declaration of dividends 19 139. Dividends payable from profits, etc. 19 140. Declaration of amount of profits, etc., conclusive 19 141. Interim dividends 19 142. Dividends differentiated by paid-up capital 20 143. Right to set off debts against dividends 20 144. Where lien on dividends 20 145. Dividends on shares of deceased, etc. 20 146. Setting off calls and dividends 20 147. Cash dividend, dividend in kind, stock dividend, etc. 20 148. Power of directors to settle issues re dividends 20 149. Dividends on jointly registered shares 20 150. Satisfaction of dividend 20 ACCOUNTS 151. Directors' duty to keep accounts 20 152. Where books to be kept 21 153. Inspection of books by shareholders 21 154. Reports on accounts to general meeting 21 6 - vi - AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 21 156. First auditors 21 157. Directors may fill casual vacancy 21 158. Persons qualified for appointment as auditors 21 159. Removal of auditor 21 160. Remuneration 21 161. Duties of auditors 21 NOTICES 162. How notice given 21 163. Notice to shareholder without registered address 21 164. Holders of share warrants not entitled to notice 21 165. Notice to joint holders 22 166. When notice deemed given - proof of notice 22 167. Transferees bound by prior notice 22 168. Notice valid though shareholder deceased 22 169. How notice to be signed 22 170. How time to be counted 22 INDEMNITY 171. Indemnity of directors, officers, etc. 22 172. Individual liability of directors, officers, etc. 22 REMINDERS 173. Reminders to directors of obligations under Act 23 7 ARTICLES OF ASSOCIATION OF AQUA CARE WATER SOFTENING & PURIFICATION INCORPORATED INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 - 2 - 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 9 - 3 - CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other 10 - 4 - rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 11 - 5 - 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 12 - 6 - (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or 13 - 7 - (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 14 - 8 - subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 15 - 9 - 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 16 - 10 - 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 17 - 11 - 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 18 - 12 - 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 19 - 13 - 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than 10. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply 20 - 14 - to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. 21 - 15 - PRESIDENT AND VICE-PRESIDENTS 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. . 22 - 16 - (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. 23 - 17 - REGISTERS 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 24 - 18 - (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 25 - 19 - (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 26 - 20 - 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 27 - 21 - 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 28 - 22 - 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 29 - 23 - insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). 30 - 24 - Name(s) of Subscriber(s) Dated at Halifax, Nova Scotia the day of , 199 . Witness to above signature(s): - ------------------------------ Halifax, Nova Scotia EX-3.19 20 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.19 MEMORANDUM OF ASSOCIATION OF HIGH VALLEY WATER LIMITED 1. The name of the Company is High Valley Water Limited. 2. There are no restrictions on the objects and powers of the Company and the Company shall expressly have the following powers: (a) To sell or dispose of its undertaking, or a substantial part thereof; (b) To distribute any of its property in specie among its members; and (c) To amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The authorized capital of the Company is: Ten Million (10,000,000) common shares without nominal or par value. with power to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including restrictions on voting rights and including redemption and purchase of such shares, subject, however, to -the provisions of the Companies Act of Nova Scotia. EX-3.20 21 ARTICLES OF ASSOCIATION 1 Exhibit 3.20 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 2 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 3 25. Shareholder advances on unpaid shares 3 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 4 2 - ii - LIEN ON SHARES 34. Lien on shares for debts of shareholder 4 35. Sale of shares not paid up to enforce lien 4 36. Application of proceeds of shares by Company 4 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 5 42. Fee on transfer 5 43. Transfer instrument to remain with Company 5 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 5 45. Right of executor of sole shareholder 5 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 6 51. Terms of issue of new shares 6 52. New shares may be offered to existing shareholders 6 53. New capital within control of directors 6 54. Reduction of capital 6 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 7 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 7 3 - iii - CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 8 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 8 63. Securities assignable free from equities 8 64. Securities at discount, premium, with preference 8 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 9 68. Notice of meeting - Waiver of notice 9 69. Notice of two meetings for special resolution 9 70. Accidental omission of notice 9 RECORD DATES 71. Setting record dates - when no record date set 9 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 9 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 10 76. If quorum not present - dissolution or adjournment 10 77. Resolution by show of hands - demand of poll 10 78. Conduct of poll 10 79. Casting vote 10 80. Adjournment of meeting 10 81. Poll on question of adjournment, election of chairman 10 82. Effect of demand of poll on continuance of meeting 10 VOTES OF SHAREHOLDERS 83. Voting generally 10 84. Votes on transmission by death, bankruptcy, etc. 11 85. Votes of joint registered shareholders 11 86. Voting in person, by proxy, by corporate representative 11 87. Proxy requirements generally 11 88. Votes of shareholders of unsound mind 11 89. Depositing proxies before meeting 11 90. Votes by proxy after authority revoked 11 91. Form of proxy 11 92. Votes when call due on shares 12 4 - iv - 93. Resolution of directors ratified by shareholders 12 94. Resolution in writing without meeting 12 DIRECTORS 95. Number of directors - maximum and minimum 12 96. First directors 12 97. Remuneration of directors 12 98. Directors may act notwithstanding vacancy 12 99. Directors may also be officers 12 100. Vacation of office on bankruptcy, etc. 12 101. Directors' conflicts of interest 12 ELECTION OF DIRECTORS 102. Election of directors at general meeting 13 103. Retiring directors remain in office until succeeded 13 104. Number of directors elected, qualification 13 105. Removal of director 13 106. When directors may be appointed by other directors 13 MANAGING DIRECTOR 107. Authority to appoint managing director 13 108. Resignation and removal of managing director 13 109. Remuneration of managing director 13 110. Powers and duties of managing director 13 CHAIRMAN OF THE BOARD 111. Chairman of the Board 13 PRESIDENT AND VICE-PRESIDENTS 112. President 13 113. Vice-Presidents 14 SECRETARY AND TREASURER 114. Secretary 14 115. Treasurer 14 OFFICERS 116. Other officers 14 117. Same person may hold more than one office 14 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 14 119. Participation at meeting by telephone 14 120. Place of meetings - When notice required 14 121. Summoning of meetings 14 122. Questions decided by majority - casting vote - proxies 14 5 - v - 123. Chairman of directors' meetings 15 124. Authority of meeting when quorum present 15 125. Committees of directors 15 126. Proceedings of committees of directors 15 127. Effect on meeting of defectively appointed director 15 128. Resolution of directors in writing without meeting 15 129. Remuneration of directors for extra services 15 REGISTERS 130. Registers and branch registers 15 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 15 POWERS OF DIRECTORS 132. General powers of directors 16 133. Specifically enumerated powers of directors 16 SOLICITORS 134. Solicitors 17 THE SEAL 135. Use of common seal 17 136. Facsimiles of common seal 17 137. Facsimile seal for use outside Nova Scotia 18 DIVIDENDS 138. Declaration of dividends 18 139. Dividends payable from profits, etc. 18 140. Declaration of amount of profits, etc., conclusive 18 141. Interim dividends 18 142. Dividends differentiated by paid-up capital 18 143. Right to set off debts against dividends 18 144. Where lien on dividends 18 145. Dividends on shares of deceased, etc. 18 146. Setting off calls and dividends 18 147. Cash dividend, dividend in kind, stock dividend, etc. 18 148. Power of directors to settle issues re dividends 18 149. Dividends on jointly registered shares 19 150. Satisfaction of dividend 19 ACCOUNTS 151. Directors' duty to keep accounts 19 152. Where books to be kept 19 153. Inspection of books by shareholders 19 154. Reports on accounts to general meeting 19 6 - vi - AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 19 156. First auditors 19 157. Directors may fill casual vacancy 19 158. Persons qualified for appointment as auditors 19 159. Removal of auditor 19 160. Remuneration 20 161. Duties of auditors 20 NOTICES 162. How notice given 20 163. Notice to shareholder without registered address 20 164. Holders of share warrants not entitled to notice 20 165. Notice to joint holders 20 166. When notice deemed given - proof of notice 20 167. Transferees bound by prior notice 20 168. Notice valid though shareholder deceased 20 169. How notice to be signed 20 170. How time to be counted 20 INDEMNITY 171. Indemnity of directors, officers, etc. 20 172. Individual liability of directors, officers, etc. 21 REMINDERS 173. Reminders to directors of obligations under Act 21 7 ARTICLES OF ASSOCIATION OF HIGH VALLEY WATER LIMITED INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 - 2 - 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 9 - 3 - CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other 10 - 4 - rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 11 - 5 - 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 12 - 6 - (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or 13 - 7 - (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 14 - 8 - subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 15 - 9 - 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 16 - 10 - 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 17 - 11 - 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 18 - 12 - 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 19 - 13 - 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than 10. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply 20 - 14 - to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. PRESIDENT AND VICE-PRESIDENTS 21 - 15 - 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. . (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 22 - 16 - 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. REGISTERS 23 - 17 - 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 24 - 18 - (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 25 - 19 - (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 26 - 20 - 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 27 - 21 - 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 28 - 22 - 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 29 - 23 - insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). 30 - 24 - Name(s) of Subscriber(s) Dated at Halifax, Nova Scotia the day of , 199 . Witness to above signature(s): - ------------------------------ Halifax, Nova Scotia EX-3.21 22 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.21 SCHEDULE A MEMORANDUM OF ASSOCIATION OF 3003969 NOVA SCOTIA LIMITED. 1. The name of the Company is 3003969 Nova Scotia Limited. 2. There are no restrictions the objects and powers of the Company and the Company shag expressly have the following powers: (a) To sell or dispose of its undertaking, or a substantial part thereof; (b) To distribute any of its property in specie among its members; and (c) To amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The capital of the Company is: (a) 10,000 Class A common shares without par value; (b) 10,000 Class B common shares without par value; and (c) 100,000 preferred shares without par value; with power to divide the shares in the capital for the dm being into several classes and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including Restrictions on voting rights and including redemption and purchase of such shares, subject, however, to the provisions of the Companies Act of Nova Scotia. The rights, privileges, restrictions and conditions attaching to the Class A common shares, Class B common shares and preferred shares as are set out in Schedule A attached hereto. ---------------------------------- Registrar of Joint Stock Companies Dated 17th day of November, 1997 2 SCHEDULE "A" SPECIAL RIGHTS AND RESTRICTIONS PART 26 SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO CLASS A COMMON SHARES 26.1. The holders of the Class A Common shares shall be entitled to receive notice of and to attend and vote at all meetings of the shareholders of the Company and each Class A Common share shall confer upon the holder thereof the right to one vote in person or by proxy at all meetings of shareholders of the Company. 26.2. The Directors may, in their discretion, declare non-cumulative dividends to any one or more class of shareholders to the exclusion of one or more of the others. The holders of the Class A Common shares shall be entitled to such dividends as may be declared upon the Class A Common shares. 26.3. in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Class A Common shares shall, after the holders of the Preferred shares shall have received an amount equal to the Redemption Amount thereof together with any dividends declared thereon and unpaid, be entitled to participate pro rata with the holders of the Class a Common shares in the distribution of the remainder of the property and assets of the Company. PART 28 SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO CLASS B COMMON SHARES 28.1. The holders of the Class B Common shares shall be entitled' to receive notice of and to attend and vote at all meetings of the shareholders of the Company and each Class B Common share shall confer upon the holder thereof the right to one vote in person or by proxy at all meetings of shareholders of the Company. 28.2. The Directors may, in their discretion, declare non-cumulative dividends to any one or more class of shareholders to the exclusion of one or more of the others. The holders of the Class B Common shares shall be entitled to such dividends as may be declared upon the Class B Common shares. 28.3. In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Class B Common shares shall, after the holders of the Preferred shares shall have received an amount equal to the Redemption Amount thereof together with any dividends declared thereon and unpaid, be entitled to participate pro rata with the holders of the Class A Common shares in the distribution of the remainder of the property and assets of the Company. 2 3 SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO PREFERRED SHARES 27.1. The holders of the Preferred shares shall not, as such, have any voting rights for the election of Directors or for any other purpose, nor shall they be entitled to attend shareholders' meetings or to receive notice of shareholders' meetings. 27.2. The Directors may, in their discretion, declare non-cumulative dividends to any one or more class of shareholders to the exclusion of one or more of the others. The holders of the Preferred shares shall be entitled to non-cumulative dividends not exceeding the rate of eight per cent (8%) per annum on the Redemption Amount of the Preferred shares. 27.3. (a) subject to the provisions of the Companies Act, the Company may, by resolution of the Directors, redeem at any time the whole or from time to time any part of the then outstanding Preferred shares on payment for each share of the Redemption Amount thereof as hereinafter defined, together with any dividends declared thereon and unpaid. In exercising the powers conferred by this clause, notice shall be given as hereinafter provided, and the Directors by resolution may discriminate between shareholders of the Preferred shares and may redeem any part or all of the Preferred shares of one or more holder or holders without taking similar action with respect to the Preferred shares of other holders. Not less than fifteen (l5) days' notice in writing of such redemption shall be given by mailing to the registered holder of the share or shares to be redeemed specifying the date and place or places of redemption. If notice of any such redemption be given by the Company in mariner aforesaid and an amount sufficient to redeem the shares to be redeemed be deposited with any trust company or chartered bank (as specified in the notice) on or before the date fixed for redemption, the holders thereof shall thereafter have no rights against the Company in respect thereof except upon surrender of certificates for the shares being redeemed to receive payment therefor out of the moneys so deposited. (b) The Redemption Amount in respect of the Preferred shares shall be determined by the Directors of the Company at the time of the issuance of the shares, and shall be equal to the fair market value of the consideration received by the Company as consideration for the issuance of the Preferred shares. The amount determined by the Directors (hereinafter called the "Determined Value") shall be determined by resolutions of the Directors upon the issuance of any Preferred shares. On determining the Determined Value the Directors may act on whatever advice or evidence they in their absolute discretion deem necessary or advisable. (c) The Redemption Amount in respect of each Preferred share shall be determined by dividing the Redemption Amount for all the Preferred shares by the number of such shares issued. The paid-up capital of each Preferred share shall be the par value thereof. (d) Dividends shall not be paid on any other class of shares of the Company if to do so would reduce the value of the net assets of the Company to less than the total Redemption Amount of all the Preferred shares then issued and outstanding. (e) Notwithstanding the provisions of sub-articles (b) and (c) hereof, if the Minister of National Revenue, the Minister of Finance for the Province of Nova Scotia, 3 4 their authorized representative or any similar authority shall assess or reassess the Company or its shareholders to income tax or propose such an assessment or reassessment on the basis of a determination or assumption that the fair market value of the consideration received in respect of the issuance of any Preferred share or shares does not equal the Determined Value, the following adjustments shall be made: 1. for the purposes of the adjustments hereunder the fair market value of the consideration received shall be deemed to be: (i) subject to clause (iii), the fair market value of the consideration as determined by the authority making or proposing such an assessment or reassessment, provided that the Directors agree that that determination is accurate; or (ii) subject to clause (iii), where the Directors do not agree that the authority's determination is accurate, the fair market value of the consideration as determined by a qualified person whom the Directors shall appoint to make that determination forthwith following the making or proposing of such an assessment or reassessment; or (iii) where any such assessment or reassessment is the subject of an appeal to a court of competent jurisdiction, the fair market value of the consideration. as determined by that court. 2. If the fair market value determined pursuant to clause 1. is less than the Determined Value, the following adjustments shall be made forthwith following such determination to account for that deficiency: (i) if at the date of adjustment, the share in respect of the consideration transferred is issued and outstanding and still held by the original holder thereof, its Redemption Amount shall be reduced by an amount equal to the lesser of the deficiency and the amount by which the Redemption Amount of the share exceeds its par value and the Redemption Amount so adjusted shall be deemed retroactively to the date of issue of the share to have been its Redemption Amount. If more than one share in respect of the consideration transferred is issued and outstanding and still held by the original holder thereof, the reduction in the Redemption Amount shall be made pro rata; and 4 5 (ii) If the reduction made pursuant to, subclause 2.(i) is less than the total deficiency, the Redemption Amount of such other Preferred shares held by that original holder at the date of adjustment as may be selected by him shall be reduced by an amount equal to such portion of the deficiency as that original holder may determine and the Redemption Amount of such share so adjusted shall be deemed retroactively to the date of issue of that share to have been its Redemption Amount; and (iii) If the aggregate reduction made pursuant to subclasses 2.(i) and 2.(ii) is less than the total deficiency, the original holder shall make a contribution of capital to the Company equal to the balance of the deficiency. 3. If the fair market value determined pursuant to clause 1. is greater than the Determined Value, the following adjustments shall be made forthwith following such determination to account for that excess: (i) If at the date of adjustment the share in respect of the consideration transferred remains issued and outstanding and held by the original holder thereof, the Redemption Amount of that share shall be increased by the amount of the excess and the Redemption Amount so adjusted shall be deemed retroactively to the date of issue of the share to have been its Redemption Amount. If more than one share in respect of the consideration transferred is issued and outstanding and still held by the original holder thereof, the increase in the Redemption Amount shall be made pro rata; and (ii) In any other case, the Redemption Amounts of all other Preferred shares of the same class held by that original holder at the date of adjustment shall be increased by an amount equal to the excess divided by the number of such Preferred shares and the Redemption Amount of each such share shall be deemed retroactively to the date of issue to have been its Redemption Amount; and if no such shares are held by the original holder at the date of adjustment the Directors shall issue to him Preferred shares of the same class having an aggregate 5 6 Redemption Amount equal to the amount of the excess. 27.4. Subject to the provisions of the "Company Act", the Company shall, upon receiving notice as hereinafter provided from a shareholder holding Preferred shares, redeem the number of Preferred shares registered in the name of the shareholder which are specified in the notice by paying to such shareholder for each Preferred share, to be redeemed the Redemption Amount thereof as defined in Article 27.3. hereof, together with any dividends declared thereon and unpaid. Not less than twenty-one (21) days notice in writing-of such redemption shall be given to the Company by the shareholder seeking to have the Preferred shares redeemed, such notice to be delivered by mailing to the registered office of the Company specifying the number of Preferred shares to be redeemed and surrendering the necessary number of share certificates for cancellation. The Company may waive any notice required to be given under this paragraph, and such waiver, whether given before or after the redemption, shall cure any default in giving such notice. 27.5. In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the. Preferred shares shall be entitled to receive the Redemption Amount thereof together with an amount equal to any dividends declared and unpaid thereon, before any amount shall be paid or any property or assets distributed to the holders of the Common shares and upon payment of the amount so payable to them, the holders of the Preferred shares shall not be entitled to participate any further in the distribution of the remainder of the property and assets of the Company. 6 EX-3.22 23 ARTICLES OF ASSOCIATION 1 Exhibit 3.22 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once 2 SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Instalments payable by registered holder 2 10. Joint registration 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 3 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 4 25. Shareholder advances on unpaid shares 4 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 5 2 - ii - LIEN ON SHARES 34. Lien on shares for debts of shareholder 5 35. Sale of shares not paid up to enforce lien 5 36. Application of proceeds of shares by Company 5 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 6 42. Fee on transfer 6 43. Transfer instrument to remain with Company 6 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 6 45. Right of executor of sole shareholder 6 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 7 51. Terms of issue of new shares 7 52. New shares may be offered to existing shareholders 7 53. New capital within control of directors 7 54. Reduction of capital 7 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 8 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 8 3 - iii - CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 9 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 9 63. Securities assignable free from equities 9 64. Securities at discount, premium, with preference 9 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 10 68. Notice of meeting - Waiver of notice 10 69. Notice of two meetings for special resolution 10 70. Accidental omission of notice 10 RECORD DATES 71. Setting record dates - when no record date set 10 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 10 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 11 76. If quorum not present - dissolution or adjournment 11 77. Resolution by show of hands - demand of poll 11 78. Conduct of poll 11 79. Casting vote 11 80. Adjournment of meeting 11 81. Poll on question of adjournment, election of chairman 11 82. Effect of demand of poll on continuance of meeting 11 VOTES OF SHAREHOLDERS 83. Voting generally 11 84. Votes on transmission by death, bankruptcy, etc. 12 85. Votes of joint registered shareholders 12 86. Voting in person, by proxy, by corporate representative 12 87. Proxy requirements generally 12 88. Votes of shareholders of unsound mind 12 89. Depositing proxies before meeting 12 90. Votes by proxy after authority revoked 12 91. Form of proxy 12 92. Votes when call due on shares 12 4 - iv - 93. Resolution of directors ratified by shareholders 13 94. Resolution in writing without meeting 13 DIRECTORS 95. Number of directors - maximum and minimum 13 96. First directors 13 97. Remuneration of directors 13 98. Directors may act notwithstanding vacancy 13 99. Directors may also be officers 13 100. Vacation of office on bankruptcy, etc. 13 101. Directors' conflicts of interest 13 ELECTION OF DIRECTORS 102. Election of directors at general meeting 14 103. Retiring directors remain in office until succeeded 14 104. Number of directors elected, qualification 14 105. Removal of director 14 106. When directors may be appointed by other directors 14 MANAGING DIRECTOR 107. Authority to appoint managing director 14 108. Resignation and removal of managing director 14 109. Remuneration of managing director 14 110. Powers and duties of managing director 14 CHAIRMAN OF THE BOARD 111. Chairman of the Board 14 PRESIDENT AND VICE-PRESIDENTS 112. President 15 113. Vice-Presidents 15 SECRETARY AND TREASURER 114. Secretary 15 115. Treasurer 15 OFFICERS 116. Other officers 15 117. Same person may hold more than one office 15 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 15 119. Participation at meeting by telephone 15 120. Place of meetings - When notice required 15 121. Summoning of meetings 16 122. Questions decided by majority - casting vote - proxies 16 5 - v - 123. Chairman of directors' meetings 16 124. Authority of meeting when quorum present 16 125. Committees of directors 16 126. Proceedings of committees of directors 16 127. Effect on meeting of defectively appointed director 16 128. Resolution of directors in writing without meeting 16 129. Remuneration of directors for extra services 16 REGISTERS 130. Registers and branch registers 17 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 17 POWERS OF DIRECTORS 132. General powers of directors 17 133. Specifically enumerated powers of directors 17 SOLICITORS 134. Solicitors 19 THE SEAL 135. Use of common seal 19 136. Facsimiles of common seal 19 137. Facsimile seal for use outside Nova Scotia 19 DIVIDENDS 138. Declaration of dividends 19 139. Dividends payable from profits, etc. 19 140. Declaration of amount of profits, etc., conclusive 19 141. Interim dividends 19 142. Dividends differentiated by paid-up capital 20 143. Right to set off debts against dividends 20 144. Where lien on dividends 20 145. Dividends on shares of deceased, etc. 20 146. Setting off calls and dividends 20 147. Cash dividend, dividend in kind, stock dividend, etc. 20 148. Power of directors to settle issues re dividends 20 149. Dividends on jointly registered shares 20 150. Satisfaction of dividend 20 ACCOUNTS 151. Directors' duty to keep accounts 20 152. Where books to be kept 21 153. Inspection of books by shareholders 21 154. Reports on accounts to general meeting 21 6 - vi - AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 21 156. First auditors 21 157. Directors may fill casual vacancy 21 158. Persons qualified for appointment as auditors 21 159. Removal of auditor 21 160. Remuneration 21 161. Duties of auditors 21 NOTICES 162. How notice given 21 163. Notice to shareholder without registered address 21 164. Holders of share warrants not entitled to notice 21 165. Notice to joint holders 22 166. When notice deemed given - proof of notice 22 167. Transferees bound by prior notice 22 168. Notice valid though shareholder deceased 22 169. How notice to be signed 22 170. How time to be counted 22 INDEMNITY 171. Indemnity of directors, officers, etc. 22 172. Individual liability of directors, officers, etc. 22 REMINDERS 173. Reminders to directors of obligations under Act 23 7 ARTICLES OF ASSOCIATION OF 3003969 NOVA SCOTIA LIMITED INTERPRETATION 1. In these Articles, unless there be something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires; 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 - 2 - 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in instalments, every such instalment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and sever-ally liable for the payment of all instalments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any share or prescribed security of the Company. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 9 - 3 - CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by instalments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the instalment is due shall pay interest on such call or instalment at the rate of 9% per year or such other 10 - 4 - rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or instalment on or before the day appointed for payment, the directors may at any time thereafter while the call or instalment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or instalment and such interest and expenses are to be paid. The notice shall also state that in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or instalment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, instalments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 11 - 5 - 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfilment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such mariner as they think fit, but no sale shall be made until the period for the payment, fulfilment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfilment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________, ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________ 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 12 - 6 - (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Wan-ant will be entitled to attend and vote at general meetings, or 13 - 7 - (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Sham Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by- resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and instalments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 14 - 8 - subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 15 - 9 - 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 16 - 10 - 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 17 - 11 - 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 18 - 12 - 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as my proxyholder to attend and to vote for me and on my behalf at the ordinary/special adjournment thereof, or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 19 - 13 - 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than 10. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding did office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply 20 - 14 - to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. 21 - 15 - PRESIDENT AND VICE-PRESIDENTS 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice. (2) Notice of every other directors' meeting may be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting. . 22 - 16 - (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. 23 - 17 - REGISTERS 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company. (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 24 - 18 - (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 25 - 19 - (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 26 - 20 - 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, instalments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 27 - 21 - 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share wan-ant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 28 - 22 - 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 29 - 23 - insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). EX-3.23 24 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.23 SCHEDULE A MEMORANDUM OF ASSOCIATION OF CANADIAN SPRINGS WATER COMPANY LIMITED 1. The name of the Company is Canadian springs Water Company Limited. 2. There are no restrictions on the objects and powers of the Company and the Company shall expressly have the following powers: a. To sell or dispose of its undertaking, or a substantial part thereof; b. to distribute any of its property in specie among its members; and c. to amalgamate with any company or other body of persons. 3. The liability of the members is limited. 4. The capital of the Company is: d. 10,000 Class A shares; e. 100 Class B shares; f. 100,000 Class C shares; and g. 1,000 Class D shares. with power to divide the shares in the capital for the time being into several classes and to attach thereto respectively any preferred, deferred or qualified rights, privileges or conditions, including restrictions on voting rights and including redemption and purchase of such shares, subject, however, to the provisions of the Companies Act of Nova Scotia. The rights privileges, restrictions and conditions attaching to the Class A, Class B, Class C and Class D shares as are set out in Schedule A attached hereto. 2 SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO SHARES The Class "A" shares (the "Class "A" shares") shall consist of one hundred (100) Class "A" shares and shall have attached thereto the following right, privileges, restrictions and conditions: 1. Dividends 1.01. In each year at the discretion of the directors, dividends may be paid on the Class "A" shares out of all profits or surpluses available for distribution; 1.02. Dividends must not be paid on the Class "A" shares if to do so would reduce the value of the net assets of the Company to less than the aggregate of the redemption amount of the issued Class "C" and Class "D" shares; 1.03. Dividends may be paid on one class of shares entitled to dividends to the exclusion of any other class of shares entitled to dividends; 2. Voting Powers 2.01. The holders of the Class "A" shares are not entitled to vote at any meeting of the shareholders of the Company and they are not entitled to receive notice of or attend any meetings of the shareholders of the Company; 3. Liquidation, Dissolution or Winding-Up 3.01. In the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon distribution of the assets of the Company among its members for the purpose of winding-up its affairs or upon a reduction or return of its capital the holders of the Class "A" shares shall be entitled to receive all profits and assets of the Company remaining after the Class "C" and "D" shares have received their redemption amount and after the Class "B" shares have received their paid up capital; 4. Redemption by the Corporation 4.01. The Class "A" shares are not redeemable; 5. Retraction by the Shareholder 5.01. The Class "A" shares are not retractable; 3 The Class "B" shares (the "Class "B" shares") shall consist of one hundred (100) Class "B" shares and shall have attached thereto the following right, privileges, restrictions, and conditions: 1. Dividends 1.01. The holders of the Class "B" shares are not entitled to any payment of dividends on such shares; 2. Voting Powers 2.01. At all meetings of the shareholders of the Company the holders of the Class "B" shares are entitled to one vote for each Class B" share held; 3. Liquidation, Dissolution or Winding-Up 3.01. In the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon distribution of the assets of the Company among its members for the purpose of winding-up its affairs or upon a reduction or return of its capital the holders of the Class "B" shares shall be entitled to receive their paid up capital after the Class "C" and "d" shares have received their redemption amount; 4. Redemption by the Corporation 4.01. The Class "B" shares are not redeemable; 5. Retraction by the Shareholder 5.01. The Class "B" shares are not retractable; The Class "C" shares (the "Class "C" shares") shall consist of one million (1,000,000) Class "C" shares and shall have attached thereto the following rights, privileges, restrictions and conditions: 1. Dividends 1.01. If any year, the Company ceases to be a "small business corporation" as that term is defined in the Income Tax Act (Canada) (the "Act") so that the holder of the Class "C" shares would otherwise be deemed to receive an interest benefit under section 74.4 of that Act, then at the discretion of the directors dividends may be paid on the Class C" shares out of all profits or surpluses available for distribution but such dividends may not exceed 4/5 of the amount equal to the deemed interest benefit that would otherwise arise under section 74.4; 4 2. Voting Powers 2.01. The holders of the Class "C" shares are not entitled to vote at any meeting of the shareholders of the Company and they are not entitled to receive notice of or attend any meetings of the shareholders of the Company; 3. Liquidation, Dissolution or Winding-Up 3.01. In the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon distribution of the assets of the Company among its members for the purpose of winding-up its affairs or upon a reduction or return of its capital the holders of the Class "C" shares shall be entitled to receive their redemption amount before any amount is distributed to other shareholders; 4. Redemption by the Corporation 4.01. The Class "C" shares are redeemable; 4.02. The Company may redeem the whole or any number of the issued Class "C" shares on payment for each share to be redeemed of the redemption amount and no more provided however that not less than 21 days notice in writing of such redemption is given by mailing such notice to the registered holders of the shares to be redeemed specifying a date and place or places of redemption unless the holders of the shares to be redeemed waive any notice required to be given under this paragraph which waiver, whether given before or after the redemption, will cure any default in giving such notice and if notice as required of any redemption be given by the Company and an amount sufficient to redeem the shares be deposited with any trust company or chartered bank of Canada as specified in any notice given, on or before the date fixed for redemption, the holders thereof will thereafter have no rights against the Company in respect of such shares except upon the surrender of certificates for such shares to receive payment for them out of the monies so deposited; 4.03. For greater certainty the Company may redeem Class "C" shares and not Class "D" shares or may redeem Class "D" shares and not Class "C" shares and notwithstanding anything in these Articles to the contrary, if not all of the outstanding shares of any class are to be redeemed, the shares to be redeemed may be selected either in proportion to the number of shares registered in the name of each shareholder or from every or any particular holder of shares of that class; 4.04. If a part only of the shares of any class represented by any certificate are to be redeemed then a new certificate representing the shares which are not to be redeemed shall be issued at the expense of the Company; 5 4.05. No shares of any particular class may be redeemed if to do so would reduce the value of the net assets of the Company to less than the aggregate of the redemption amount of all issued shares of all other classes which have rights on liquidation in priority to the rights of the class of t he shares to be redeemed; 5. Retraction by the Shareholder 5.01. The Class "C" shares are retractable; 5.02. Subject to the provisions of the Companies Act , the Company will, upon receiving notice from a shareholder holding Class "C" shares, redeem the number of Class "C" shares registered in the name of the shareholders which are specified in the notice by paying to such shareholder for each Class "C" share to be redeemed the redemption amount of the share and no more provided however that not less than 21 days notice in writing of such redemption must be given to the Company by the shareholder seeking to have the Class "C" shares redeemed, such notice to be delivered by mailing to the registered office of the Company a notice specifying the number of Class "C" shares to be redeemed and surrendering the necessary number of share certificates for cancellation unless the Company waives any notice required to be given under this paragraph which waiver, whether given before or after the redemption, cures any default in giving such notice; and notwithstanding anything in the Articles to the contrary, any redemption of shares by the Company upon receipt of a retraction notice from any member holding Class "C" shares need not be made on a pro rata basis among every member who holds shares of the class to be redeemed. 6. Additional Special Rights and Restrictions 6.01. The Class "C" shares will only be issued as consideration for the acquisition of property by the Company in circumstances where the transferor of such property and the Company have agreed to elect to effect the transfer of such property pursuant to the provisions of section 85 of the Income Tax Act (Canada); 6.02. The aggregate redemption amount of the Class "C" shares issued in connection with a purchase and sale transaction to which section 85 applies will be the amount by which: (i) the aggregate fair market value of all the property acquired by the Company in the transaction to which section 85 applies and in respect of which the Class "C" shares were issued. exceeds 6 (ii) the aggregate fair market value of all the consideration (other than any Class "C" shares in the Company or a right to receive any such shares) received from the Company by the transferor of such property. as determined by the directors of the Company at the time of the issuance of the Class "C" shares, provided that the directors may, in accordance with the terms of any agreement between the Company and the holders of Class "C" shares, amend from time-to-time their determination of the aggregate redemption amount of the Class "C" shares after the time of the issuance of such shares; 6.03. The redemption amount of each Class "C" share issued in connection with a purchase and sale transaction to which section 85 applies will be determined by dividing the aggregate redemption amount for the class by the number of shares of the class issued in respect of such transaction; 6.04. Class "C" shares shall only be issued in respect of a purchase and sale transaction to which section 85 applies if no other Class "C" shares are outstanding in respect of any other purchase and sale transaction to which section 85 applies; and 6.05. the paid-up capital of each Class "C" share is its par value. The Class "D" shares (the "Class "D" shares") shall consist of one million (1,00,000) Class "D" shares and shall have attached thereto the following rights, privileges, restrictions and conditions: 1. Dividends 1.01. The holders of the Class "D" shares are not entitled to any payment of dividends on such shares; 2. Voting Powers 2.01. The holders of the Class "D" shares are not entitled to vote at any meeting of the shareholders of the Company and they are not entitled to receive notice of or attend any meetings of the shareholders of the Company; 3. Liquidation, Dissolution or Winding-Up 3.01. In the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or upon distribution of the assets of the Company among its members for the purpose of winding-up its affairs or, upon a reduction or return of its capital the holders of the Class "D" shares shall be entitled to receive their redemption amount but only after the Class "C" shares have received their redemption amount. 7 4. Redemption by the Corporation 4.01. The Class "D" shares are redeemable; 4.02. The Company may redeem the whole or any number of the issued Class "D" shares on payment for each share to be redeemed of the redemption amount and no more provided however that not less than 21 days notice in writing of such redemption is given by mailing such notice to the registered holders of the shares to be redeemed specifying a date and place or places of redemption unless the holders of the shares to be redeemed waive any notice required to be given under this paragraph which waiver, whether given before or after the redemption, will cure any default in giving such notice and if notice as required of any redemption be given by the Company and an amount sufficient to redeem the shares be deposited with any trust company or chartered bank of Canada as specified in any notice given, on or before the date fixed for redemption, the holders thereof will thereafter have no rights against the Company in respect of such shares except upon the surrender of certificates for such shares to receive payment for them out of the monies so deposited; 4.03. For greater certainty the Company may redeem Class "C" shares and not Class "D" shares or may redeem Class "D" shares and not Class "C" shares and notwithstanding anything in these Articles to the contrary, if not all of the outstanding shares of any class are to be redeemed, the shares to be redeemed may be selected in such manner as the directors determine and need not be selected either in proportion to the number of shares registered in the name of each shareholder or from every or any particular holder of shares of that class; 4.04. If a part only of the shares of any class represented by any certificate are to be redeemed then a new certificate representing the shares which are not to be redeemed shall be issued at the expense of the Company; 4.05. No shares of any particular class may be redeemed if to do so would reduce the value of the net assets of the Company to less than the aggregate of the redemption amount of all issued shares of all other classes which have rights on liquidation in priority to the rights of the class of the shares to be redeemed; 5. Retraction by the Shareholder 5.01. The Class "D" shares are retractable; 5.02. Subject to the provisions of the Companies Act, the Company will, upon receiving notice from a shareholder holding Class "D" shares, redeem the number of Class "D" shares registered in the name of the shareholders which are specified in the notice by paying to such shareholder for each Class "D": share to be redeemed the redemption amount of the share and no more provided however that not less than 8 21 days notice in writing of such redemption must be given to the Company by the shareholder seeking to have the Class "D" shares redeemed, such notice to be delivered by mailing to the registered office of the Company a notice specifying the number of Class "D" shares to be redeemed and surrendering the necessary number of share certificates for cancellation unless the Company waives any notice required to be given under this paragraph which waiver, whether given before or after the redemption, cures any default in giving such notice; and notwithstanding anything in these Articles to the contrary, any redemption of shares by the Company upon receipt of a retraction notice from any member holding Class "D" sharers need not be made on a pro rata basis among every member who holds shares of the class to be redeemed. 6. Additional Special Rights and Restrictions 6.01. the paid-up capital of each Class "D" share is its par value; and 6.02. The redemption amount of each Class "D" share is $100.00. EX-3.24 25 ARTICLES OF ASSOCIATION 1 Exhibit 3.24 TABLE OF CONTENTS TO ARTICLES OF ASSOCIATION Article Description Page - ------- ----------- ---- 1. Interpretation 1 2. Table A not to apply 1 3. Pre-Incorporation Agreement 1 4. Payment of expenses of Incorporation, etc. 1 5. May commence business at once 1 SHARES 6. Shares under control of directors 2 7. Commission on subscription 2 8. Amount and timing of calls, etc. 2 9. Installments payable by registered holder 2 10. Joint registration of shares 2 11. Liability of joint holders - survivor only recognized 2 12. Registered holder treated as absolute owner 2 13. Private company 2 CERTIFICATES 14. Share certificates 2 15. Entitlement to share certificate 3 16. Certificate issued to joint holders 3 17. Worn out, defaced or lost certificates 3 18. Fee for certificate 3 19. Branch registers 3 CALLS 20. Directors may make calls 3 21. When calls deemed made 3 22. Notice of call - timing and contents 3 23. Interest on unpaid call 3 24. Resolution making call conclusive evidence 3 25. Shareholder advances on unpaid shares 3 FORFEITURE OF SHARES 26. Notice before forfeiture 4 27. Contents of notice 4 28. Forfeiture when notice not complied with 4 29. Notice of forfeiture resolution, register entry 4 30. Forfeited share becomes property of Company 4 31. Annulment of forfeiture, etc. 4 32. Liability of shareholder to pay call after forfeiture 4 33. Certificate of forfeiture conclusive evidence 4 2 -ii- LIEN ON SHARES 34. Lien on shares for debts of shareholder 4 35. Sale of shares not paid up to enforce lien 4 36. Application of proceeds of shares by Company 4 VALIDITY OF SALES 37. Validity of sale on forfeiture or to enforce lien 5 TRANSFER OF SHARES 38. How transfer effected 5 39. Form of transfer instrument 5 40. Directors may decline to register transfer 5 41. Delivery of transfer for registration 5 42. Fee on transfer 5 43. Transfer instrument to remain with Company 5 TRANSMISSION OF SHARES 44. Executors of deceased recognized as holder 5 45. Right of executor of sole shareholder 5 46. Transmission of shares on death, bankruptcy 6 SURRENDER OF SHARES 47. Surrender of shares in compromise 6 SHARE WARRANTS 48. Issue of Share Warrants 6 49. Conditions under which Share Warrants issued 6 INCREASE AND REDUCTION OF CAPITAL 50. Increase of capital 6 51. Terms of issue of new shares 6 52. New shares may be offered to existing shareholders 6 53. New capital within control of directors 6 54. Reduction of capital 6 ALTERATION OF CAPITAL 55. Altering capital by ordinary resolution 7 56. Altering capital by special resolution 7 57. Redemption and purchase of shares 7 INTEREST ON SHARE CAPITAL 58. When share capital may bear interest 7 3 -iii- CLASSES AND SERIES OF SHARES 59. Shares with preferred, deferred or special rights 8 MEETINGS AND VOTING BY CLASS OR SERIES 60. Procedure, etc. for class vote 8 61. Restrictions on separate class and series votes 8 BORROWING POWERS 62. Directors' authority to borrow, give security, guarantee 8 63. Securities assignable free from equities 8 64. Securities at discount, premium, with preference 8 GENERAL MEETINGS 65. Ordinary general meetings 9 66. Special general meetings - how called 9 67. Contents of requisition 9 68. Notice of meeting - Waiver of notice 9 69. Notice of two meetings for special resolution 9 70. Accidental omission of notice 9 RECORD DATES 71. Setting record dates - when no record date set 9 PROCEEDINGS AT GENERAL MEETINGS 72. Business of ordinary general meeting 9 73. Quorum prerequisite to holding meeting 10 74. Requirements for quorum 10 75. Chairman of meeting 10 76. If quorum not present - dissolution or adjournment 10 77. Resolution by show of hands - demand of poll 10 78. Conduct of poll 10 79. Casting vote 10 80. Adjournment of meeting 10 81. Poll on question of adjournment, election of chairman 10 82. Effect of demand of poll on continuance of meeting 10 VOTES OF SHAREHOLDERS 83. Voting generally 10 84. Votes on transmission by death, bankruptcy, etc. 11 85. Votes of joint registered shareholders 11 86. Voting in person, by proxy, by corporate representative 11 87. Proxy requirements generally 11 88. Votes of shareholders of unsound mind 11 89. Depositing proxies before meeting 11 90. Votes by proxy after authority revoked 11 91. Form of proxy 11 92. Votes when call due on shares 12 4 -iv- 93. Resolution of directors ratified by shareholders 12 94. Resolution in writing without meeting 12 DIRECTORS 95. Number of directors - maximum and minimum 12 96. First directors 12 97. Remuneration of directors 12 98. Directors may act notwithstanding vacancy 12 99. Directors may also be officers 12 100. Vacation of office on bankruptcy, etc. 12 101. Directors' conflicts of interest 12 ELECTION OF DIRECTORS 102. Election of directors at general meeting 13 103. Retiring directors remain in office until succeeded 13 104. Number of directors elected, qualification 13 105. Removal of director 13 106. When directors may be appointed by other directors 13 MANAGING DIRECTOR 107. Authority to appoint managing director 13 108. Resignation and removal of managing director 13 109. Remuneration of managing director 13 110. Powers and duties of managing director 13 CHAIRMAN OF THE BOARD 111. Chairman of the Board 13 PRESIDENT AND VICE-PRESIDENTS 112. President 13 113. Vice-Presidents 14 SECRETARY AND TREASURER 114. Secretary 14 115. Treasurer 14 OFFICERS 116. Other officers 14 117. Same person may hold more than one office 14 PROCEEDINGS OF DIRECTORS 118. Meetings of directors - quorum requirement 14 119. Participation at meeting by telephone 14 120. Place of meetings - When notice required 14 121. Summoning of meetings 14 122. Questions decided by majority - casting vote - proxies 14 5 -v- 123. Chairman of directors' meeting 15 124. Authority of meeting when quorum present 15 125. Committees of directors 15 126. Proceedings of committees of directors 15 127. Effect on meeting of defectively appointed director 15 128. Resolution of directors in writing without meeting 15 129. Remuneration of directors for extra services 15 REGISTERS 130. Registers and branch registers 15 MINUTES 131. Minutes and Minutes books - minutes prima facie evidence 15 POWERS OF DIRECTORS 132. General powers of directors 16 133. Specifically enumerated powers of directors 16 SOLICITORS 134. Solicitors 17 THE SEAL 135. Use of common seal 17 136. Facsimiles of common seal 17 137. Facsimile seal for use outside Nova Scotia 18 DIVIDENDS 138. Declaration of dividends 18 139. Dividends payable from profits, etc. 18 140. Declaration of amount of profits, etc., conclusive 18 141. Interim dividends 18 142. Dividends differentiated by paid-up capital 18 143. Right to set off debts against dividends 18 144. Where lien on dividends 18 145. Dividends on shares of deceased, etc. 18 146. Setting off calls and dividends 18 147. Cash dividend, dividend in kind, stock dividend, etc. 18 148. Power of directors to settle issues re dividends 18 149. Dividends on jointly registered shares 19 150. Satisfaction of dividend 19 ACCOUNTS 151. Directors' duty to keep accounts 19 152. Where books to be kept 19 153. Inspection of books by shareholders 19 154. Reports on accounts to general meeting 19 6 -vi- AUDITORS AND AUDIT 155. Appointment of auditors at ordinary general meeting 19 156. First auditors 19 157. Directors may fill casual vacancy 19 158. Persons qualified for appointment as auditors 19 159. Removal of auditor 19 160. Remuneration 20 161. Duties of auditors 20 NOTICES 162. How notice given 20 163. Notice to shareholder without registered address 20 164. Holders of share warrants not entitled to notice 20 165. Notice to joint holders 20 166. When notice deemed given - proof of notice 20 167. Transferees bound by prior notice 20 168. Notice valid though shareholder deceased 20 169. How notice to be signed 20 170. How time to be counted 20 INDEMNITY 171. Indemnity of directors, officers, etc. 20 172. Individual liability of directors, officers, etc. 21 REMINDERS 173. Reminders to directors of obligations under Act 21 7 ARTICLES OF ASSOCIATION OF CANADIAN SPRINGS WATER COMPANY LIMITED INTERPRETATION 1. In these Articles, unless there is something in the subject or context inconsistent therewith: (1) "Act" means the Companies Act (Nova Scotia); (2) "Articles" means these Articles of Association of the Company and all amendments hereto; (3) "Company" means the company named above; (4) "director" means a director of the Company; (5) "Memorandum" means the Memorandum of Association of the Company and all amendments thereto; (6) "month" means calendar month; (7) "Office" means the registered office of the Company; (8) "person" includes a body corporate; (9) "proxyholder" includes an alternate proxyholder; (10) "Register" means the register of members kept pursuant to the Act, and where the context permits includes a branch register of members; (11) "Registrar" means the Registrar as defined in the Act; (12) "Secretary" includes any person appointed to perform the duties of the Secretary temporarily; (13) "shareholder" means member as that term is used in the Act in connection with a company limited by shares; (14) "special resolution" has the meaning assigned by the Act; (15) "in writing" and "written" includes printing, lithography and other modes of representing or reproducing words in visible form; (16) words importing number or gender include all numbers and genders unless the context otherwise requires. 2. The regulations in Table A in the First Schedule to the Act shall not apply to the Company. 3. The directors may enter into and carry into effect or adopt and carry into effect any agreement made by the promoters of the Company on behalf of the Company and may agree to any modification in the terms of any such agreement, either before or after its execution 4. The directors may, out of the funds of the Company, pay all expenses incurred for the incorporation and organization of the Company. 8 -2- 5. The Company may commence business as soon after incorporation as the directors think fit, notwithstanding that part only of the shares has been allotted. SHARES 6. The directors shall control the shares and, subject to the provisions of these Articles, may allot or otherwise dispose of them to such person, at such times, on such terms and conditions and, if the shares have a par value, either at a premium or at par, as they think fit. 7. The directors may pay on behalf of the Company a reasonable commission to any person in consideration of subscribing or agreeing to subscribe (whether absolutely or conditionally) for any shares in the Company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for any shares in the Company. Subject to the Act, the commission may be paid or satisfied in shares of the Company. 8. On the issue of shares the Company may arrange among the holders thereof differences in the calls to be paid and in the times for their payment. 9. If the whole or part of the allotment price of any shares is, by the conditions of their allotment, payable in installments, every such installment shall, when due, be payable to the Company by the person who is at such time the registered holder of the shares. 10. Shares may be registered in the names of joint holders not exceeding three in number. 11. Joint holders of a share shall be jointly and severally liable for the payment of all installments and calls due in respect of such share. On the death of one or more joint holders of shares the survivor or survivors of them shall alone be recognized by the Company as the registered holder or holders of the shares. 12. Save as herein otherwise provided, the Company may treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or required by statute, be bound to recognize any equitable or other claim to or interest in such share on the part of any other person. 13. The Company is a private company, and: (1) no transfer of any share or prescribed security of the Company shall be effective unless or until approved by the directors; (2) the number of holders of issued and outstanding prescribed securities or shares of the Company, exclusive of persons who are in the employment of the Company or in the employment of an affiliate of the Company and exclusive of persons who, having been formerly in the employment of the Company or the employment of an affiliate of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one prescribed security or share of the Company, shall not exceed 50 in number, two or more persons or companies who are the joint registered owners of one or more prescribed securities or shares being counted as one holder; and (3) the Company shall not invite the public to subscribe for any of its securities. In this Article, "private company" and "securities" have the meanings ascribed to those terms in the Securities Act (Nova Scotia), and "prescribed security" means any of the securities prescribed by the Nova Scotia Securities Commission from time to time for the purpose of the definition of "private company" in the Securities Act (Nova Scotia). 9 -3- CERTIFICATES 14. Certificates of title to shares shall comply with the Act and may otherwise be in such form as the directors may from time to time determine. Unless the directors otherwise determine, every certificate of title to shares shall be signed manually by at least one of the Chairman, President, Secretary, Treasurer, a vice-president, an assistant secretary, any other officer of the Company or any director of the Company or by or on behalf of a share registrar, transfer agent or branch transfer agent appointed by the Company or by any other person whom the directors may designate. When signatures of more than one person appear on a certificate all but one may be printed or otherwise mechanically reproduced. All such certificates when signed as provided in this Article shall be valid and binding upon the Company. If a certificate contains a printed or mechanically reproduced signature of a person, the Company may issue the certificate, notwithstanding that the person has ceased to be a director or an officer of the Company, and the certificate is as valid as if such person were a director or an officer at the date of its issue. Any certificate representing shares of a class publicly traded on any stock exchange shall be valid and binding on the Company if it complies with the rules of such exchange whether or not it otherwise complies with this Article. 15. Except as the directors may determine, each shareholder's shares may be evidenced by any number of certificates so long as the aggregate of the shares stipulated in such certificates equals the aggregate registered in the name of the shareholder. 16. Where shares are registered in the names of two or more persons, the Company shall not be bound to issue more than one certificate or set of certificates, and such certificate or set of certificates shall be delivered to the person first named on the Register. 17. Any certificate that has become worn, damaged or defaced may, upon its surrender to the directors, be cancelled and replaced by a new certificate. Any certificate that has become lost or destroyed may be replaced by a new certificate upon proof of such loss or destruction to the satisfaction of the directors and the furnishing to the Company of such undertakings of indemnity as the directors deem adequate. 18. The sum of one dollar or such other sum as the directors from time to time determine shall be paid to the Company for every certificate other than the first certificate issued to any holder in respect of any share or shares. 19. The directors may cause one or more branch Registers of shareholders to be kept in any place or places, whether inside or outside of Nova Scotia. CALLS 20. The directors may make such calls upon the shareholders in respect of all amounts unpaid on the shares held by them respectively and not made payable at fixed times by the conditions on which such shares were allotted, and each shareholder shall pay the amount of every call so made to the person and at the times and places appointed by the directors. A call may be made payable by installments. 21. A call shall be deemed to have been made at the time when the resolution of the directors authorizing such call was passed. 22. At least 14 days' notice of any call shall be given, and such notice shall specify the time and place at which and the person to whom such call shall be paid. 23. If the sum payable in respect of any call or installment is not paid on or before the day appointed for the payment thereof, the holder for the time being of the share in respect of which the call has been made or the installment is due shall pay interest on such call or installment at the rate of 9% per year or such other 10 -4- rate of interest as the directors may determine from the day appointed for the payment thereof up to the time of actual payment. 24. At the trial or hearing of any action for the recovery of any amount due for any call, it shall be sufficient to prove that the name of the shareholder sued is entered on the Register as the holder or one of the holders of the share or shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book and that such notice of such call was duly given to the shareholder sued in pursuance of these Articles. It shall not be necessary to prove the appointment of the directors who made such call or any other matters whatsoever and the proof of the matters stipulated shall be conclusive evidence of the debt. 25. The directors may receive from any shareholder willing to advance it all or any part of the amount due upon shares held by such shareholder beyond the sums called for; and upon the amount so paid or satisfied in advance or so much thereof as from time to time exceeds the amount of the calls then made upon the shares in respect of which such advance has been made the Company may pay interest at such rate or permit such participation in profits upon the amount so paid or satisfied in advance as the shareholder paying such sum in advance and the directors agree. FORFEITURE OF SHARES 26. If any shareholder fails to pay any call or installment on or before the day appointed for payment, the directors may at any time thereafter while the call or installment remains unpaid serve a notice on such shareholder requiring payment thereof together with any interest that may have accrued and all expenses that may have been incurred by the Company by reason of such non-payment. 27. The notice shall name a day (not being less than 14 days after the date of the notice) and a place or places on and at which such call or installment and such interest and expenses are to be paid. The notice shall also state that, in the event of non-payment on or before the day and at the place or one of the places so named, the shares in respect of which the call was made or installment is payable will be liable to be forfeited. 28. If the requirements of any such notice are not complied with, any shares in respect of which such notice has been given may at any time thereafter, before payment of all calls or installments, interest and expenses due in respect thereof, be forfeited by a resolution of the directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture. 29. When any share has been so forfeited, notice of the resolution shall be given to the shareholder in whose name it stood immediately prior to the forfeiture and an entry of the forfeiture shall be made in the Register. 30. Any share so forfeited shall be deemed the property of the Company and the directors may sell, re-allot or otherwise dispose of it in such manner as they think fit. 31. The directors may at any time before any share so forfeited has been sold, re-allotted or otherwise disposed of, annul the forfeiture thereof upon such conditions as they think fit. 32. Any shareholder whose shares have been forfeited shall nevertheless be liable to pay and shall forthwith pay to the Company all calls, installments, interest and expenses owing upon or in respect of such shares at the time of the forfeiture together with interest thereon at the rate of 9% per year or such other rate of interest as the directors may determine from the time of forfeiture until payment. The directors may enforce such payment if they think fit, but are under no obligation to do so. 11 -5- 33. A certificate signed by the Secretary stating that a share has been duly. forfeited on a specified date in pursuance of these Articles and the time when it was forfeited shall be conclusive evidence of the facts therein stated as against any person who would have been entitled to the share but for such forfeiture. LIEN ON SHARES 34. The Company shall have a first and paramount lien upon all shares (other than fully paid-up shares) registered in the name of a shareholder (whether solely or jointly with others) and upon the proceeds from the sale thereof for debts, liabilities and other engagements of the shareholder, solely or jointly with any other person, to or with the Company, whether or not the period for the payment, fulfillment or discharge thereof has actually arrived, and such lien shall extend to all dividends declared in respect of such shares. Unless otherwise agreed, the registration of a transfer of shares shall operate as a waiver of any lien of the Company on such shares. 35. For the purpose of enforcing such lien the directors may sell the shares subject to it in such manner as they think fit, but no sale shall be made until the period for the payment, fulfillment or discharge of such debts, liabilities or other engagements has arrived, and until notice in writing of the intention to sell has been given to such shareholder or the shareholder's executors or administrators and default has been made by them in such payment, fulfillment or discharge for seven days after such notice. 36. The net proceeds of any such sale after the payment of all costs shall be applied in or towards the satisfaction of such debts, liabilities or engagements and the residue, if any, paid to such shareholder. VALIDITY OF SALES 37. Upon any sale after forfeiture or to enforce a lien in purported exercise of the powers given by these Articles the directors may cause the purchaser's name to be entered in the Register in respect of the shares sold, and the purchaser shall not be bound to see to the regularity of the proceedings or to the application of the purchase money, and after the purchaser's name has been entered in the Register in respect of such shares the validity of the sale shall not be impeached by any person and the remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively. TRANSFER OF SHARES 38. The instrument of transfer of any share in the Company shall be signed by the transferor. The transferor shall be deemed to remain the holder of such share until the name of the transferee is entered in the Register in respect thereof and shall be entitled to receive any dividend declared thereon before the registration of the transfer. 39. The instrument of transfer of any share shall be in writing in the following form or to the following effect: For value received, _______ hereby sell, assign, and transfer unto ________ ______ shares in the capital of the Company represented by the within certificate, and do hereby irrevocably constitute and appoint ____________ attorney to transfer such shares on the books of the Company with full power of substitution in the premises. Dated the __ day of _________, 19__ Witness: 40. The directors may, without assigning any reason therefor, decline to register any transfer of shares (1) not fully paid-up or upon which the Company has a lien, or 12 -6- (2) the transfer of which is restricted by any agreement to which the Company is a party. 41. Every instrument of transfer shall be left for registration at the Office of the Company, or at any office of its transfer agent where a Register is maintained, together with the certificate of the shares to be transferred and such other evidence as the Company may require to prove title to or the right to transfer the shares. 42. The directors may require that a fee determined by them be paid before or after registration of any transfer. 43. Every instrument of transfer shall, after its registration, remain in the custody of the Company. Any instrument of transfer that the directors decline to register shall, except in case of fraud, be returned to the person who deposited it. TRANSMISSION OF SHARES 44. The executors or administrators of a deceased shareholder (not being one of several joint holders) shall be the only persons recognized by the Company as having any title to the shares registered in the name of such shareholder. When a share is registered in the names of two or more joint holders, the survivor or survivors or the executors or administrators of the deceased survivor, shall be the only persons recognized by the Company as having any title to, or interest in, such share. 45. Notwithstanding anything in these Articles, if the Company has only one shareholder (not being one of several joint holders) and that shareholder dies, the executors or administrators of the deceased shareholder shall be entitled to register themselves in the Register as the holders of the shares registered in the name of the deceased shareholder whereupon they shall have all the rights given by these Articles and by law to shareholders 46. Any person entitled to shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer, upon producing such evidence of entitlement as the directors require, may be registered as a shareholder in respect of such shares, or may, without being registered, transfer such shares subject to the provisions of these Articles respecting the transfer of shares. The directors shall have the same right to refuse registration as if the transferee were named in an ordinary transfer presented for registration. SURRENDER OF SHARES 47. The directors may accept the surrender of any share by way of compromise of any question as to the holder being properly registered in respect thereof. Any share so surrendered may be disposed of in the same manner as a forfeited share. SHARE WARRANT 48. The Company, with respect to any fully paid-up shares, may issue warrants ("Share Warrants") stating that the bearer is entitled to the shares therein specified, and may provide, by coupons or otherwise, for the payment of future dividends on the shares included in the Share Warrants. 49. The directors may determine and vary the conditions upon which Share Warrants will be issued and, without limiting the generality of the foregoing, may determine the conditions upon which (1) a new Share Warrant or coupon will be issued in the place of one worn out, defaced, lost or destroyed, or (2) the bearer of a Share Warrant will be entitled to attend and vote at general meetings, or 13 -7- (3) a Share Warrant may be surrendered and the name of the bearer entered in the Register in respect of the shares therein specified. Subject to such conditions and to these Articles the bearer of a Share Warrant shall be a shareholder to the full extent. The bearer of a Share Warrant shall be subject to the conditions for the time being in force, whether made before or after the issue of the Share Warrant. INCREASE AND REDUCTION OF CAPITAL 50. Subject to the Act, the Company may by resolution of its shareholders increase its share capital by the creation of new shares of such amount as it thinks expedient. 51. Subject to the Act, the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached thereto as the Company by resolution of its shareholders determines or, if no direction is given, as the directors determine. 52. The Company by resolution of its shareholders may, before the issue of any new shares, determine that such shares or any of them shall be offered in the first instance to all the then shareholders or to the holders of any class or series of shares in proportion to the amount of the capital held by them, or make any other provisions as to the issue and allotment of such shares. In default of any such determination or to the extent that it does not apply, the directors shall control the new shares. 53. Except as otherwise provided by the conditions of issue , or by these Articles, any capital raised by the creation of new shares shall be considered part of the original capital and shall be subject to the provisions herein contained with reference to payment of calls and installments, transfer and transmission, forfeiture, lien and otherwise. 54. The Company may, by special resolution where required, reduce its share capital in any way and with and subject to any incident authorized and consent required by law. ALTERATION OF CAPITAL 55. Subject to the Act, the Company may by resolution of its shareholders: (1) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (2) convert all or any of its paid-up shares into stock and reconvert that stock into paid-up shares of any denomination; (3) exchange shares of one denomination for another; or (4) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled. 56. Subject to the Act, the Company may by special resolution: (1) subdivide its shares. or any of them, into shares of smaller amount than is fixed by the Memorandum, so, however, that in the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived and the special resolution whereby any share is subdivided may determine that as between the holders of the shares resulting from such 14 -8- subdivision, one or more of such shares shall have some preference or special advantage as regards dividend, capital, voting or otherwise, over, or as compared with, the others or other; (2) convert any part of its issued or unissued share capital into preference shares redeemable or purchasable by the Company; (3) provide for the issue of shares without any nominal or par value provided that, upon any such issue, a declaration executed by the Secretary must be filed with the Registrar stating the number of shares issued and the amount received therefor; (4) convert all or any of its previously authorized, unissued or issued, fully paid-up shares, other than preferred shares, with nominal or par value into the same number of shares without any nominal or par value, and reduce, maintain or increase accordingly its liability on any of its shares so converted; provided that the power to reduce its liability on any of its shares so converted may, where it results in a reduction of capital, only be exercised subject to confirmation by the court as provided by the Act; or (5) convert all or any of its previously authorized, unissued or issued, fully paid-up shares without nominal or par value into the same or a different number of shares with nominal or par value, and for such purpose the shares issued without nominal or par value and replaced by shares with a nominal or par value shall be considered as fully paid, but their aggregate par value shall not exceed the value of the net assets of the Company as represented by the shares without par value issued before the conversion. 57. Subject to the Act and any provisions attached to such shares, the Company may redeem, purchase or acquire any of its shares and the directors may determine the manner and the terms for redeeming, purchasing or acquiring such shares and may provide a sinking fund on such terms as they think fit for the redemption, purchase or acquisition of shares of any class or series. INTEREST ON SHARE CAPITAL 58. The Company may pay interest at a rate not exceeding 6% per year on share capital issued and paid-up for the purpose of raising funds to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be operated profitably for a lengthy period of time. Such interest may be paid for such period and may-be charged to capital as part of the cost of construction of the work or building or of the provision of the plant. The payment of the interest shall not operate to reduce the amount paid-up on the shares in respect of which it is paid. The accounts of the Company shall show full particulars of the payment during the period to which the accounts relate. CLASSES AND SERIES OF SHARES 59. Subject to the Act and the Memorandum, and without prejudice to any special rights previously conferred on the holders of existing shares, any share may be issued with such preferred, deferred or other special rights, or with such restrictions, whether in regard to dividends, voting, return of share capital or otherwise, as the Company may from time to time determine by special resolution. MEETINGS AND VOTING BY CLASS OR SERIES 60. Where the holders of shares of a class or series have, under the Act, the Memorandum, the terms or conditions attaching to such shares or otherwise, the right to vote separately as a class in respect of any matter then, except as provided in the Act, the Memorandum, these Articles or such terms or conditions, all the provisions in these Articles concerning general meetings (including, without limitation, provisions respecting notice, quorum and procedure) shall, mutatis mutandis, apply to every meeting of holders of such class or series of shares convened for the purpose of such vote. 15 -9- 61. Unless the rights, privileges, terms or conditions attached to a class or series of shares provide otherwise, such class or series of shares shall not have the right to vote separately as a class or series upon an amendment to the Memorandum or Articles to: (1) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the shares of such class or series; (2) effect an exchange, reclassification or cancellation of all or part of the shares of such class or series; or (3) create a new class or series of shares equal or superior to the shares of such class or series. BORROWING POWERS 62. The directors on behalf of the Company may: (1) raise or borrow money for the purposes of the Company or any of them; (2) secure, subject to the sanction of a special resolution where required by the Act, the repayment of funds so raised or borrowed in such manner and upon such terms- and conditions in all respects as they think fit, and in particular by the execution and delivery of mortgages of the Company's real or personal property, or by the issue of bonds, debentures or other securities of the Company secured by mortgage or other charge upon all or any part of the property of the Company, both present and future, including its uncalled capital for the time being; (3) sign or endorse bills, notes, acceptances, cheques, contracts, and other evidence of or securities for funds borrowed or to be borrowed for the purposes aforesaid; (4) pledge debentures as security for loans; (5) guarantee obligations of any person. 63. Bonds, debentures and other securities may be made assignable, free from any equities between the Company and the person to whom such securities were issued. 64. Any bonds, debentures and other securities may be issued at a discount, premium or otherwise and with special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at general meetings of the Company, appointment of directors and other matters. GENERAL MEETINGS 65. Ordinary general meetings of the Company shall be held at least once in every calendar year at such time and place as may be determined by the directors and not later than 15 months after the preceding ordinary general meeting. All other meetings of the Company shall be called special general meetings. Ordinary or special general meetings may be held either within or without the Province of Nova Scotia. 66. The President, a vice-president or the directors may at any time convene a special general meeting, and the directors, upon the requisition of shareholders in accordance with the Act shall forthwith proceed to convene such meeting or meetings to be held at such time and place or times and places as the directors determine. 16 -10- 67. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at the Office of the Company. It may consist of several documents in like form each signed by one or more of the requisitionists. 68. At least seven clear days' notice, or such longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, shall be given to the shareholders entitled to be present at such meeting by notice given as permitted by these Articles. With the consent in writing of all the shareholders entitled to vote at such meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of the shareholders. 69. When it is proposed to pass a special resolution, the two meetings may be convened by the same notice, and it shall be no objection to such notice that it only convenes the second meeting contingently upon the resolution being passed by the requisite majority at the first meeting. 70. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, shall not invalidate any resolution passed at any general meeting. RECORD DATES 71. (1) The directors may fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend or entitled to receive any distribution; (b) entitled to receive notice of a meeting; or (c) for any other purpose. (2) If no record date is fixed, the record date for the determination of shareholders (a) entitled to receive notice of a meeting shall be the day immediately preceding the day on which the notice is given, or, if no notice is given, the day on which the meeting is held; and (b) for any other purpose shall be the day on which the directors pass the resolution relating to the particular purpose. PROCEEDINGS AT GENERAL MEETINGS 72. The business of an ordinary general meeting shall be to receive and consider the financial statements of the Company and the report of the directors and the report, if any, of the auditors, to elect directors in the place of those retiring and to transact any other business which under these Articles ought to be transacted at an ordinary general meeting. 73. No business shall be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. A corporate shareholder of the Company that has a duly authorized agent or representative present at any such meeting shall for the purpose of this Article be deemed to be personally present at such meeting. 74. One person, being a shareholder, proxyholder or representative of a corporate shareholder, present and entitled to vote shall constitute a quorum for a general meeting, and may hold a meeting. 17 -11- 75. The Chairman shall be entitled to take the chair at every general meeting or, if there be no Chairman, or if the Chairman is not present within fifteen 15 minutes after the time appointed for holding the meeting, the President or, failing the President a vice-president shall be entitled to take the chair. If the Chairman, the President or a vice-president is not present within 15 minutes after the time appointed for holding the meeting or if all such persons present decline to take the chair, the shareholders present entitled to vote at the meeting shall choose another director as chairman and if no director is present or if all the directors present decline to take the chair, then such shareholders shall choose one of their number to be chairman. 76. If within half an hour from the time appointed for a general meeting a quorum is not present, the meeting, if it was convened pursuant to a requisition of shareholders, shall be dissolved; if it was convened in any other way, it shall stand adjourned to the same day, in the next week, at the same time and place. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may hold the meeting. 77. Subject to the Act, at any general meeting a resolution put to the meeting shall be decided by a show of hands unless, either before or on the declaration of the result of the show of hands, a poll is demanded by the chairman, a shareholder or a proxyholder; and unless a poll is so demanded, a declaration by the chairman that the resolution has been carried, carried by a particular majority, lost or not carried by a particular majority and an entry to that effect in the Company's book of proceedings shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour or against such resolution. 78. When a poll is demanded, it shall be taken in such manner and at such time and place as the chairman directs, and either at once or after an interval or adjournment or otherwise. The result of the poll shall be the resolution of the meeting at which the poll was demanded. The demand of a poll may be withdrawn. When any dispute occurs over the admission or rejection of a vote, it shall be resolved by the chairman and such determination made in good faith shall be final and conclusive. 79. The chairman shall not have a casting vote in addition to any vote or votes that the Chairman has as a shareholder. 80. The chairman of a general meeting may with the consent of the meeting adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting that was adjourned. 81. Any poll demanded on the election of a chairman or on a question of adjournment shall be taken forthwith without adjournment. 82. The demand of a poll shall not prevent the continuance of a meeting for the transaction of any business other than the question on which a poll has been demanded. VOTES OF SHAREHOLDERS 83. Subject to the Act and to any provisions attached to any class or series of shares concerning voting rights (1) on a show of hands every shareholder present in person, every duly authorized representative of a corporate shareholder, and, if not prevented from voting by the Act, every proxyholder, shall have one vote; and (2) on a poll every shareholder present in person, every duly authorized representative of a corporate shareholder, and every proxyholder, shall have one vote for every share held; whether or not such representative or proxyholder is a shareholder. 18 -12- 84. Any person entitled to transfer shares upon the death or bankruptcy of any shareholder or in any way other than by allotment or transfer may vote at any general meeting in respect thereof in the same manner as if such person were the registered holder of such shares so long as the directors are satisfied at least 48 hours before the time of holding the meeting of such person's right to transfer such shares. 85. Where there are joint registered holders of any share, any of such holders may vote such share at any meeting, either personally or by proxy, as if solely entitled to it. If more than one joint holder is present at any meeting, personally or by proxy, the one whose name stands first on the Register in respect of such share shall alone be entitled to vote it. Several executors or administrators of a deceased shareholder in whose name any share stands shall for the purpose of this Article be deemed joint holders thereof. 86. Votes may be cast either personally or by proxy or, in the case of a corporate shareholder by a representative duly authorized under the Act. 87. A proxy shall be in writing and executed in the manner provided in the Act. A proxy or other authority of a corporate shareholder does not require its seal. Holders of Share Warrants shall not be entitled to vote by proxy in respect of the shares included in such warrants unless otherwise expressed in such warrants. 88. A shareholder of unsound mind in respect of whom an order has been made by any court of competent jurisdiction may vote by guardian or other person in the nature of a guardian appointed by that court, and any such guardian or other person may vote by proxy. 89. A proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Office of the Company or at such other place as the directors may direct. The directors may, by resolution, fix a time not exceeding 48 hours excluding Saturdays and holidays preceding any meeting or adjourned meeting before which time proxies to be used at that meeting must be deposited with the Company at its Office or with an agent of the Company. Notice of the requirement for depositing proxies shall be given in the notice calling the meeting. The chairman of the meeting shall determine all questions as to validity of proxies and other instruments of authority. 90. A vote given in accordance with the terms of a proxy shall be valid notwithstanding the previous death of the principal, the revocation of the proxy, or the transfer of the share in respect of which the vote is given, provided no intimation in writing of the death, revocation Or transfer is received at the Office of the Company before the meeting or by the chairman of the meeting before the vote is given. 91. Every form of proxy shall comply with the Act and its regulations and subject thereto may be in the following form: I, ___________ of ____________ being a shareholder of ___________ hereby appoint __________ __________ of _________ (or failing him/her ________ of ________) as proxyholder to attend and to vote for me and on my behalf at the ordinary/special general meeting of the Company, to be held on the __ day of _____, ___ and at any adjournment thereof, , or at any meeting of the Company which may be held prior to [insert specified date or event]. [If the proxy is solicited by or behalf of the management of the Company, insert a statement to that effect.] Dated this __ day of _____ __. ------------------- Shareholder 19 -13- 92. Subject to the Act, no shareholder shall be entitled to be present or to vote on any question, either personally or by proxy, at any general meeting or to be reckoned in a quorum while any call is due and payable to the Company in respect of any shares of such shareholder. 93. Any resolution passed by the directors, notice of which has been given to the shareholders in the manner in which notices are hereinafter directed to be given and which is, within one month after it has been passed, ratified and confirmed in writing by shareholders entitled on a poll to three-fifths of the votes, shall be as valid and effectual as a resolution of a general meeting. This Article shall not apply to a resolution for winding up the Company or to a resolution dealing with any matter that by statute or these Articles ought to be dealt with by a special resolution or other method prescribed by statute. 94. A resolution, including a special resolution, in writing and signed by every shareholder who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such shareholders at a meeting and satisfies all of the requirements of the Act respecting meetings of shareholders. DIRECTORS 95. Unless otherwise determined by resolution of shareholders, the number of directors shall not be less than one or more than _________. 96. Notwithstanding anything herein contained the subscribers to the Memorandum shall be the first directors of the Company. 97. The directors may be paid out of the funds of the Company as remuneration for their service such sums, if any, as the Company may by resolution of its shareholders determine, and such remuneration shall be divided among them in such proportions and manner as the directors determine. The directors may also be paid their reasonable travelling, hotel and other expenses incurred in attending meetings of directors and otherwise in the execution of their duties as directors. 98. The continuing directors may act notwithstanding any vacancy in their body, but if their number falls below the minimum permitted, the directors shall not, except in emergencies or for the purpose of filling vacancies, act so long as their number is below the minimum. 99. A director may, in conjunction with the office of director, and on such terms as to remuneration and otherwise as the directors arrange or determine, hold any other office or place of profit under the Company or under any company in which the Company is a shareholder or is otherwise interested. 100. The office of a director shall ipso facto be vacated, if the director: (1) becomes bankrupt or makes an assignment for the benefit of creditors; (2) is, or is found by a court of competent jurisdiction to be, of unsound mind; (3) by notice in writing to the Company, resigns the office of director; or (4) is removed in the manner provided by these Articles. 101. No director shall be disqualified by holding the office of director from contracting with the Company, either as vendor, purchaser, or otherwise, nor shall any such contract, or any contract or arrangement entered into or proposed to be entered into by or on behalf of the Company in which any director is in any way interested, either directly or indirectly, be avoided, nor shall any director so contracting or being so interested be liable to account to the Company for any profit realized by any such contract or arrangement by reason only of such director holding that office or of the fiduciary relations thereby established, provided the director makes a declaration or gives a general notice in accordance with the Act. No 20 -14- director shall, as a director, vote in respect of any contract or arrangement in which the director is so interested, and if the director does so vote, such vote shall not be counted. This prohibition may at any time or times be suspended or relaxed to any extent by a resolution of the shareholders and shall not apply to any contract by or on behalf of the Company to give to the directors or any of them any security for advances or by way of indemnity. ELECTION OF DIRECTORS 102. At the dissolution of every ordinary general meeting at which their successors are elected, all the directors shall retire from office and be succeeded by the directors elected at such meeting. Retiring directors shall be eligible for re-election. 103. If at any ordinary general meeting at which an election of directors ought to take place no such election takes place, or if no ordinary general meeting is held in any year or period of years, the retiring directors shall continue in office until their successors are elected. 104. The Company may by resolution of its shareholders elect any number of directors permitted by these Articles and may determine or alter their qualification. 105. The Company may, by special resolution or in any other manner permitted by statute, remove any director before the expiration of such director's period of office and may, if desired, appoint a replacement to hold office during such time only as the director so removed would have held office. 106. The directors may appoint any other person as a director so long as the total number of directors does not at any time exceed the maximum number permitted. No such appointment except to fill a casual vacancy, shall be effective unless two-thirds of the directors concur in it. Any casual vacancy occurring among the directors may be filled by the directors, but any person so chosen shall retain office only so long as the vacating director would have retained it if the vacating director had continued as director. MANAGING DIRECTOR 107. The directors may appoint one or more of their body to be managing directors of the Company, either for a fixed term or otherwise, and may remove or dismiss them from office and appoint replacements. 108. Subject to the provisions of any contract between a managing director and the Company, a managing director shall be subject to the same provisions as to resignation and removal as the other directors of the Company. A managing director who for any reason ceases to hold the office of director shall ipso facto immediately cease to be a managing director. 109. The remuneration of a managing director shall from time to time be fixed by the directors and may be by way of any or all of salary, commission and participation in profits. 110. The directors may from time to time entrust to and confer upon a managing director such of the powers exercisable under these Articles by the directors as they think fit and may confer such powers for such time, and to be exercised for such objects and purposes and upon such terms and conditions, and with such restrictions as they think expedient; and they may confer such powers either collaterally with, or to the exclusion of, and in substitution for, all or any of the powers of the directors in that behalf; and may from time to time revoke, withdraw, alter or vary all or any of such powers. CHAIRMAN OF THE BOARD 111. The directors may elect one of their number to be Chairman and may determine the period during which the Chairman is to hold office. The Chairman shall perform such duties and receive such special remuneration as the directors may provide. 21 -15- PRESIDENT AND VICE-PRESIDENTS 112. The directors shall elect the President of the Company, who need not be a director, and may determine the period for which the President is to hold office. The President shall have general supervision of the business of the Company and shall perform such duties as may be assigned from time to time by the directors. 113. The directors may also elect vice-presidents, who need not be directors, and may determine the periods for which they are to hold office. A vice-president shall, at the request of the President or the directors and subject to the directions of the directors, perform the duties of the President during the absence, illness or incapacity of the President, and shall also perform such duties as may be assigned by the President or the directors. SECRETARY AND TREASURER 114. The directors shall appoint a Secretary of the Company to keep minutes of shareholders' and directors' meetings and perform such other duties as may be assigned by the directors. The directors may also appoint a temporary substitute for the Secretary who shall, for the purposes of these Articles, be deemed to be the Secretary. 115. The directors may appoint a treasurer of the Company to carry out such duties as the directors may assign. OFFICERS 116. The directors may elect or appoint such other officers of the Company, having such powers and duties, as they think fit. 117. If the directors so decide the same person may hold more than one of the offices provided for in these Articles. PROCEEDINGS OF DIRECTORS 118. The directors may meet together for the dispatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit, and may determine the quorum necessary for the transaction of business. Until otherwise determined, one director shall constitute a quorum and may hold a meeting. 119. If all directors of the Company entitled to attend a meeting either generally or specifically consent, a director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at that meeting for purposes of these Articles. 120. Meetings of directors may be held either within or without the Province of Nova Scotia and the directors may from time to time make arrangements relating to the time and place of holding directors' meetings, the notices to be given for such meetings and what meetings may be held without notice. Unless otherwise provided by such arrangements: (1) A meeting of directors may be held at the close of every ordinary general meeting of the Company without notice; (2) Notice of every other directors' meeting shall be given as permitted by these Articles to each director at least 48 hours before the time fixed for the meeting; and 22 -16- (3) A meeting of directors may be held without formal notice if all the directors are present or if those absent have signified their assent to such meeting or their consent to the business transacted at such meeting. 121. The President or any director may at any time, and the Secretary, upon the request of the President or any director, shall summon a meeting of the directors to be held at the Office of the Company. The President, the Chairman or a majority of the directors may at any time, and the Secretary, upon the request of the President, the Chairman or a majority of the directors, shall summon a meeting to be held elsewhere. 122. (1) Questions arising at any meeting of directors shall be decided by a majority of votes. The chairman of the meeting may vote as a director but shall not have a second or casting vote. (2) At any meeting of directors the chairman shall receive and count the vote of any director not present in person at such meeting on any question or matter arising at such meeting whenever such absent director has indicated by telegram, letter or other writing lodged with the chairman of such meeting the manner in which the absent director desires to vote on such question or matter and such question or matter has been specifically mentioned in the notice calling the meeting as a question or matter to be discussed or decided thereat. In respect of any such question or matter so mentioned in such notice any director may give to any other director a proxy authorizing such other director to vote for such first named director at such meeting, and the chairman of such meeting, after such proxy has been so lodged, shall receive and count any vote given in pursuance thereof notwithstanding the absence of the director giving such proxy. 123. If no Chairman is elected, or if at any meeting of directors the Chairman is not present within five minutes after the time appointed for holding the meeting, or declines to take the chair, the President, if a director, shall preside. If the President is not a director, is not present at such time or declines to take the chair, a vice-president who is also a director shall preside. If no person described above is present at such time and willing to take the chair, the directors present shall choose some one of their number to be chairman of the meeting. 124. A meeting of the directors at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions for the time being vested in or exercisable by the directors generally. 125. The directors may delegate any of their powers to committees consisting of such number of directors as they think fit. Any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on them by the directors. 126. The meetings and proceedings of any committee of directors shall be governed by the provisions contained in these Articles for regulating the meetings and proceedings of the directors insofar as they are applicable and are not superseded by any regulations made by the directors. 127. All acts done at any meeting of the directors or of a committee of directors or by any person acting as a director shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of the director or person so acting, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a director. 128. A resolution in writing and signed by every director who would be entitled to vote on the resolution at a meeting is as valid as if it were passed by such directors at a meeting. 129. If any one or more of the directors is called upon to perform extra services or to make any special exertions in going or residing abroad or otherwise for any of the purposes of the Company or the business thereof, the Company may remunerate the director or directors so doing, either by a fixed sum or by a percentage of profits or otherwise. Such remuneration shall be determined by the directors and may be either in addition to or in substitution for remuneration otherwise authorized by these Articles. 23 -17- REGISTERS 130. The directors shall cause to be kept at the Company's Office in accordance with the provisions of the Act a Register of the shareholders of the Company, a register of the holders of bonds, debentures and other securities of the Company and a register of its directors. Branch registers of the shareholders and of the holders of bonds, debentures and other securities may be kept elsewhere, either within or without the Province of Nova Scotia, in accordance with the Act. MINUTES 131. The directors shall cause minutes to be entered in books designated for the purpose: (1) of all appointments of officers; (2) of the names of directors present at each meeting of directors and of any committees of directors; (3) of all orders made by the directors and committees of directors; and (4) of all resolutions and proceedings of meetings of shareholders and of directors. Any such minutes of any meeting of directors or of any committee of directors or of shareholders, if purporting to be signed by the chairman of such meeting or by the chairman of the next succeeding meeting, shall be receivable as prima facie evidence of the matters stated in such minutes. POWERS OF DIRECTORS 132. The management of the business of the Company is vested in the directors who, in addition to the powers and authorities by these Articles or otherwise expressly conferred upon them, may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the shareholders, but subject nevertheless to the provisions of any statute, the Memorandum or these Articles. No modification of the Memorandum or these Articles shall invalidate any prior act of the directors that would have been valid if such modification had not been made. 133. Without restricting the generality of the terms of any of these Articles and without prejudice to the powers conferred thereby, the directors may: (1) take such steps as they think fit to carry out any agreement or contract made by or on behalf of the Company; (2) pay costs, charges and expenses preliminary and incidental to the promotion, formation, establishment, and registration of the Company; (3) purchase or otherwise acquire for the Company any property, rights or privileges that the Company is authorized to acquire, at such price and generally on such terms and conditions as they think fit; (4) pay for any property, rights or privileges acquired by, or services rendered to the Company either wholly or partially in cash or in shares (fully paid-up or otherwise), bonds, debentures or other securities of the Company; (5) subject to the Act, secure the fulfillment of any contracts or engagements entered into by the Company by mortgaging or charging all or any of the property of the Company and its unpaid capital for the time being, or in such other manner as they think fit; 24 -18- (6) appoint, remove or suspend at their discretion such experts, managers, secretaries, treasurers, officers, clerks, agents and servants for permanent, temporary or special services, as they from time to time think fit, and determine their powers and duties and fix their salaries or emoluments and require security in such instances and to such amounts as they think fit; (7) accept a surrender of shares from any shareholder insofar as the law permits and on such terms and conditions as may be agreed; (8) appoint any person or persons to accept and hold in trust for the Company any property belonging to the Company, or in which it is interested, execute and do all such deeds and things as may be required in relation to such trust, and provide for the remuneration of such trustee or trustees; (9) institute, conduct, defend, compound or abandon any legal proceedings by and against the Company, its directors or its officers or otherwise concerning the affairs of the Company, and also compound and allow time for payment or satisfaction of any debts due and of any claims or demands by or against the Company; (10) refer any claims or demands by or against the Company to arbitration and observe and perform the awards; (11) make and give receipts, releases and other discharges for amounts payable to the Company and for claims and demands of the Company; (12) determine who may exercise the borrowing powers of the Company and sign on the Company's behalf bonds, debentures or other securities, bills, notes, receipts, acceptances, assignments, transfers, hypothecations, pledges, endorsements, cheques, drafts, releases, contracts, agreements and all other instruments and documents; (13) provide for the management of the affairs of the Company abroad in such manner as they think fit, and in particular appoint any person to be the attorney or agent of the Company with such powers (including power to sub-delegate) and upon such terms as may be thought fit; (14) invest and deal with any funds of the Company in such securities and in such manner as they think fit; and vary or realize such investments; (15) subject to the Act, execute in the name and on behalf of the Company in favour of any director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property, present and future, as they think fit; (16) give any officer or employee of the Company a commission on the profits of any particular business or transaction or a share in the general profits of the Company; (17) set aside out of the profits of the Company before declaring any dividend such amounts as they think proper as a reserve fund to meet contingencies or provide for dividends, depreciation, repairing, improving and maintaining any of the property of the Company and such other purposes as the directors may in their absolute discretion think in the interests of the Company; and invest such amounts in such investments as they think fit, and deal with and vary such investments, and dispose of all or any part of them for the benefit of the Company, and divide the reserve fund into such special funds as they think fit, with full power to employ the assets constituting the reserve fund in the business of the Company without being bound to keep them separate from the other assets; 25 -19- (18) make, vary and repeal rules respecting the business of the Company, its officers and employees, the shareholders of the Company or any section or class of them; (19) enter into all such negotiations and contracts, rescind and vary all such contracts, and execute and do all such acts, deeds and things in the name and on behalf of the Company as they consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company; (20) provide for the management of the affairs of the Company in such manner as they think fit. SOLICITORS 134. The Company may employ or retain solicitors any of whom may, at the request or on the instruction of the directors, the Chairman, the President or a managing director, attend meetings of the directors or shareholders, whether or not the solicitor is a shareholder or a director of the Company. A solicitor who is also a director may nevertheless charge for services rendered to the Company as a solicitor. THE SEAL 135. The directors shall arrange for the safe custody of the common seal of the Company (the "Seal"). The Seal may be affixed to any instrument in the presence of and contemporaneously with the attesting signature of; any director or officer acting within such person's authority or (ii) any person under the authority of a resolution of the directors or a committee thereof. For the purpose of certifying documents or proceedings the Seal may be affixed by any director or the President, a vice-president, the Secretary, an assistant secretary or any other officer of the Company without the authorization of a resolution of the directors. 136. The Company may have facsimiles of the Seal which may be used interchangeably with the Seal. 137. The Company may have for use at any place outside the Province of Nova Scotia, as to all matters to which the corporate existence and capacity of the Company extends, an official seal that is a facsimile of the Seal of the Company with the addition on its face of the name of the place where it is to be used; and the Company may by writing under its Seal authorize any person to affix such official seal at such place to any document to which the Company is a party. DIVIDENDS 138. The directors may from time to time declare such dividend as they deem proper upon shares of the Company according to the rights and restrictions attached to any class or series of shares, and may determine the date upon which such dividend will be payable and that it will be payable to the persons registered as the holders of the shares on which it is declared at the close of business upon a record date. No transfer of such shares registered after the record date shall pass any right to the dividend so declared. 139. No dividends shall be payable except out of the profits, retained earnings or contributed surplus of the Company and no interest shall be payable on any dividend except insofar as the rights attached to any class or series of shares provide otherwise. 140. The declaration of the directors as to the amount of the profits, retained earnings or contributed surplus of the Company shall be conclusive. 141. The directors may from time to time pay to the shareholders such interim dividends as in their judgment the position of the Company justifies. 26 -20- 142. Subject to the Memorandum, these Articles and the rights and restrictions attached to any class or series of shares, dividends may be declared and paid to the shareholders in proportion to the amount of capital paid-up on the shares (not including any capital paid-up bearing interest) held by them respectively. 143. The directors may deduct from the dividends payable to any shareholder amounts due and payable by the shareholder to the Company on account of calls, installments or otherwise, and may apply the same in or towards satisfaction of such amounts so due and payable. 144. The directors may retain any dividends on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. 145. The directors may retain the dividends payable upon shares to which a person is entitled or entitled to transfer upon the death or bankruptcy of a shareholder or in any way other than by allotment or transfer, until such person has become registered as the holder of such shares or has duly transferred such shares. 146. When the directors declare a dividend on a class or series of shares and also make a call on such shares payable on or before the date on which the dividend is payable, the directors may retain all or part of the dividend and set off the amount retained against the call. 147. The directors may declare that a dividend be paid by the distribution of cash, paid-up shares (at par or at a premium), debentures, bonds or other securities of the Company or of any other company or any other specific assets held or to be acquired by the Company or in any one or more of such ways. 148. The directors may settle any difficulty that may arise in regard to the distribution of a dividend as they think expedient, and in particular without restricting the generality of the foregoing may issue fractional certificates, may fix the value for distribution of any specific assets, may determine that cash payments will be made to any shareholders upon the footing of the value so fixed or that fractions may be disregarded in order to adjust the rights of all parties, and may vest cash or specific assets in trustees upon such trusts for the persons entitled to the dividend as may seem expedient to the directors. 149. Any person registered as a joint holder of any share may give effectual receipts for all dividends and payments on account of dividends in respect of such share. 150. Unless otherwise determined by the directors, any dividend may be paid by a cheque or warrant delivered to or sent through the post to the registered address of the shareholder entitled, or, when there are joint holders, to the registered address of that one whose name stands first on the register for the shares jointly held. Every cheque or wan-ant so delivered or sent shall be made payable to the order of the person to whom it is delivered or sent. The mailing or other transmission to a shareholder at the shareholder's registered address (or, in the case of joint shareholders at the address of the holder whose name stands first on the Register) of a cheque payable to the order of the person to whom it is addressed for the amount of any dividend payable in cash after the deduction of any tax which the Company has properly withheld, shall discharge the Company's liability for the dividend unless the cheque is not paid on due presentation. If any cheque for a dividend payable in cash is not received, the Company shall issue to the shareholder a replacement cheque for the same amount on such terms as to indemnity and evidence of non-receipt as the directors may impose. No shareholder may recover by action or other legal process against the Company any dividend represented by a cheque that has not been duly presented to a banker of the Company for payment or that otherwise remains unclaimed for 6 years from the date on which it was payable. ACCOUNTS 151. The directors shall cause proper books of account to be kept of the amounts received and expended by the Company, the matters in respect of which such receipts and expenditures take place, all sales and purchases of goods by the Company, and the assets, credits and liabilities of the Company. 27 -21- 152. The books of account shall be kept at the head office of the Company or at such other place or places as the directors may direct. 153. The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions the accounts and books of the Company or any of them shall be open to inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the directors or a resolution of the shareholders. 154. At the ordinary general meeting in every year the directors shall lay before the Company such financial statements and reports in connection therewith as may be required by the Act or other applicable statute or regulation thereunder and shall distribute copies thereof at such times and to such persons as may be required by statute or regulation. AUDITORS AND AUDIT 155. Except in respect of a financial year for which the Company is exempt from audit requirements in the Act, the Company shall at each ordinary general meeting appoint an auditor or auditors to hold office until the next ordinary general meeting. If at any general meeting at which the appointment of an auditor or auditors is to take place and no such appointment takes place, or if no ordinary general meeting is held in any year or period of years, the directors shall appoint an auditor or auditors to hold office until the next ordinary general meeting. 156. The first auditors of the Company may be appointed by the directors at any time before the first ordinary general meeting and the auditors so appointed shall hold office until such meeting unless previously removed by a resolution of the shareholders, in which event the shareholders may appoint auditors. 157. The directors may fill any casual vacancy in the office of the auditor but while any such vacancy continues the surviving or continuing auditor or auditors, if any, may act. 158. The Company may appoint as auditor any person, including a shareholder, not disqualified by statute. 159. An auditor may be removed or replaced in the circumstances and in the manner specified in the Act. 160. The remuneration of the auditors shall be fixed by the shareholders, or by the directors pursuant to authorization given by the shareholders, except that the remuneration of an auditor appointed to fill a casual vacancy may be fixed by the directors. 161. The auditors shall conduct such audit as may be required by the Act and their report, if any, shall be dealt with by the Company as required by the Act. NOTICES 162. A notice (including any communication or document) shall be sufficiently given, delivered or served by the Company upon a shareholder, director, officer or auditor by personal delivery at such person's registered address (or, in the case of a director, officer or auditor, last known address) or by prepaid mail, telegraph, telex, facsimile machine or other electronic means of communication addressed to such person at such address. 163. Shareholders having no registered address shall not be entitled to receive notice. 164. The holder of a share warrant shall not, unless otherwise expressed therein, be entitled in respect thereof to notice of any general meeting of the Company. 28 -22- 165. All notices with respect to registered shares to which persons are jointly entitled may be sufficiently given to all joint holders thereof by notice given to whichever of such persons is named first in the Register for such shares. 166. Any notice sent by mail shall be deemed to be given, delivered or served on the earlier of actual receipt and the third business day following that upon which it is mailed, and in proving such service it shall be sufficient to prove that the notice was properly addressed and mailed with the postage prepaid thereon. Any notice given by electronic means of communication shall be deemed to be given when entered into the appropriate transmitting device for transmission. A certificate in writing signed on behalf of the Company that the notice was so addressed and mailed or transmitted shall be conclusive evidence thereof. 167. Every person who by operation of law, transfer or other means whatsoever becomes entitled to any share shall be bound by every notice in respect of such share that prior to such person's name and address being entered on the Register was duly served in the manner hereinbefore provided upon the person from whom such person derived title to such share. 168. Any notice delivered, sent or transmitted to the registered address of any shareholder pursuant to these Articles, shall, notwithstanding that such shareholder is then deceased and that the Company has notice thereof, be deemed to have been served in respect of any registered shares, whether held by such deceased shareholder solely or jointly with other persons, until some other person is registered as the holder or joint holder thereof, and such service shall for all purposes of these Articles be deemed a sufficient service of such notice on the heirs, executors or administrators of the deceased shareholder and all joint holders of such shares. 169. Any notice may bear the name or signature, manual or reproduced, of the person giving the notice written or printed. 170. When a given number of days' notice or notice extending over any other period is required to be given, the day of service and the day upon which such notice expires shall not, unless it is otherwise provided, be counted in such number of days or other period. INDEMNITY 171. Every director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, and the heirs and legal representatives of such person, in the absence of any dishonesty on the part of such person, shall be indemnified by the Company against, and it shall be the duty of the directors out of the funds of the Company to pay, all costs, losses and expenses, including an amount paid to settle an action or claim or satisfy a judgment, that such director, officer or person may incur or become liable to pay in respect of any claim made against such person or civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having been a director or officer of the Company or such body corporate, partnership or other association, whether the Company is a claimant or party to such action or proceeding or otherwise; and the amount for which such indemnity is proved shall immediately attach as a lien on the property of the Company and have priority as against the shareholders over all other claims. 172. No director or officer, former director or officer, or person who acts or acted at the Company's request, as a director or officer of the Company, a body corporate, partnership or other association of which the Company is or was a shareholder, partner, member or creditor, in the absence of any dishonesty on such person's part, shall be liable for the acts, receipts, neglects or defaults of any other director, officer or such person, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired for or on behalf of the Company, or through the insufficiency or deficiency of any security in or upon which any of the funds of the Company are invested, or for any loss or damage arising from the bankruptcy, 29 -23- insolvency or tortious acts of any person with whom any funds, securities or effects are deposited, or for any loss occasioned by error of judgment or oversight on the part of such person, or for any other loss, damage or misfortune whatsoever which happens in the execution of the duties of such person or in relation thereto. REMINDERS 173. The directors shall comply with the following provisions of the Act or the Corporations Registration Act (Nova Scotia) where indicated: (1) Keep a cur-rent register of shareholders (Section 42). (2) Keep a current register of directors, officers and managers, send to the Registrar a copy thereof and notice of all changes therein (Section 98). (3) Keep a current register of holders of bonds, debentures and other securities (Section 111 and Third Schedule). (4) Send notice to the Registrar of any redemption or purchase of preference shares (Section 50). (5) Send notice to the Registrar of any consolidation, division, conversion or reconversion of the share capital or stock of the Company (Section 53). (6) Send notice to the Registrar of any increase of capital (Section 55). (7) Call a general meeting every year within the proper time (Section 83). Meetings must be held not later than 15 months after the preceding general meeting. (8) Send to the Registrar copies of all special resolutions (Section 88). (9) When shares are issued for a consideration other than cash, file a copy of the contract with the Registrar on or before the date on which the shares are issued (Section 109). (10) Send to the Registrar notice of the address of the Company's registered Office and of all changes in such address (Section 79). (11) Keep proper minutes of all shareholders' meetings and directors' meetings in the Company's minute book kept at the Company's registered Office (Sections 89 and 90). (12) Obtain a certificate under the Corporations Registration Act (Nova Scotia) as soon as business is commenced. (13) Send notice of recognized agent to the Registrar under the Corporations Registration Act (Nova Scotia). EX-3.25 26 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.25 No. 2899075 THE COMPANIES ACTS 1985 AND 1989 ------------------------------- COMPANY LIMITED BY SHARES ------------------------------- ARTICLES OF ASSOCIATION of SPARKLING SPRING WATER UK LIMITED(1) ------------------------------- - ---------- 1 Names changed from ??? Limited by Special Resolution of the Shareholders passed on 27th April 1994. 2 1 Preliminary 1.1 In these Articles: "the Act" means the Companies Act 1985 (as amended). "Table A" means Table A in the Companies (Tables A to F) Regulations 1985 as amended by the Companies (Tables A to F) (Amendment) Regulations 1985. References to regulations are to regulations in Table A. "the Statutes" means the Act and any statutory modification or re-enactment thereof for the time being in force and every other Act for the time being in force concerning companies and affecting the Company. 1.2 Subject as hereinafter provided, the regulations contained in Table A shall apply to the Company. 1.3 Regulations 38, 73 to 78 inclusive, 87, 101 and 118 shall not apply to the Company, but the Articles hereinafter contained and the remaining regulations of Table A, subject to the modifications hereinafter expressed, shall constitute the regulations of the Company. 2 Shares (2)2.1 The share capital of the Company is 1,990,000 divided into (pound)1,990,000 Ordinary Shares of (pound)1 each. 2.2 Subject to the provisions of Articles 2.3 and 2.4 and to any directions which may be given by the Company in general meeting, the Directors may unconditionally exercise the power of the Company to allot relevant securities (within the meaning of section 80(2) of the - ---------- 2 Adopted by Special Resolution of the Shareholders passed on 3rd June 1994. 1 3 Act) and without prejudice to the generality of the foregoing any shares unissued at the date of incorporation of the Company and any shares hereafter created shall be under the control of the Directors, who may allot, grant options over or otherwise dispose of the same to such persons (including the Directors themselves) on such terms and at such times as they may think proper, provided that no shares shall be issued at a discount. (2)2.3 The maximum nominal amount of share capital which or in respect of which the Directors may allot, grant options or subscriptions or conversion rights, create, deal with or otherwise dispose of in accordance with this Article shall be (pound)1,990,000 or such other amount as shall be authorized by the Company in general meeting. 2.4 The authority conferred on the Directors by Articles 2.2 and 2.3 shall expire on the day preceding the fifth anniversary of the date of incorporation of the Company. 2.5 The provisions of section 89(1) of the Act shall not apply to the Company. (3)2.6 (a) No dividend shall be declared or paid by the Company during the Security Period (as defined in the Credit Agreement) without the prior written consent of the Bank (as defined in the Credit Agreement). (b) For the purposes of this Article 2.5, "Credit Agreement" means the credit agreement of even date as the date of adoption of this Article 2.6 and made between the Company (1) and National Westminster Bank plc (as the Bank) (2). 3 Lien 3.1 The lien conferred by regulation 8 shall apply to: - ---------- 3 Adopted by Special Resolution of the Shareholders passed on 7th June 1994. 4 (a) all shares of the Company whether fully paid or not; (b) to all shares registered in the name of any person indebted or under liability tot he Company, whether he be the sole registered holder thereof or one of several joint holders; and shall be for all indebtedness or other liability to the Company of any member. Regulation 8 shall be modified accordingly. 4 Transfer of shares 4.1 The Directors may, in their absolute discretion and without assigning any reason, decline to register any transfer of any share, whether or not it is a fully paid share. Regulation 24 shall be modified accordingly. 5 General meetings 5.1 An annual general meeting and an extraordinary general meeting called for the passing of a special resolution or an elective resolution or a resolution appointing a person as a Director shall be called by at least 21 clear days' notice. All other extraordinary general meetings shall be called by at least 14 days' notice but a general meeting, other than one called for the passing of an elective resolution, may be called by shorter notice if it is so agreed: (a) in the case of an annual general meeting, by all the members entitled to attend and vote thereat; and (b) in the case of any other meeting, by a majority in number of the members having a right to attend and vote, being a majority together holding not less than 95 percent 5 in nominal value of the shares giving that right or such lesser percentage, not being less than 90 percent, as may be specified in or pursuant to any elective resolution passed by the Company. The notice shall specify the time and place of the meeting, the general nature of the business to be transacted and the terms of any resolution to be proposed at it and, in the case of an annual general meeting, shall specify the meeting as such. Subject to the provisions of these Articles and to any restrictions imposed on any shares, the notice shall be given to all members, to all persons entitled to a share in consequence of the death or bankruptcy of a member and to the Directors and the auditors. 5.2 The following provisions of this Article apply if the Company has only a single member: (a) regulation 40 shall be modified by the insertion at the end of that regulation of the following proviso: ", provided that if the company has only a single member, the quorum shall be one such person."; and (b) if the single member takes any decision which may be taken by the Company in general meeting and which has effect as if agreed by the Company in general meeting, the single member shall (unless the decision is taken by way of a written resolution) provide the Company with a written record of that decision. However, failure to do so shall not affect the validity of such decision. 5.3 Regulation 37 shall be modified by: (a) the substitution of the words "seven weeks" for the words "eight weeks"; and 6 (b) the deletion of the second sentence thereof and by the addition at the end of the regulation of the following sentence: "If the company has only a single member, such member shall be entitled at any time to call a general meeting." 5.4 Regulation 41 shall be modified by the addition at the end of that regulation of the following sentence. "If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the meeting shall be dissolved. Provided that if the company has only a single member, the preceding provisions of this regulation as to adjournment shall not apply and, if within half an hour from the time appointed for the meeting, or if during a meeting such a quorum ceases to be present, the meeting shall be dissolved and shall not be adjourned." 5.5 A poll may be demanded at any general meeting by the Chairman or by any member present in person or by proxy and entitled to vote. Regulation 46 shall be modified accordingly. 5.6 A resolution in writing in accordance with regulation 53 shall be deemed to have been duly executed on behalf of a corporation if signed by one of its directors or its secretary. In the case of a share held by joint holders the signature of any one of them on behalf of all such joint holders shall be sufficient for the purposes of that regulation. The Directors shall cause a record of each resolution in writing, and of the signatures to it, to be entered in a book in the same way as minutes of proceedings of a general meeting of the Company and to be signed by a Director or the secretary of the Company. 5.7 Before a resolution in writing is executed, the Company, if it is required by section 381B of the Act to do so: 7 (a) shall send a copy of the proposed resolution to the auditors; and (b) shall ensure that the resolution is not passed unless either it has received the auditors' notification in the terms of section 381(B)(3)(a) of the Act or the period for giving a notice under section 381(B)(2) has expired without any notice having been given to the Company by the auditors in accordance with that sub-section. 5.8 A proxy shall be entitled to vote on a show of hands and regulation 54 shall be modified accordingly. 6 Directors 6.1 The first Directors shall be appointed in writing by completion of the statement required to be delivered for registration by section 10 of the Act. (4)6.2 Unless otherwise determined by ordinary resolution the number of directors shall not be subject to any maximum but shall not be less than one. Regulation 64 shall be modified accordingly. 7 Powers and duties of Directors 7.1 Subject to the provisions of the Statutes, a Director may be interested directly or indirectly in any contract or arrangement or in any proposed contract or arrangement with the Company or with any other company in which the Company may be interested and he may hold and be remunerated in respect of any office or place of profit (other than the office of auditor of the Company or any subsidiary thereof) under the Company or any such other company and he or any firm of which he is a member may actin a professional capacity for - ---------- 4 Adopted by Special Resolution of the Shareholders passed on 27th April 1994. 8 the Company or any such other company and be remunerated therefor. Notwithstanding his interest a Director may vote on any matter in which he is interested and be included for the purpose of a quorum at any meeting at which the same is considered and he may retain for his own benefit all profits and advantages accruing to him. Regulation 94 shall be modified accordingly. 7.2 The Directors may exercise all the powers of the Company contained in clause 3(ab) of the Memorandum of Association of the Company. 8 Appointment, removal and disqualification of Directors 8.1 Without prejudice to the powers of the Company under section 303 of the Act to remove a Director by Ordinary Resolution, the holder or holders for the time being of more than one half of the issued Ordinary Shares of the Company shall have the power from time to time and at any time to appoint any person or persons as a Director or Directors and to remove from office any Director howsoever appointed. Any such appointment or removal shall be effected by an instrument in writing signed by the member or members making the same or (in the case of a member being a corporation) signed on its behalf by one of its directors or its secretary and shall take effect upon lodgment at the registered office of the Company. 8.2 The office of a Director shall be vacated if he is removed from office under Article 8.1. Regulation 81 shall be modified accordingly. 8.3 Unless and until otherwise determined by the Company by Ordinary Resolution, either generally or in any particular case, no Director shall vacate or be required to vacate his office as a Director on or by reason of his attaining or having attained the age of 70, and 9 any person proposed to be appointed a Director shall be capable of being appointed as a Director notwithstanding that he has attained the age of 70, and no special notice need be given of any resolution for the appointment as a Director of a person who shall have attained the age of 70, and it shall not be necessary to give to the members notice of the age of any Director or person proposed to be appointed as such. 8.4 Regulation 88 shall be modified by the deletion of the third sentence thereof. 9 Rotation of Directors 9.1 The Directors shall not be liable to retire by rotation, and accordingly the second and third sentences of regulation 79 shall be deleted. 10 Alternate Directors 10.1 Any appointment or removal of an alternate Director made under Table A shall be delivered at the registered office of the Company. In regulation 65 the words "approved by resolution of the directors and" shall be deleted. 10.2 If his appointor is for the time being absent from the United Kingdom or otherwise not available the signature of an alternate Director to any resolution in writing of the Directors shall be as effective as the signature of his appointor. An alternate Director shall be deemed to be a Director for the purpose (inter alia) of signing instruments pursuant to Article 12. 10.3 An alternate Director shall be entitled to contract and be interested in and benefit from contracts or arrangements with the Company and to be repaid expenses and to be indemnified to the same extent mutatis mutandis as if he were a Director, but he shall not 10 be entitled to receive from the Company in respect to his appointment as alternate Director any remuneration, except only such part (if any) of the remuneration otherwise payable to his appointor as such appointor may by notice in writing to the Company from time to time direct. 10.4 Regulation 66 shall be modified by the deletion of the second sentence thereof. 11 Proceedings of Directors 11.1 Any Director or member of a committee of the Directors may participate in a meeting of the Directors or such committee by means of conference telephone or similar communications equipment whereby all persons participating in the meeting can hear each other and participation in a meeting in this manner shall be deemed to constitute presence in person at such meeting. 11.2 The following sentence shall be inserted after the first sentence of regulation 72: "Any committee shall have power unless the Directors direct otherwise to co-opt as a member or members of the committee any person or persons although not being a Director of the Company." 11.3 For a signed resolution under regulation 93 to be effective it shall not be necessary for it to be signed by a Director who is prohibited by the Articles or by law from voting thereon. Regulation 93 shall be modified accordingly. 12 The seal 12.1 If the Company has a seal, it shall only be used with the authority of the Directors or a committee of the Directors. The Directors may determine who shall sign any instrument 11 to which the seal is affixed and unless otherwise so determined it shall be signed by a Director and by the secretary or second Director. The obligation under regulation 6 relating to the sealing of share certificates shall apply only if the Company has a seal. 12.2 If the Company has a common seal, the Company may also have an official seal for use abroad under the provisions of the Act, where and as the Directors shall determine, and the Company may by writing under the common seal appoint any agents or agent, committees or committee abroad to be the duly authorized agents of the Company, for the purpose of affixing and using such official seal, and may impose such restrictions on the use thereof as may be thought fit. Wherever in these Articles reference is made to the common seal of the Company, the reference shall, when and so far as may be applicable, be deemed to include any such official seal as aforesaid. 13 Notices 13.1 Every Director of the Company and every alternate Director shall be entitled to receive notices of general meetings (at his usual address or such other address as he may notify to the Company) in addition to the persons so entitled under the Statutes. The third sentence of regulation 112 shall be deleted. 13.2 Any notice required by these Articles to be given by the Company may be given by any visible form on paper, including telex, facsimile and electronic mail, and a notice communicated by such forms of immediate transmission shall be deemed to be given at the time it is transmitted to the person to whom it is addressed. Regulations 111 and 112 shall be modified accordingly. 12 13.3 In the first sentence of regulation 112 the words "(or at such other address, whether within or outside the United Kingdom, as he may supply to the company for that purpose)" shall be inserted after "registered address". 13.4 A notice posted to an address outside the United Kingdom shall be deemed, unless the contrary is proved, to be given at the expiration of 7 days after the envelope containing it was posted and regulation 115 shall be amended accordingly. 13.5 Regulation 116 shall be modified by the substitution of the words "the address, if any, whether within or outside the United Kingdom" for the words "the address, if any, within the United Kingdom" in the first sentence thereof. 14 Indemnity 14.1 Subject to the provisions of, and so far as may be consistent with, the Statutes, but without prejudice to any indemnity to which a Director may be otherwise entitled, every Director, auditor, secretary or other officer of the Company shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses and liabilities as incurred by him in the execution and/or discharge of his duties and/or the exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office including (without prejudice to the generality of the foregoing) any liability incurred by him in defending any proceedings, civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by him as an officer or employee of the Company and in which judgment is given in his favor (or the proceedings are otherwise disposed of without any finding or admission of any material breach of duty on his part) or in which he is acquitted or in connection with any application under any statute for relief 13 from liability in respect of any such act or omission in which relief is granted to him by the Court. EX-3.26 27 ARTICLES OF ASSOCIATION 1 Exhibit 3.26 No. 2899075 THE COMPANIES ACTS 1985 AND 1989 ------------------------- COMPANY LIMITED BY SHARES ------------------------- MEMORANDUM OF ASSOCIATION of SPARKLING SPRING WATER UK LIMITED 1. The name of the Company is "sparkling Spring Water UK Limited". 2. The registered office of the Company will be situated in England and Wales. 3. The object of the Company is to carry on business as a general commercial company. In particular, but without prejudice to the generality of the foregoing, the Company has the following objects: (a) (i) To manufacture, buy, sell, improve, treat, preserve, fine aerate, mineralise, bottle and otherwise deal in spring mineral and aerated waters and other liquids of every description and to carry on all or any of the business of manufacturers, bottlers, merchants and distributors of and dealers in spring mineral and aerated waters and other liquids of every description. (ii) To purchase, lease or otherwise acquire bottles, drums and other containers for water and other liquids and supply the same to customers. 2 (iii) To supply maintenance, cleaning and sanitation services. (b) To purchase, take on lease or in exchange, hire or otherwise acquire and hold, for any estate or interest, and manage any lands, buildings, servitudes, easements, rights, privileges, concessions, machinery, plant, stock-in-trade and any heritable or moveable real or personal property of any kind. (c) To purchase or otherwise acquire, dispose of, protect, extend and renew any patents, registered designs, trade marks, and service marks (whether registered or not) copyright, design right or any similar property rights including those subsisting in inventions, designs, drawings, performances, computer programs, semi-conductor topographies, confidential information, business names, goodwill and the style of presentation of goods or services and applications for protection thereof which may seem to the Company capable of being used for any of the purposes of the Company, or the acquisition of which may seem calculated directly or indirectly to benefit the Company and to use, exercise, develop, receive or grant licenses in respect of or otherwise turn to account any of the same for any purpose whatsoever, whether manufacturing or otherwise, which the Company may think calculated directly or indirectly to achieve these objects. (d) To form, promote, subsidize and assist companies, syndicates or other bodies of all kinds and to issue on commission or otherwise underwrite, subscribe for and take or guarantee the payment of any dividend or interest on any shares, stocks, debentures or other capital or securities or 3 obligations of any such companies, syndicates or other bodies, and to pay or provide for brokerage commission and underwriting in respect of any such issue. (e) To enter into partnerships or into any arrangement for sharing profits, union of interests, co-operation or otherwise with any person or company for the purpose of carrying on business within any of the objects of the Company. (f) To carry on any other business which may seem to the Company capable of being conveniently carried on in connection with the above or calculated directly or indirectly to enhance the value of or render profitable any of the Company's property or rights. (g) To purchase or otherwise acquire and undertake all or any part of the business, property, liabilities and transactions of any person, body or company carrying on any business which this Company is authorized to carry on, or possessed of property, assets or rights suitable for any of the objects of the Company. (h) To develop, work, improve, manage, lease, mortgage, charge, pledge, turn to account or otherwise deal with all or any part of the property, assets or rights of the Company, to surrender or accept surrender of any lease or tenancy or rights, and to sell or deal with the property, assets, business, rights or undertaking of the Company, or any part thereof, and on such terms and for such consideration as the Company may think fit, and including for cash or shares, debentures or securities of any other company. 4 (i) To build, construct, erect, maintain, alter, replace or remove any buildings, works, offices, erections, plant, machinery, tools, equipment or otherwise as may seem desirable for any of the businesses or in the interests of the Company, and to manufacture, buy, sell, lease or otherwise acquire and generally deal in any plant, tools, machinery, goods or things of any description which may be conveniently dealt with in connection with any of the Company's objects. (j) To manage and conduct the affairs of any companies, firms, bodies and persons carrying on business of any kind whatsoever, and in any part of the world. (k) To enter into, carry on and participate in financial transactions and dealings and operations of all kinds and to take any steps which may be considered expedient for carrying into effect such transactions, dealings and operations including, without prejudice to the generality of the foregoing, borrowing and lending money and entering into contracts and arrangements of all kinds. (l) To borrow or raise money in such manner as the company shall think fit and in particular by the issue (whether at par or at a premium discount and for such consideration as the Company may think fit) of bonds, debentures or debenture stock (payable to bearer or otherwise), mortgages or charges, shares or other securities, perpetual or otherwise, and, if the Company thinks fit, charged upon all or any of the Company's property (both present and future) and undertaking including its uncalled capital and further, if so 5 thought fit, convertible into any stock or shares or securities of the Company or any other company, and collaterally or further to secure any obligations of the Company by a trust deed or other assurance or pledge. (m) To guarantee or otherwise support or secure, either with or without the Company receiving any consideration or advantage and whether by personal covenant or by mortgaging or charging all or part of the undertaking, property, assets and rights present and future and uncalled capital of the Company or by both such methods or by any other means whatsoever, the liabilities and obligations of and the payment of any moneys whatsoever (including but not limited to capital, principal, premiums, interest, dividends, costs and expenses on any stocks, shares or securities) by any person, firm or company whatsoever including but not limited to any company which is for the time being the holding company or a subsidiary (both as defined by section 736 Companies Act 1985) of the Company or of the Company's holding company or is controlled by the same person or persons as control the Company or is otherwise associated with the Company in its business. (n) To grant indemnities of every description and to undertake obligations of every description. (o) To make, draw, accept, exchange, endorse, negotiate, execute and issue promissory notes, bills of exchange or other negotiable instruments or payment orders and to receive money on deposit or loan. 6 (p) To pay all or any expenses incurred in connection with the formation and promotion and incorporation of the Company and to pay commission to and remunerate any person or company for services rendered in underwriting or placing, or assisting to underwrite or place, any of the shares in the Company's capital or any debentures or other securities of the Company, or in or about the formation or promotion of the Company or the conduct of its business. (q) To pay for any property or rights acquired by the Company in such manner as the Company may think fit, including payment either in cash or fully or partly paid-up shares with or without preferred or deferred rights in respect of dividend or repayment of capital or otherwise, or by any securities which the Company has power to issue, or partly in one mode and partly in another and generally on such terms as the Company may determine. (r) To accept payment for any property or rights sold or otherwise disposed of or dealt with by the Company in such manner as the Company may think fit, including payment either in cash, by installments or otherwise, or in fully or partly paid-up share of any company or corporation, with or without deferred or preferred rights in respect of dividend or repayment of capital or otherwise, or in debentures or mortgage debentures or debenture stock, mortgages or other securities of any company or corporation, or partly in one mode and partly in another, and generally on such terms as the Company may determine. 7 (s) While the Company remains a private company, and subject to the provisions of the Companies Act 1985, to: [ MISSING PAGE TO BE TYPED IN] (t) (u) (v) (w) (x) To procure the Company or any branch or representative of it to be registered or recognized in any country or place abroad or with any applicable regulatory authority. (y) To obtain any provisional or other order or Act of Parliament of the United Kingdom or of the legislature of any other State or jurisdiction for enabling the Company to carry any of its objects into effect, or for effecting any modifications to the Company's constitution, or for any other purpose which may seem expedient, and to oppose or make representations in connection with any proceeding, proposal or application which may seem calculated, directly or indirectly, to prejudice the Company's interests. (z) To appoint any person or persons, firm or firms, company or companies to be the attorney or agent of the Company and to act as agents, managers, secretaries, contractors or in similar capacity. (aa) To insure the life of any person who may, in the opinion of the Company, be of value to the Company as having or holding for the Company 8 interests, goodwill or influence or other assets and to pay the premiums on such insurance. (ab) To establish and maintain or procure the establishment and maintenance of contributory or non-contributory pension or superannuation funds of the benefit of the person referred to below, to grant emoluments, pensions, allowances, donations, gratuities, loans and bonuses to such persons and to make payments for or towards insurance on the life or lives of such persons; to establish, subsidize, subscribe to or otherwise support any institution, association, society, club, other establishments, or fund, the support of which may, in the opinion of the Company, be calculated directly or indirectly to benefit the Company or any such persons, or may be connected with any place where the Company carries on business: to institute and maintain any institution, association, society, club or other establishment of profit-sharing scheme, share incentive scheme or employees' share scheme calculated to advance the interests if the Company or to benefit such persons; to institute and maintain or assist in the institution or maintenance of any scheme calculated to promote the purchase or holding of shares of or securities in the Company by the public, any section thereof or such persons; and, subject to the provisions of the Act, to lend money or make payments to, or guarantee or give an indemnity in respect of, or to give any financial or other assistance to, any such person, or trustees on their behalf or any other person, for the purposes of, or to facilitate the institution or maintenance of, any such 9 schemes; to join, participate in and subsidize or assist any association of employers or employees or any trade association; and to subscribe or guarantee money for charitable or benevolent objects or for any public, general or useful object or for any exhibition; the said persons are any persons who are or were at any time in the employment or service of the Company or of any of its businesses or of any company which was or is for the time being the holding company or a subsidiary (both as defined by section 736 Companies Act 1985) of the Company or of the company's holding company or is otherwise associated with the Company or any of its businesses or who are or were at any time directors or officers of the Company or of such other company or business aforesaid, or holding or who hold or who held any salaried employment or office in the Company or such other company or business, and the families (including former spouses) of them or any person who is or was dependent on them. (ac) To purchase and maintain insurance for the benefit of any persons who are or were at any time directors, officers or employees of the Company or any other company which is a subsidiary or subsidiary undertaking of the Company or in which the Company has any interest, whether direct or indirect, or who are or were at any time trustees of any pension fund in which any employee of the Company or of any other such company or subsidiary undertaking are or have been interested indemnifying such persons against liability for negligence, default, breach of duty or breach of trust or any other liabilities which may be lawfully insured against. 10 [CANNOT READ COPY - FOLLOWING NEED TO BE INSERTED] (ad) (ae) (af) It is hereby declared that: (i) (ii) 4. The liability of the members is limited. 5. The share capital of the Company is (pound)100 divided into 100 Ordinary Shares of (pound)1 each. NOTE: By Ordinary Resolution of the Shareholders passed on 3rd June 1994 the authorized share capital of the Company was increased from (pound)100 divided into 100 Ordinary Shares of (pound)1 each to (pound)1,990,000 divided into 1,990,000 Shares of (pound)1 each by the creation of 1,989,900 new Ordinary Shares of (pound)1 each. We, the entity whose name, address and description is subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association and we agree to take the number of shares in the capital of the company set opposite our name. 11 - -------------------------------------------------------------------------------- Number of Shares taken NAME, ADDRESS AND DESCRIPTION by Subscriber OF SUBSCRIBER (in words) - -------------------------------------------------------------------------------- Norton Rose Limited, One Blackfriars House, P.O. Box 570, 19 New Bridge Street, London EC4V 6DH Paul Edelstyn (authorized signatory) - -------------------------------------------------------------------------------- DATED this 7th February 1994 WITNESS to the above Signature: Matthew Rutter, Blackfriars House P.O. Box 570, 19 New Bridge Street, London EC4V 6DH Trainee Solicitor 12 - -------------------------------------------------------------------------------- NAME, ADDRESS AND DESCRIPTION OF SUBSCRIBER - -------------------------------------------------------------------------------- Norton Rose Limited, One Blackfriars House, P.O. Box 570, 19 New Bridge Street, London EC4V 6DH Paul Edelstyn (authorized signatory) - -------------------------------------------------------------------------------- DATED this 7th February 1994 WITNESS to the above signature: Matthew Rutter, Blackfriars House P.O. Box 570, 19 New Bridge Street, London EC4V 6DH Trainee Solicitor 13 Annex A THE COMPANIES ACTS 1985 and 1989 -------------------------- COMPANY LIMITED BY SHARES -------------------------- SPECIAL RESOLUTION of SPARKLING SPRING WATER UK LIMITED Passed on 7th June 1994 AT an Extraordinary General Meeting of the above-named Company, duly convened, and held on 7th June 1994, the following Resolution was duly passed as a Special Resolution: SPECIAL RESOLUTION THAT the Articles of Association be amended by the addition of the following new Article 2.6: 2.6 (a) No dividend shall be declared or paid by the Company during the Security Period (as defined in the Credit Agreement) without the prior written consent of the Bank (as defined in the Credit Agreement). 14 (b) For the purposes of this Article 2.6, "Credit Agreement" means the credit agreement of even date as the date of adoption of this Article 2.6 and made between the Company (1) and National Westminster Bank plc (as the Bank) (2)". ------------------------------ Chairman EX-3.27 28 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.27 The Companies Act 1985 ------------------------------ Company Limited By Shares ------------------------------ MEMORANDUM OF ASSOCIATION of AQUAPORTE (UK) LIMITED 1. The name of the company is "AQUAPORTE (UK) LIMITED" 2. The registered office of the Company will be situated in England. 3. The objects for which the Company is established are: (1) To carry on all or any of the following businesses: Representatives, agents, factors, distributors, importers, exporters, manufacturers and wholesale and retail dealers for or on behalf of any individual, company, firm or other body or as principals in and about every kind of marketable product, process, materials and services of whatever description, and for these purposes to negotiate and handle contracts and agreements of all kinds, to act as representatives and agents of and for any individual, company, firm, association, authority, organization or other body in any part of the work and for any purpose whatever, to tender for and to place contracts, investments and other rights, to act for and to provide all kinds of services, agencies and consultancies to all or any parties or prospective parties to any contract or other agreement, and to carry on business as advertising 2 and publicity agents, sales promoters, marketing and market research specialists, direct selling and mail order specialists, exhibition and display contractors and promoters, merchandising agents, warehousers, storers, packers, customs house brokers, shipping and forwarding agents, clearing agents, wharfingers, insurance brokers, carriers, hauliers and providers of all kinds of facilities in connection with or ancillary to any of the above businesses and all other businesses at the discretion of the Directors. (2) To buy, sell, export, manufacture and deal in all kinds of goods, stores and equipment whether in connection with any of the above activities or otherwise and to act as agents for all purposes. (3) To apply for, purchase or otherwise acquire any patents, licenses, concessions, privileges and like rights, conferring a non-exclusive or exclusive or limited right to use, or any secret or other information as to any invention which may seem capable of being used for any of the purposes of the Company, or the acquisition of which may seem calculated directly or indirectly to benefit the Company and to use, exercise, develop, grant licenses in respect of, or otherwise turn to account, the rights and information so acquired. (4) To sell, improve, manage, develop, lease, mortgage, let, charge, dispose of, turn to account, or otherwise deal with all or any part of the undertaking or property or rights of the Company, and to sell the undertaking of the Company, or any part thereof for such consideration as the Company may think fit, and in particular for cash, shares, debentures or debenture stock 2 3 or other obligations, whether fully paid or otherwise, of any other company. (5) To carry on the business of commission agents, factors, general merchants and dealers in every description of goods, exporters and importers, concessionaires, wholesale and retail traders, carriers, warehousemen, designers, advertising contractors or agents, or trustees, brokers or agents for any company. (6) To manufacture, refine, repair, purchase, sell, export, import, deal in or let on hire all kinds of goods, substances and other articles which may be advantageous to the Company or which any of the customers or other companies having dealings with the Company may from time to time require. (7) To carry on any other activity and do anything of any nature which may seem to the Company capable of being conveniently carried on or done by the Company in connection with the above, or may seem to the Company calculated directly or indirectly to benefit the Company. (8) To purchase, take on lease or license or in exchange, apply for, hire, renew or otherwise acquire and hold for any estate or interest, and to sell, let, license or otherwise dispose of, in whole or in party, any lands, buildings, machinery, rights, stock-in-trade, business concerns, chooses in action, and any other real and personal property of any kind including all of the assets of the Company and to perform any services or render any consideration and to construct, equip, alter and maintain any buildings, works and 3 4 machinery necessary or convenient for the Company's business and in each case for any consideration which may be thought fit. (9) To enter into partnership or any other arrangement for sharing profits or joint adventure or co-operation with any company carrying on, engaged in or about to carry on or engage in any business or transaction capable of being conducted so as directly or indirectly to benefit the Company, and to subsidize or otherwise assist any such company. (10) To invest and deal with moneys of the Company not immediately required in or upon such investments (other than shares in the Company) and in such manner as may from time to time seem expedient. (11) To lend money to such companies with or without security and otherwise on such terms as may seem expedient. (12) To guarantee, grant indemnities in respect of, support or secure, whether by personal convenant or by mortgaging or charging all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company or by both such methods, the performance of the contracts or obligations and the repayment or payment of the principal and premium of an interest and dividends on any securities or obligations of any company whether having objects or engaged or intending to engage in business similar to those of the Company or not. (13) To borrow and raise money and to secure or discharge any debt or obligation of or binding on the Company in such manner as may be thought fit an din particular by mortgages and charges upon the undertaking and all or any of the property and assets (present and future) and the uncalled 4 5 capital of the Company, or by the creation and issue on such terms as may be thought expedient of securities of any description. (14) To draw, make, accept, endorse, discount, execute and issue promissory notes, bills of exchange, shipping documents and other negotiable or transferable instruments, and to buy, sell and deal in foreign currencies. (15) To grant pensions, allowances, gratuities and bonuses to existing or former employees and officers (including Directors) of the Company or of any company in which the Company (directly or through other companies) holds shares or of any predecessor in business of the Company or of its holding company, or to their dependents or relations or connections, and to make payments towards insurance for any such purpose, and to establish or support trusts, funds or schemes (whether contributory or non-contributory) for any such purposes or any other institutions, trusts, funds, schemes, clubs and conveniences calculated to benefit any such persons. (16) To promote or assist in promoting any company or companies in any part of the world and to subscribe for shares therein or other securities thereof for the purpose of carrying on any business which the Company is authorized to carry on or for any other purpose which may seem directly or indirectly calculated to benefit the Company. (17) To amalgamate with any other company in any manner whatsoever (whether with or without a liquidation of the Company). (18) To procure the Company to be registered or recognized in any country or place in any part of the world. 5 6 (19) To compensate for loss of office any Directors or other officers of the Company and to make payments to any persons whose office, employment or duties may be terminated by virtue of any transaction in which the Company is engaged. (20) To pay out of the funds of the Company the costs, charges and expenses of any incidental to the formation and registration of the Company or any company promoted by the Company, the issue of the capital of the Company or any such other company, the negotiations between the promoters preliminary to the formation of the Company, the acquisition by the Company of any property or assets and the accomplishment of all or any formalities which the Company may think necessary or proper in connection with any of the matters aforesaid. (21) To insure with any other company against losses, damages, risks and liabilities of all kinds which may affect the Company. (22) To act as directors or managers of, or to appoint directors or managers of, any subsidiary company or any other company in which the Company is or may be interested. (23) To contribute by donation, subscription, guarantee or otherwise to any public, general, charitable or other useful object whatever. (24) To distribute among the members in specie any property of the Company, or any proceeds of sale or disposal of any property of the Company, but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law. 6 7 (25) To do all or any of the above things in any part of the world, and either as principals, agents, trustees, contractors or otherwise, and either alone or in conjunction with others, and either by or through agents, sub-contractors, trustees, subsidiaries or otherwise. (26) To do all such other things as are incidental or conducive to the above objects or any of them. It is hereby declared that the word "company" in this clause shall (except where referring to the Company) be deemed to include any person or partnership or other body of persons, whether incorporated or not incorporated, and whether domiciled in Great Britain or elsewhere. The intention is that the objects specified in each paragraph of this clause shall, except where otherwise expressed, be in nowise limited or restricted by reference to or inference from the terms of any other paragraph, form the name of the Company or from the order in which such objects are stated, but may be carried out in as full and ample a manner and shall be construed in as wide a sense as if each of the said paragraphs defined the objects of a separate and independent company. 4. The liability of the members is limited. 5.* The share capital of the Company is (pound)100, divided into 100 Ordinary shares of (pound)1 each. - ---------- * Pursuant to an Ordinary Resolution passed on ?th April 1995, the Authorized Share Capital was increased to (pound)40,000, divided into 40,000 Ordinary shares of (pound)1 each. 7 8 WE, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND NUMBER OF SHARES TAKEN DESCRIPTIONS OF SUBSCRIBERS BY EACH SUBSCRIBER - -------------------------------------------------------------------------------- ROBERT JOHN WINDMILL One Inveresk House 1 Aldwych London WC2R OHF Solicitor BETTY PATRICIA DOREEN BAILEY One Inveresk House 1 Aldwych London WC2R OHF CHARTERED SECRETARY - -------------------------------------------------------------------------------- Dated this 7th day of December 1988. Witness to the above Signatures: JOHN STEIN Inveresk House 1 Aldwych London WC2R OHF SOLICITOR 8 EX-3.28 29 ARTICLES OF ASSOCIATION 1 Exhibit 3.28 No. 2331724 The Companies Act 1985 ------------------------------- Company Limited By Shares ------------------------------- ARTICLES OF ASSOCIATION of AQAUPORTE (UK) LIMITED ---------------------------------------------- Incorporated the 29th day of December 1988 ---------------------------------------------- McKenna & Co. Inveresk House 1 Aldwych London WC2R OHF 2 The Companies Act 1985 ------------------------------- Company Limited by Shares ------------------------------- ARTICLES OF ASSOCIATION of AQUAPORTE (UK) LIMITED ----------------------- INTERPRETATION 1. In these Articles: "The Act" means the Companies Act 1985; "Table A" means Table A in the Schedule to the Companies (Tables A to F) regulations 1985 as amended by the Companies (Tables A to F) (Amendment) Regulations 1985. 2. The Regulations contained in Table A shall apply to the Company except in so far as they are excluded by or are inconsistent with these Articles. 3. Regulations 8, 24, 41, 59, 64, 65, 73 to 78, 80, 94 and 118 of Table A shall not apply to the Company. SHARE CAPITAL 4. Subject to any direction to the contrary which may be given by the Company in General Meeting, the directors are unconditionally authorized to allot, create deal with or otherwise dispose of relevant securities (within the meaning of section 80(2) of the Act) to such persons 1 3 (including any director) on such terms and at such time or times as they think fit, provided that no shares shall be issued at a discount. 5. The maximum nominal amount of share capital which the directors may allot or otherwise dispose of in accordance with Article 4 shall be the nominal amount of unissued shares at the date of incorporation of the Company or such other amount as shall be authorized by the Company in General Meeting. 6. The authority conferred on the directors by Articles 4 and 5 shall remain in force for a period of five years from the date of incorporation of the Company and thereafter provided this authority is renewed from time to time by the Company in General Meeting in accordance with Section 80 of the Act. 7. The provisions of Section 89(1) of the Act shall not apply to the Company. LIEN 8. The Company shall have a first and paramount lien on every share for all monies (whether presently payable or note) called or payable at a fixed time in respect of that share, and the Company shall also have a first and paramount lien on all shares registered in the name of any person (whether solely or jointly with others) for all monies owing to the Company from him or his estate either alone or jointly with any other person whether as a member or not and whether such monies are presently payable or not. The directors may at any time declare any share to be wholly or partly exempt from the provisions of this Article. The company's lien on a share shall extend to any amount payable in respect of it. TRANSFER OF SHARES 9. The directors may, in their absolute discretion and without giving any reason therefor, decline to register any transfer of any share whether or not it is a fully paid share. 2 4 PROCEEDINGS AT GENERAL MEETINGS 10. If a quorum is not present within half an hour of the time appointed for a General Meeting, the meeting, if convened on the requisition of members, shall be dissolved; in any other case it shall stand adjourned to such day and at such time and place as the director may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum. 11. A poll may be demanded at any General Meeting by any member entitled to vote thereat. Regulation 46 of Table A shall be modified accordingly. 12. On a show of hands or on a poll votes may be given either personally or by proxy. NUMBER OF DIRECTORS 13. Unless otherwise determined by ordinary resolution, the number of directors shall not be subject to any maximum and the minimum number of directors shall be one. DELEGATION OF POWER 14. The following sentence shall be inserted after the first sentence of Regulation 72 of Table A: "Any committee of directors shall have the power unless the directors direct otherwise to appoint as a member or as members of the committee for any specific purpose any person or persons who are not directors of the Company." ALTERNATE DIRECTORS 15. Any director (other than an alternate director) may appoint any person to be an alternate director and may remove from office an alternate director so appointed by him. 3 5 16. When an alternate director is also a director or acts as an alternate director for more than one director, such alternate director shall have one vote for every director so represented by him (in addition to his own vote if he is himself a director) and when so acting shall be considered as two directors of the purpose of making a quorum if the quorum exceeds two. "(c) he becomes, in the opinion of all his co-directors, incapable by reason of mental disorder of discharging his duties as a director; or" "(e) he is otherwise duly removed from office." REMUNERATION OF DIRECTORS 23. Regulation 82 of Table A shall be amended by the addition of the following: "Such remuneration shall be divided between the directors in such proportion and manner as the directors may unanimously determine or in default of such determination equally, except that any director holding office for less than a year or other period for which remuneration is paid shall rank in such division in proportion to the fraction of such year or other period during which he has held office. Any director who, at the request of the directors, performs special services or goes or resides abroad for any purpose of the Company may receive such extra remuneration by way of salary, commission or participation in profits, or partly in one way and partly in another, as the directors may determine." PROCEEDINGS OF DIRECTORS 24. Regulation 88 of Table A shall be amended by substituting for the sentence: "It shall not be necessary to give notice of a meeting to a director who is absent from the United Kingdom". 4 6 the following sentence: "Notice of every meeting of directors shall be given to each director or his alternate director, including directors and alternate directors who may for the time being be absent from the United Kingdom and have given the Company their address outside the United Kingdom". 25. If and so long as the minimum number of directors specified under these Articles is one, sole director may exercise all the powers conferred on the directors by these Articles, and shall do so by written resolution under his hand and, so long as there is such sole director, Regulations 88 to 90 of Table A shall not apply to the company and Article 23 of these Articles shall have no effect. 26. Any director (including an alternate director) may participate in a meeting of the directors or a committee of directors of which he is a member by means of a conference telephone or similar communicating equipment whereby all persons participating in the meeting can hear each other and participation in a meeting in this manner shall be deemed to constitute presence in person at such meeting. 27. Subject to such disclosure as is required by Section 317 of the Act a director shall be entitled to vote at a meeting of directors or of a committee of directors on any resolution concerning a matter in which he has, directly or indirectly, an interest or duty which is material and which conflicts or may conflict with the interests of the Company. THE SEAL 28. In accordance with Section 39 of the Act the Company may have an official seal for use in any territory, district or place elsewhere than in the United Kingdom. 5 7 NOTICES 29. Any notice required by these Articles to be given by the Company may be given by any visible form on paper, including telex, facsimile and electronic mail, and a notice communicated by such forms of immediate transmission shall be deemed to be given at the time it is transmitted to the person to whom it is addressed. Regulations 111, and 112 of Table A shall be amended accordingly. INDEMNITY 30. Subject to the provisions of the Act but without prejudice to any indemnity to which a director may otherwise be entitled, every director, secretary, auditor or other officer of the Company shall be entitled to be indemnified by the Company against all losses and liabilities sustained or incurred by him in the execution of his duties or in the exercise of his powers or otherwise in connection with his office including, but without prejudice to the generality of the foregoing, any liability incurred by him (a) in defending any proceedings, whether civil or criminal, in which judgment is given in his favor or in which he is acquitted or which are otherwise disposed of without any finding or admission of any material breach of duty on his part, or (b) in connection with any application in which relief is granted to him by the Court from liability in respect of any act or omission done or alleged to be done by him as an officer or employee of the Company. 6 8 - -------------------------------------------------------------------------------- NAMES, ADDRESSES AND DESCRIPTIONS OF SUBSCRIBERS - -------------------------------------------------------------------------------- ROBERT JOHN WINDMILL Inveresk House 1 Aldwych London WC2R OHF SOLICITOR BETTY PATRICIA DOREEN BAILEY Inveresk House 1 Aldwych London WC2R OHF CHARTERED SECRETARY Dated this 7th day of December, 1988 Witness to the above Signatures: JOHN STEIN Inveresk House 1 Aldwych London WC2R OHF SOLICITOR 7 EX-3.29 30 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.29 THE COMPANIES ACTS, 1946 TO 1976 ---------------------------- COMPANY LIMITED BY SHARES ---------------------------- MEMORANDUM OF ASSOCIATION of MARLBOROUGH EMPLOYMENT LIMITED ---------------------------- I. The name of the Company is Marlborough Employment Limited. II. The Registered Office of the Company will be situate in Scotland. III. The objects for which the Company is established are:- 1. To carry on business as an employment agency and to promote and establish contract between employers and employees, partners, vendors and purchasers of and in all types of business, professional practice, trade and property whatsoever, and in particular but without prejudice to the foregoing generality:- (a) To act as agents for the provision of the services of and the procuring of temporary or permanent employment for all types of management or executive staff, professional, commercial, technical, scientific, engineering, electronic and sales and distributive staff of all kinds. (b) To act as agents for the provision of the services of and the procuring of temporary or permanent employment for shorthand typists, copy typists, office machine operators, telephonists, receptionists, clerks, clerkesses, cashiers, bookkeepers, cash room assistants and other classes of clerical, secretarial and office staff and to undertake and transact agency work of all kinds. (c) To set up and maintain Registers of vacancies in all types of professional, technical, scientific and secretarial employment and Registers of all types of 2 staff with full particulars and to make suitable charges for all entries in such Registers and to charge commissions or other fees for successful placings. (d) To carry on business as manufacturers of and dealers in paper, stationary and office requisites of all kinds. (e) To undertake duplicating, copy typing, shorthand typing, printing, lithography, electro typing, photography, photographic printing, photo-lithography, photo-copying, engraving and all other types of transfer and copy work. (f) To carry out as principals or agents all forms of computer operations and data processing, the provision of systems analysis, punch card systems and the renting and application of computer time, and the provision, renting and operating of business accounting machine of all types. (g) To enter into contracts for the provision of scientific, technical, engineering, secretarial and manual assistance of all kinds and to be responsible for the administration, discipline and payment of those providing such assistance. (h) To carry on the business of promotors, organisers and conductors of training and instructional courses of all kinds likely to be required by employers or otherwise in connection with any businesses either alone or in conjunction with Government Training Boards, and that either by means of individual or class tuition, postal tuition or by lectures or otherwise as may be required. (i) To carry on business as advertising contractors or agents, service agents, publicity agents, press agents and press cutting agents, sales consultants and specialists and business advertisers. 2. To carry on any other business which may be conveniently carried on in connection with any of the Company's objects or may be calculated directly or indirectly to enhance the value of or render profitable any of the Company's properties, assets, rights or interests. 3. To carry on all or any of the foregoing businesses either on account of the Company or for others and to buy, sell, manufacture, repair, alter and exchange, let on hire and deal in all kinds of apparatus, articles, goods or things which may be required for the purposes of the businesses carried on by the Company or any of them or which may be supplied, manufactured, sold or dealt in by persons engaged in any such businesses or which may seem capable of being profitably dealt with in connection with any of the said businesses. 4. To acquire and take over all or any part of the property, business and liabilities of any person or company carrying on any business which this Company is authorized - 2 - 3 to carry on, or possessed of any property suitable for the purpose of the Company or which may be conveniently joined or carried on in connection with the business of the Company or calculated directly or indirectly to enhance the value of, or facilitate the realisation of, or render profitable any of the Company's property or rights; and as the consideration for the same to pay cash or to issue shares, debentures or debenture stock of the Company or partly in one of such modes and partly in another or others. 5. To acquire by purchase, ???, lease, exchange, hire or otherwise any heritable or moveable property and any interest therein which the Company may consider expedient to be held for the purposes of the Company and to erect, reconstruct, maintain and repair any buildings thereon and to dispose of by sale, ???, lease, exchange or otherwise any such property, buildings or interest therein. 6. To invest the capital and other moneys of the Company in the purchase, or to lend the same upon the security, of shares, stocks, debentures, debenture stock, bonds, mortgages, obligations and securities of any kind, issued or guaranteed by any company, corporation, or undertaking, of whatever nature constituted or carrying on business in any part of the world, or by any Government, Sovereign, Ruler, Commissioners, public body or authority -- whether in the United Kingdom of Great Britain and Northern Ireland or elsewhere; provided that the moneys of the Company shall neither be employed in the purchase, nor lent upon the security, of its own shares or stock. 7. To sell, exchange or otherwise dispose of, deal with, or turn to account, any of the shares, stocks, and others acquired or agreed to be acquired, and generally to vary the securities and investments of the Company from time to time. 8. To receive, borrow or raise money in such manner as may be thought fit, and for that purpose to issue debentures or debenture stock, perpetual or redeemable, or to draw, make, accept, endorse, discount, sell, execute, deposit, and issue banker's drafts, cheques, bonds of cash credit, bills of exchange, promissory notes and other like instruments and to secure the repayment of any moneys borrowed or, raised or owing by the Company by a charge or lien upon or conveyance of, the whole, or any part of the Company's property or assets, including its uncalled capital, and to give to lenders and creditors, or trustees for their behoof, powers of sale and all or other usual and necessary powers. 9. To lend and advance money or give credit with or without security to such persons or companies and on such terms as may be thought fit, and in particular to persons dealing with the Company. 10. To transact or carry on al kinds of agency business. - 3 - 4 11. To give any guarantee in relation to the repayment of any debentures, debenture stock, bonds, obligations, or other securities, or the payment of any interest or dividends thereon. 12. To guarantee, support or secure, whether by personal covenant or by mortgaging or charging all or any part of the undertaking, property and assets )present and future) and uncalled capital of the Company or by both such methods the performance of the obligations and the repayment or payment of the principal and premium of and interest on any securities or obligations of any company which is for the time being associated with the Company in business or otherwise. 13. To promote any other company for the purpose of acquiring all or any of the property, and undertaking all or any of the liabilities of, this Company or of undertaking any business or operations which may appear likely to assist or benefit this Company, and to place or guarantee the placing of, underwrite, apply for, accept and hold, or subscribe, the whole or any part of the capital or securities of any such company, or to lend money to, or guarantee the performance of the contracts of, any such company, and to amalgamate with any other company or companies. 14. To sell or otherwise dispose of the whole or any part of the undertakings of the Company for such consideration as may be agreed, and in particular for shares, debentures, debenture stock, or securities of any company purchasing the same. 15. To lend money upon the security of any real or heritable property of any description or tenure, or of any interest therein, situated in any part of the world, or of any moveable property. 16. To act as agents, or brokers, and as trustees, for any person, firm or company, and to undertake and perform sub-contracts, and also to not in any of the businesses of the Company through or by means of agents, brokers, sub-contractors, or others. 17. To remunerate any person, firm or company rendering services to this Company, either by each payment or by the allotment to him or them of shares or securities of the Company credited as paid up in full or in part, or otherwise. 18. To provide for the welfare of persons (including Managing Directors and Managers) in or formerly in the employment of the Company, and the wives, widows, families and dependents of such persons by the grant of pensions, allowances or other payments. 19. To pay all or any expenses incurred in connection with the formation, promotion, and incorporation of the Company, or to contract with any person, firm or company to pay the same, and to pay commissions to brokers and others for underwriting, placing, selling or guaranteeing the subscriptions of any shares, - 4 - 5 debentures, or securities of this Company, or of any company promoted by this Company. 20. To effect insurance against risk of loss to the Company. 21. To distribute among the members of the Company in kind any property of the Company, and in particular any shares, debentures, or securities of other companies, belonging to this Company, or of which this Company may have the power of disposing. 22. To do all such other things as may be deemed incidental or conducive to the attainment of the above objects, or any of them. And it is hereby declared that the word "company" in this Clause, except where used in reference to this Company, shall be deemed to include any partnership or other body of persons whether incorporated or not and whether domiciled in the United Kingdom or elsewhere; that the words "property" and "assets" shall include heritable or real estate as well as moveable or personal estate; that words importing the singular number only shall include the plural number and vice versa; and that objects specified in each paragraph of this clause shall except where otherwise expressed in such paragraph, be in no ??? limited by reference to or inference from any other paragraph. IV. The liability of the members is limited. V. The Share Capital of the Company is (pound)50,000 divided into 50,000 Ordinary Shares of (pound)1 each. The shares forming the capital for the time being of the Company may be divided into such classes and have attached thereto such respective preferences, rights or privileges and be subject to such conditions or restrictions as are defined by the Articles of the Association for the time being of the Company. WE, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association, and we respectively agree to take the number of Shares in the Capital of the Company set opposite our respective manner. - -------------------------------------------------------------------------- Names Addresses and Descriptions of Number of Shares taken Subscribers. by each Subscriber - -------------------------------------------------------------------------- JOHN DUFFY IAN J. BLACK - -------------------------------------------------------------------------- - 5 - 6 Dated the day of 1978 Name, address and description of witness to the above Signatures: - 6 - EX-3.30 31 ARTICLES OF ASSOCIATION 1 Exhibit 3.30 THE COMPANIES ACTS, 1948 TO 1976 ---------------------- COMPANY LIMITED BY SHARES --------------- ARTICLES OF ASSOCIATION OF MARLBOROUGH EMPLOYMENT LIMITED 1. The regulations contained in Part I of Table "A" appended to the Companies Act, 1948 shall apply to and shall be the regulations of the Company, save in so far as they are varied hereby or inconsistent herewith. MODIFICATION OF TABLE "A" PART I 2. Regulations 24 and 75 of Part I of Table "A" shall not apply to the Company and the following regulations shall be modified: Regulation 7, so that the words "Except as required by law, no person shall be recognized by the Company as holding any share upon any trust, and "shall be held to be delete and there shall be added to the end of the said regulation the words "The Company shall, however, be entitled to register trustees as such in respect of any shares." Regulation 11, so that the words "(not being a fully paid share)" and "(other than fully paid shares)" shall be held to be delete. Regulation 22, so that the words "and transferee" shall be held to be delete. Regulation 28, so that there shall be added immediately after the word "every" the word "confirmation". Regulation 33, so that there shall be added to the end thereof the words "and all expenses that may have been incurred by the Company by reason of such non-payment." Regulation 53, so that for the words "three members present in person" there shall be substituted the words "two members present in person or by proxy". 2 Regulation 58, so that the word "two" shall be substituted for the word "three" where it occurs in paragraph (b) of that regulation. Regulation / Regulation 79, so that the words from and including the word "Provided" to the end of the clause shall be held to be delete. Regulation 84, sot hat for Clause (2) thereof there shall be substituted the following clause, namely "(2) A Director shall be entitled to vote in respect of any contract or arrangement in which he is interested and, notwithstanding any declaration he has made in such respect, his vote shall be counted and he shall be counted in the quorum present at the meeting;" that Clause (4) thereof shall be held to be delete and that Clause (5) thereof be renumbered as Clause (4). Regulation 86, so that the words "and every Director present at any meeting of Directors or Committee of Directors shall sign his name in a book to be kept for that purpose" shall be held to be delete. Regulation 88, so that in Clause (a) thereof the word and figures "or 195" shall be held to be delete and that there shall be added to the end of Clause (f) thereof the words "and they pass a resolution that he has by reason of such absence vacated office." PRIVATE COMPANY 3. The Company is hereby declared to be a Private Company in the sense of the Companies Act, 1948. 4. The number of members of the Company (exclusive of persons who are in the employment of the Company and of persons who, having been formerly in the employment of the Company, were while in such employment and have continued after the determination of such employment to be members of the Company) shall not exceed fifty; provided that for the purposes of this provision where two or more persons hold one or more shares in the Company jointly they shall be treated as a single member and no transfer which would increase such number of members beyond fifty shall be valid and the Directors shall refuse to recognize or register any transfer which would so increase such number. 5. No invitation shall be made to the public to subscribe for any shares or debenture of the Company, and the Company and its Directors, Officials, Agents, and all others acting or that may act on its behalf, are hereby prohibited from making any such invitation to the public. 6. The Directors may, in their absolute discretion and without assigning any reason therefor, decline to register any transfer of any share, whether or not it is a fully paid share, to a person who is not a member of the Company. - 2 - 3 TRANSFER / TRANSFER OF SHARES 7. As regards all transfers of shares, the following provisions shall (subject to the provisions of Article 6 hereof) receive effect and no member shall be entitled to transfer his shares, or any of them, otherwise than in accordance with the following provisions: (a) Any member who desires to sell or transfer any shares shall be bound to offer the same for sale as hereinafter provided. (b) The member proposing to transfer any shares (hereinafter called "the proposing transferor") shall give notice in writing (hereinafter called "the transfer notice") to the Company that he desires to transfer the same. Such notice shall specify the number of shares to be transferred and the price which the proposing transferor considers to be the fair value thereof and shall constitute the Company as his agent for the sale of the shares to any member or members of the Company at the price so fixed or at the fair value to be fixed as provided in paragraph (e) below. The transfer notice shall not be revocable except with the sanction of the Directors. On receipt of the transfer notice, the Company shall within fourteen days thereof notify all members of the Company of the shares offered for sale and shall give all members equal facilities for the purchase thereof. (c) If the Company shall, within four weeks after being served with such notice, find a member willing to purchase the shares (hereinafter called "the purchasing member") and shall give notice thereof to the proposing transferor, he shall be bound upon payment of the fair value, to transfer the shares to the purchasing member. (d) In case there shall be more than one purchasing member, the shares offered for sale shall be divided among such purchasing members in the proportion as nearly as possible in which they already hold shares in the Company, provided however, that no purchasing member shall be liable to take a greater number of shares than he shall have offered to purchase, and that any shares which cannot be so divided without creating fractions shall be apportioned by the Directors among the purchasing members as they shall think proper. (e) In case any difference arises between the proposing transferor and a purchasing member as to the fair value of a share either party may apply to a Chartered Accountant, to be appointed by the President for the time being of the Institute of Chartered Accountants in Scotland, who shall certify in writing the sum which in his opinion is the fair value, and such certificate shall be final and binding on the proposing transferor and the purchasing member concerned, and such sum shall be deemed to be the fair value. Such certificate shall not affect a sale of shares by the proposing transferor to another purchasing member, if neither party has applied to a Chartered Accountant as aforesaid. - 3 - 4 (f) / (f) If within five weeks after the service of the transfer notice on the Company the proposing transferor shall not receive notice that his offer to sell is accepted wholly or in part as aforesaid, he may, subject to paragraph (g) below, within six calendar months of serving the said notice, sell or dispose of his shares or so many thereof as shall not have been purchased as aforesaid to any other person, at the price at which he shall have so offered them or at any higher price, but not at any less price until he shall have again offered such shares at such less price and for the same period as before for sale as aforesaid. (g) A notice of acceptance of the offer of the proposing transferor to sell under paragraph (C) above, if sent by post, shall be deemed to have been received by the proposing transferor if it is proved that the letter containing the acceptance was properly addressed and put into the post office. (h) In the event of the death, bankruptcy or resignation of any Director of the Company, or in the event of any Director ceasing for any reason to be a Director of the Company, the remaining Directors shall be entitled, on giving notice in writing accordingly at any time within a period of six months after such event to such Director or the legal personal representatives or trustee in bankruptcy of such Director, as the case may be, to require him or them to sell, as at the date of receipt of such notice, the whole shares in the capital of the company held by him or them at such date all to the same effect as if he or they had served a transfer notice at such date of receipt on the Directors in terms of paragraph (b) of this Regulation in respect of all such last mentioned shares provided however that the price to be paid for such shares shall be a price equivalent to the net asset value thereof as determined by the auditors for the time being of the Company. CAPITAL AND SHARES 8. The Share Capital of the Company is #50,000 divided into 50,000 Ordinary Shares of #1 each. 9. The Shares in the original capital of the Company shall be under the control of the Directors who may allot and issue the same to such persons on such terms and conditions and at such time as the Directors think fit, provided that no shares shall be issued at a discount except as provided by Section 57 of the Companies Act, 1948. ALTERATIONS OF CAPITAL / ALTERATION OF CAPITAL 10. Subject as mentioned below, new shares created on any increase of capital may, without the sanction of the holders of any class of shares, be issued as Ordinary Shares ranking pari passu with the existing Ordinary Shares of the Company or with any such preferred, deferred or other special rights, whether in respect of dividend, return of capital, voting or - 4 - 5 otherwise, as may from time to time be determined either by Ordinary Resolution of the Company in General Meeting or by resolution of the Directors passed in pursuance of authority so to do delegated to them by Ordinary Resolution of the Company in General Meeting, and subject to the provisions of the Act the Company may issue Preference Shares, which are redeemable, or at the option of the Company are liable to be redeemed, on such terms and in such manner as the Company before the issue thereof may by Special Resolution determine. 11. Unless otherwise determined by the General Meeting increasing the capital, all new shares shall be offered to the members in proportion as nearly as may be to the number of such shares held by them except in cases where an issue is made in respect of the purchase of any heritable or moveable property and where such shares are issued as fully or partly paid in whole or part payment therefor, and such offer shall be made by notice specifying the number of shares offered and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of such time, or on receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the Directors may, subject to these Articles, dispose of the same in such manner as they may think most beneficial to the Company. The Directors may likewise so dispose of any new shares which (by reason of the ratio the new shares bear to shares held by persons entitled to an offer of new Shares) cannot, in the opinion of the Directors, be conveniently offered under this Article. GENERAL MEETINGS 12. A resolution in writing signed by or on behalf of all the members for the time being entitled to vote shall be as effective for all purposes as a Resolution duly passed at a General Meeting of the Company duly convened and held, and may consist of several documents in the like form each signed by or on behalf of one or more members. DIRECTORS 13. Unless otherwise determined by a General Meeting, the number of Directors shall be not less than two. The first Directors shall be appointed by the subscribers of the Memorandum of Association. 14. The remuneration of the Directors (other than the Managing Directors, if any,) shall be divided amongst them as they shall determine, or failing agreement, equally. 15. / 15. If any Director shall be called upon to perform extra or executive or special services of any kind for whatever period or periods, or to travel or to go or reside abroad for any business or purposes of the Company, he shall be entitled to receive such sum as the Directors may think fit for expenses of living, and also such remuneration as the Directors may think fit, either as fixed sum or as a percentage of profits or otherwise, and such remuneration may, as the Directors shall determine, be either in addition to or in - 5 - 6 substitution for his share in the remuneration of the Directors otherwise provided and the same shall be charged as part of the ordinary working expenses. 16. A Director shall not require a share qualification but nevertheless shall be entitled to attend and speak at any General Meeting of, and at any separate meeting of the holders of any class of shares in, the Company. PROCEEDINGS OF DIRECTORS 17. A resolution executed in accordance with Regulation 106 of the said Part I of Table "A" appended to the Companies Act, 1949, may be in the form of separate documents each signed by one or more Directors. NOTICES 18. If a member has no registered address in the United Kingdom and has not supplied to the Company an address within the United Kingdom for the giving of notices to him, a notice addressed to him at his last known address in the United Kingdom shall be deemed to be duly given to him on the day on which it is posted. WINDING UP 19. If any distribution is proposed to be made under Regulation 135 of the said Part I of Table "A" appended to the Companies Act, 1948, otherwise than in accordance with the existing rights of the members, every member shall have the same right of dissent and other ancillary rights, as if such resolution therefor were a Special Resolution passed pursuant to Section 287 of the Companies Act, 1948. - -------------------------------------------------------------------------------- Names, Addresses and Descriptions of Subscribers - -------------------------------------------------------------------------------- JOHN DUFFY IAN J. BLACK - -------------------------------------------------------------------------------- Dated this ________ day of ___________, 19__. Name, address and description of witness to the above signature. - 6 - 7 THE COMPANIES ACT 1985 SPECIAL RESOLUTION (Pursuant to Companies Act 1985 S.378(2)) of MARLBOROUGH EMPLOYMENT LIMITED COMPANY NUMBER 66241 PASSED 5th July 1996 ----------------------- At an EXTRAORDINARY GENERAL MEETING of the members of the said company, after due notice specifying the intention to propose the following Resolution as a SPECIAL RESOLUTION had been given, held at GLASGOW in the Region of Strathclyde on the 5th day of July, 1996 the following SPECIAL RESOLUTION was duly passed. "That paragraph 111(i) of the Memorandum and Articles of Association be deleted and replaced with the following: To carry on the business of holding, management and investment company and to improve, develop, hold as an investment and undertake the management of any property, real or personal, or any interest therein as owners, trustees, agents or otherwise and generally to acquire, hold, deal in, dispose of or turn in account any lands, buildings, estates, plant and equipment, commodities, options, shares, stocks, debentures, bonds, loans, annuities and investments and securities of any description, businesses, policies of insurance, patents and licenses and other such property or rights for or on behalf of any company, whether subsidiary or not; to promote sports drinks and associated products within the group; to provide accounting, company secretarial and general office services and to act as brokers of and agents for and distributors of goods and services of all kinds, to tender for and to place contracts and investments on behalf of any person, firm or company, to co-ordinate and administer the policies and trading activities of any companies with which the company may be associated, and generally to act as financiers, concessionaires, factors, capitalists and underwriters and to guarantee and secure to act as financiers, concessionaires, factors, capitalists and underwriters and to guarantee and secure the payment of money or performance or fulfillment of contracts and obligations by any company, firm or person and to advance money and lend assets of any description, with or without security, and on such terms and in such manner as may from time to time seem expedient". ----------------------------------- Company Secretary EX-3.31 32 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.31 THE COMPANIES ACT 1985 PRIVATE COMPANY LIMITED BY SHARES MEMORANDUM OF ASSOCIATION OF OFFICE OASIS LIMITED 1. The name of the Company is "OFFICE OASIS LIMITED" 2. The Registered Office of the Company will be situate in Scotland. 3. The objects for which the Company is established are: (A) To create, establish and maintain an organization for the provision and supply of water cooling systems and cooled water to commercial and industrial premises including offices, public houses, shops, factories and workplaces of all kinds; to provide maintenance, service and repair insurance plans, contracts, agreements, and other schemes in relation thereto; to maintain, service, repair, install, fit, adapt, purchase, buy, sell, import, export, market, distribute, supply, act as agents for and dealers in such water cooling systems, equipment, devices, appliances, accessories, components and spare parts of all and every description; to act as refrigeration, air conditioning, ventilation, heating and lighting engineers and contractors, electrical, electronic, mechanical and general engineers' and contractors, plumbers, joiners, glaziers, electricians, gas filters, ____ and transport contractors; builders and building contractors, builders supply merchants and to provide services of all kinds which may be required (directly or indirectly) in connection with any of the foregoing; to manufacture, buy, sell maintain, repair and deal in equipment, plant, vehicles, machinery, tools, articles and things of all kinds capable of being used for the purpose of the above-mentioned businesses, or any of them, or likely to be required by customers of or persons having dealings with the Company. 2 (B) To carry on any other trade or business whatsoever which can, in the opinion of the Board of Directors, be advantageously carried on by the Company or calculated directly or indirectly to enhance any of the businesses of the Company. (C) To purchase, take on lease or in exchange, hire or by any other means acquire and hold for any estate or interest any property, lands, buildings, easements, rights, privileges, concessions, patents, parent rights, licenses, secret processes, machinery, equipment, plant, stock-in-trade and any real or personal property of any kind considered necessary, expedient or convenient in connection with the Company's business. (D) To borrow or raise or secure the payment of money in any manner the Company shall think appropriate for the purpose of or in connection with the Company's business, and for the purposes of or in connection with the borrowing or raising of money by the Company to become a member of any building society. (E) To mortgage and charge the undertaking and all or any of the real and personal property and assets, present or future, and all or any of the uncalled capital for the time being of the Company, and to issue at par or at a premium or discount, and for such consideration and with and subject to such rights, powers, privileges and conditions as may be thought fit, debentures or debenture stock, either permanent or redeemable or repayable, and collaterally or further to secure any securities of the Company by a trust deed or other assurance. To issue and deposit any securities which the Company has power to issue by way of mortgage to secure any sum less than the nominal amount of such securities, and also by way of security for the performance of any contract or obligations of the Company or of its customers or other persons or corporations having dealings with the Company, or in whose businesses or undertakings the Company is interested, whether directly or indirectly. (F) To guarantee the payment of any monies and the performance of any contracts, liabilities, duties, obligations or engagements of any company, society, association, body, firm or person, including without prejudice to the foregoing generality any company which is for the tie being the Company's holding or subsidiary company as defined by Section 736 of the Companies Act 1985 or any re-enactment thereof or a subsidiary of such holding company, or otherwise associated with the Company in business and whether or not this Company receives directly or indirectly any benefit, consideration or advantage therefrom, and to secure the said payment, performance, obligations and others in such manner of way as the Company may think fit by granting any Mortgage, Charge, Floating Charge, Standard Security, Assignation, Pledge, Lien or other security upon the whole or any part of the Company's undertaking, property, revenue, or assets (whether present or future) including uncalled capital with powers of sale and other usual and necessary powers. (G) To receive money or loan or deposit upon such terms as the Company may approve and to guarantee the obligations and contracts of any person or corporation. (H) To draw, make, accept, endorse, negotiate, discount and execute promissory notes, bills of exchange and other negotiable or transferable instruments. 3 (I) To invest and deal with the monies of the Company not immediately required for the purposes of its business in or upon such investments, and in such manner as may from time to time be determined necessary. (J) To apply for, purchase or otherwise acquire and protect, prolong, renew and hold, use, develop, sell, license or otherwise dispose of or deal with patents, copyrights, designs, trade marks, brevets d'invention and concessions and the like and any interest therein. (K) To pay for any property or rights acquired by the Company, either in cash or fully or partly paid-up shares, with or without preferred or deferred or special rights or restrictions in respect of dividend, repayment of capital, voting or otherwise, or by any securities which the Company has power to issue, or partly in one mode and partly in another, and generally on such terms as the Company may determine. (L) To accept payment for any property or rights sold or otherwise disposed of or dealt with by the Company, either in cash or by installments or otherwise, or in fully or partly paid-up shares of any company or corporation, with or without preferred or deferred or special rights or restrictions in respect of dividend, repayment or capital, voting or otherwise, or in debentures or mortgage debentures or debenture stock, mortgages or other securities of any company or corporation, or partly in one mode and partly in another, and generally on such terms as the Company may determine, and to hold, dispose of or otherwise deal with any shares, stock or securities so acquired. (M) To form, promote, finance or assist any other company whether for the purpose of acquiring all or any of the undertaking, property and assets of the Company or for any other purpose for which the Company may consider to be expedient. (N) to establish and maintain or procure the establishment and maintenance of any non-contributory or contributory pension or superannuation funds for the benefit of, and to give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company, or of any company which is for the time being the Company's Holding or Subsidiary company as defined by Section 736 of the Companies Act 1985, or otherwise associated with the Company in business or who are or were at any time Directors or officers of the Company or of any such other company as aforesaid and the wives, widows, families and dependents of any such persons, and also to establish and subsidize or subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or of any such other company as aforesaid, or of any such persons aforesaid, and to make payments for or towards the insurance of any such persons as aforesaid, and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful objects and to do any of the matters aforesaid either alone or in conjunction with any such other company as aforesaid. (O) To enter into a partnership or arrangement for profits, union of interests, reciprocal concession, co-operation with any company, firm or person carrying proposing to carry on any business within the objects of indirectly to benefit this Company, and to acquire and sell, deal with 4 or dispose of any shares, stock of security or other interests in any such company, and to guarantee contracts or liabilities of, subsidize or otherwise assist such company. (P) To purchaser or otherwise acquire and undertake all part of the business, property, assets, liabilities, transactions of any person, firm, or company carrying on business which this Company is authorized to carry on. (Q) To sell, improve, manage, develop, turn to ___ exchange, let on rent, royalty, share of profits or otherwise grant licenses, easements and other rights in or over, and other manner deal with or dispose of the undertaking and any of the property and assets for the time being of the ___ for such consideration as the Company may think fit. (R) To acquire, purchase, take over and undertake part of the business, property, assets and liabilities of transactions of any firm, person or company carrying on business which this Company is authorized to carry on and can be carried on in conjunction therewith or is capable of conducted so as directly or indirectly to benefit the Company to advance its interests generally. (S) To distribute among the members in specie any property the Company or any proceeds of sale or disposal of any property of the Company but so that no distribution amounting to reduction of capital may be made except with the sanction of any) for the time being required by law. (T) To do all such other things as are incident or ___ to the above objects or any of them. And it is hereby declared that in the construction of this ___- the word 'company' except where used in reference to the ____ shall be deemed to include any person or partnership or ____ body of persons, whether incorporated or not incorporated, whether domiciled in Great Britain or elsewhere, and ___ objects specified in the different paragraphs of this ___ shall, except where otherwise expressed therein, by in ___ limited by reference to any other paragraph or the name of the Company, but may be carried out in as full and ample a manner as shall be construed in as wide a sense as if each of the paragraphs defined the objects as a separate, distinct, independent company. 4. The liability of the members is limited. 5. The share capital of the Company is (pound)100 into 100 shares of (pound)1 each. WE, the Subscribers to this Memorandum of Association, are desirous of being formed into a Company pursuant to this Memorandum, and we respectively agree to take the number of shares in the capital of the Company as set out opposite our respective names. 5 NAMES, ADDRESSES NUMBER OF SHARES AND DESCRIPTIONS Taken by each OF SUBSCRIBERS Subscriber Stephen Mabbott 1 142 Queen Street Glasgow, G1 3Bu Company Registration Agent Lesley Mabbott 1 142, Queen street Glasgow, G1 3BU Secretary - ----------------------------------------------------------------------------- DATED the 10 Aug 1989 Witness to the above Signatures: Caryl Jones 142, Queen Street Glasgow, G1 3BU Secretary 6 CERTIFICATE OF INCORPORATION ON CHANGE OF NAME Company Number 119721 I hereby certify that OFFICE OASIS LIMITED having a special resolution changes its name, is not incorporated under the name of WATER AT WORK LIMITED Signed in Edinburgh 4 DECEMBER 1989 Registration of Companies C28 EX-3.32 33 ARTICLES OF ASSOCIATION 1 Exhibit 3.32 THE COMPANIES ACT 1985 PRIVATE COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF OFFICE OASIS LIMITED PRELIMINARY 1. (a) The Regulations contained in Table A in the Schedule to the Companies (Tables A to F) Regulations 1985 as amended by the Companies (Tables A to F) (Amendment) Regulations 1985 (such Table being hereinafter called "Table A") shall apply to the Company save in so far as they are excluded or varied hereby and such Regulations (save as so excluded or varied) and the Articles hereinafter contained shall be the regulations of the Company. (b) In these Articles the expression "the Act" means the Companies Act 1985, but so that any reference in these Articles to any provision of the Act shall be deemed to include a reference to any statutory modification or re-enactment of that provision for the time being in force. 2. The Company is a private company and therefore no invitation or offer shall be made to the public (whether for cash or otherwise) to subscribe for any shares in or debentures of the Company, nor shall the Company allot or agree to allot (whether for cash or otherwise) any shares in or debentures of the Company with a view to all or any of these shares or debentures being offered for sale to the public. SHARES 3. (a) The shares shall be under the control of the Directors and the Directors may allot, grant options over, or otherwise dispose of or deal with any unissued shares and relevant securities (as defined by Section 80(2) of the Act) to such persons and generally on such terms and in such manner as they think fit. (b) NEED BETTER COPY TO TYPE UP TO ITEM NO. 5. (c) (d) 2 LIEN 4. TRANSFER OF SHARES 5. APPOINTMENT OF DIRECTORS 6. Unless and until the Company, in General Meeting, shall otherwise determine there shall be no maximum number of Directors and the minimum number of Directors shall be one if and so long as there is a sole Director he may exercise all the powers and authorities vested in the Directors. Accordingly Clause 64 in Table A shall not therefore apply to the Company. 7. The Directors shall not be required to retire by rotation and Clauses 73 to 80 (inclusive) in Table A shall not therefore apply to the Company. 8. A Director shall not be required to hold any share qualification but shall nevertheless be entitled to receive notice of and to attend at all General Meetings of the Company and at all separate General Meetings of the holders of any class of shares in the capital of the Company. 9. The Company shall not be subject to Section 293 of the Act. Any person may be appointed or elected as a Director, whatever may be his age, and no Director shall be required to vacate his office by reason of his attaining or having attained the age of seventy years or any other age. DISQUALIFICATION OF DIRECTORS 10. The office of a Director shall be vacated if: - (a) he ceases to be a Director by virtue of any provision of the Act or he becomes prohibited by law form being a Director, or (b) he becomes bankrupt or makes any arrangement or composition with his creditors, or (c) he is a person of unsound mind, or (d) he resigns his office by notice to the Company, or (e) he shall, for more than six consecutive months, have been absent without permission of the Directors from meetings of Directors held during that period and the Directors so resolve that his office be vacated. POWER AND DUTIES OF A DIRECTOR 11. A Director may vote in respect of any contract or proposed contract or arrangement in which he is interested, whether directly or indirectly, or upon any matter arising therefrom and he 2 3 may be counted in the quorum present at any meeting at which any such contract, arrangement or matter is proposed or considered, and if he shall so vote, his vote shall be so counted. GENERAL MEETINGS 12. (a) A notice convening a General Meeting shall not be required to specify the general nature of the business to be transacted unless that business is deemed to be special business and therefore Clause 38 of Table A shall be modified accordingly. (b) All business that is or is to be transacted at an Extraordinary General Meeting or an Annual General Meeting shall be deemed special with the exception of declaring a dividend, the consideration of the accounts, the Reports of the Directors an Auditors and the appointment of and the fixing of the remuneration of the Auditors. (c) Every notice convening a General Meeting shall comply with the provisions of Section 372(3) of the Act as to giving information to Members in regard to their right to appoint proxies and notices of and other communications relating to any General Meeting which any Member is entitled to receive shall be sent to the Directors and to the Auditors for the time being of the Company. (d) The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and, unless so fixed, shall when one Director only is in office be one, and shall when more than one Director is in office be two. (e) If a quorum is not present within half an hour from the time appointed for a General Meeting shall stand adjourned to the same day in the next week at the same time and place or to such other day and at such other time and place as the Directors may determine, and if at the adjourned General Meeting a quorum is not present within half an hour from the time appointed therefore such adjourned General Meeting shall be dissolved. ALTERNATE DIRECTOR 13. Any Director may, by notice in writing signed by him and deposited at the Registered Office of the Company, appoint an alternate Director to act on his behalf. Such alternate Director must be either a Director of the Company, or a person approved by resolution of all the Directors for the time being of the Company . Every alternate Director shall, during the period of his appointment, be entitled to notice of Meetings of Directors and in the absence of the Director appointing him to attend and vote thereat as a Director but his appointment shall immediately cease and determine if and when the Director appointing him ceases to hold office as a Director. A Director who is also an Alternate Director shall be entitled, in addition to his own vote, to a separate vote on behalf of the Director whom he is representing. BORROWING POWERS 14. The Directors may exercise all the powers of the Company to borrow money without limit as to amount and upon such terms and in such manner as they consider appropriate and subject to 3 4 Section 80 of the Act to grant any mortgage, charge or standard security over its undertaking, property and uncalled capital or any part thereof and to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligations of the Company or of any third party. INDEMNITY 15. Subject to the provisions of the Act and in addition to such indemnity as is contained in Clause 118 of Table A, every Director, officer or official of the Company shall be indemnified out of the funds of the Company against all costs, charges, losses, expenses and liabilities incurred by him in the execution and discharge of his duties or in relation thereto. 4 5 - -------------------------------------------------------------------------------- Names and Addresses of Subscribers - -------------------------------------------------------------------------------- Stephen Mabbott 142, Queen Street Glasgow, G1 3BU Company Registration Agent Lesley Mabbott 142, Queen Street Glasgow, G1 3BU Secretary - -------------------------------------------------------------------------------- Dated the 10 AUG 1989 Witness to the above Signatures: - Caryl Jones 142, Queen Street Glasgow, G1 3BU Secretary 5 EX-3.33 34 MEMORANDUM OF ASSOCIATION 1 Exhibit 3.33 THE COMPANIES ACTS 1985 TO 1989 PRIVATE COMPANY LIMITED BY SHARES MEMORANDUM OF ASSOCIATION of NATURAL WATER LIMITED 1. The name of the Company is NATURAL WATER LIMITED 2. The Company's registered office is to be situated in Scotland 3. The objects for which the Company is established are: (A) To carry on in Scotland and elsewhere all or any of the businesses of a mineral water production company in all its branches; to act as extractors, producers, purifiers, bottlers, packers, importers, exporters, wholesalers, retailers, merchants, brokers, suppliers, distributors, distributors, agents for and dealers in mineral water of all and every description; to deal in water purification and bottling equipment and machinery and all components, spare parts, supplies and requisites of all kinds capable of being used, either directly or indirectly, in connection with the foregoing and act as water purification and treatment specialists, consultants, engineers and contractors, pump and hydraulic engineers, mechanical, electrical and general engineers and contractors and to provide services of all kinds which may be required, directly or indirectly, in connection with the foregoing; to act as general merchants and traders and to undertake, perform and carry out all kinds of commercial, trading and financial operations and to buy, sell and deal in articles and things of all kinds necessary or useful for the purposes of the aforementioned businesses, or any of them, or which may seem capable of being profitably dealt with in connection with any of such businesses or likely to be required by customers of or persons having dealings with the Company. (B) To carry on any other trade or business which may seem to the Company capable of being conveniently carried on in connection with the objects specified in Sub-Clause (A) hereof or calculated directly or indirectly to enhance the value of or render profitable any of the property or rights of the Company. (C) To purchase, take on lease or in exchange, hire or otherwise acquire and hold for any estate or interest any lands, buildings, easements, rights, privileges, concessions, patents, patent rights, licenses, secret processes, machinery, plant, stock-in trade and any real or personal property of any kind necessary or convenient for the purposes of or in connection with the Company's business or any branch or department thereof. 1 2 (D) To borrower or raise or secure the payment of money in such manner as the Company shall think fit for the purpose of or in connection with the Company's business, and for the purposes of or in connection with the borrowing or raising of money by the Company to become a member of any building society. (E) For the purposes of or in connection with the business of the Company to mortgage and charge the undertaking and all or any of the real and personal property and assets, present and future, and all or any of the uncalled capital for the time being of the Company, and to issue at par or at a premium or discount and for such consideration and with and subject to such rights, powers, privileges and conditions as may be thought fit, debentures or debenture stock, either permanent or redeemable or repayable, and collaterally or further to secure any securities of the Company by a trust deed or other assurance. To issue and deposit any securities which the Company has power to issue by way of mortgage to secure any sum less than the nominal amount of such securities and also by way of security for the performance of any contracts or obligations of the Company or of its customers or other persons or corporations having dealings with the Company, or in whose businesses or undertakings the Company is interested, whether directly or indirectly. (F) To give indemnity for, or the guarantee, support or secure the performance of all or any of the obligations of any person or company whether by personal covenant or by mortgage, charge or lien on the whole or any part of the undertaking, property and assets of the Company both present and future including its uncalled capital or by all or any of such methods; and in particular, but without limiting the generality of the foregoing, to give indemnity for, or to guarantee, support or secure whether by personal covenant or by any such mortgage, charge, or lien, or by all or any of such methods, the performance of all or any of the obligations (including the repayment or payment or the principal and premium of and interest on, any securities) of any company which is for the time being the Company's Holding or Subsidiary company as defined by Section 736 of the Companies Act 1985 or otherwise associated with the Company in business. (G) To receive money on deposit or loan upon such terms as the Company may approve and to guarantee the obligations and contracts of any person or corporation. (H) To apply for, purchase or otherwise acquire and hold, use, develop, sell, license or otherwise dispose of or deal with patents, copyrights, designs, trade marks, brevets d'invention and concessions and the like and any interest therein. (I) To draw, make, accept, endorse, negotiate, discount and execute promissory notes, bills of exchange and other negotiate instruments. (J) To invest and deal with the monies of the Company not immediately required for the purposes of its business or securities in or upon such investments, and in such manner as may from time to time be determined. 2 3 (K) To form, promote, finance or assist any other company whether for the purpose of acquiring all or any of the undertaking, property and assets of the company or for any other purpose which may be considered expedient. (L) To sell, improve, manage, develop, turn to account, exchange, let on rent, grant royalty, share of profits or otherwise, grant licenses, easements and other rights in or over and in any other manner deal with or dispose of the undertakings and all or any of the property and assets for the time being of the Company for such consideration as the Company may think fit. (M) To subscribe for, purchase or otherwise acquire and hold shares, stock, debentures or other securities of any other company. (N) To establish and maintain or procure the establishment and maintenance of any noncontributory or contributory pension or superannuation or funds for the benefit of, and to give or procure the giving of donations, gratuities, pensions, allowances or emoluments to any persons who are or were at any time in the employment or service of the Company, or of any company which is for the time being the Company's Holding or Subsidiary Company as defined by Section 736 of the Companies Act 1985, or otherwise associated with the Company in business or who are or were at any time Directors or officers of the Company or of any such other company as aforesaid, and the wives, widows, families and dependents of any such persons, and also to establish and subsidize or subscribe to any institutions, associations, clubs or funds calculated to be for the benefit of or to advance the interests and well-being of the Company or any such other company as aforesaid, or of any such persons as aforesaid, and to make payments for or towards the insurance of any such persons as aforesaid, and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition or for any public, general or useful objects and to do any of the matters aforesaid either alone or in conjunction with any such other company as aforesaid. (O) To pay for any property or rights acquired by the Company, either in cash or fully or partly paid-up shares, with or without preferred or deferred or special rights or restrictions in respect of dividend, repayment of capital, voting or otherwise, or by any securities which the Company has power to issue, or partly in one mode and partly in another, and generally on such terms as the Company may determine. (P) To accept payment for any property or rights sold or otherwise disposed of or dealt with by the Company either in cash, by installments or otherwise, or in fully or partly paid-up shares of any company or corporation, with or without deferred or preferred or special rights or restrictions in respect of dividend, repayment of capital, voting or otherwise, or in debentures or mortgage debentures or debenture stock, mortgages or other securities of any company or corporation or partly in one made and partly in another, and generally on such terms as the Company may determine, and to hold, dispose of or otherwise deal with any shares, stock or securities so acquired. 3 4 (Q) To enter into any partnership or arrangement for sharing profits, union of interests, reciprocal concession or co-operation with any company, firm or person carrying on or proposing to carry on any business within the objects of this Company or which is capable of being carried on so as directly or indirectly to benefit this Company, and to acquire and hold, sell, deal with or dispose of any shares, stock or securities of or other interests in any such company, and to guarantee the contracts or liabilities of, subsidize or otherwise assist, any such company. (R) To acquire, purchase, take over and undertake part or all of the business, property, assets and liabilities and transactions of any firm, person or company carrying on any business which this Company is authorized to carry on or which can be carried on in conjunction therewith or is capable of being conducted so as directly or indirectly to benefit the Company or to advance its interests generally. (S) To distribute among the members in specie any property of the Company or any proceeds of sale or disposal of any property of the Company but so that no distribution amounting to a reduction of capital be made except with the sanction (if any) for the time being required by law. (T) Subject to and in accordance with a due compliance with the provisions of Sections 155 to 158 (inclusive) of the Act (if and so far as such provisions shall be applicable) to give, whether directly or indirectly, any kind of financial assistance (as defined in Section 152(1) (a) of the Act for any such purpose as is specified in Section 151(1) and/or Section 151(2) of the Act. (U) To do all or any of the above things in any part of the world either alone or in conjunction with others and either as principals, agents, contractors, trustees or otherwise and either by or through agents, contractors, trustees or otherwise. And it is hereby declared that, save as otherwise expressly provided, each of the paragraphs of this Clause shall be regarded as specifying separate and independent objects and accordingly shall not be in anywise limited by reference to or inference from any other paragraph or the name of the Company and the provisions of each such paragraph shall, save as aforesaid, be carried out in as full and ample a manner and construed in as wide a sense as if each of the paragraphs defined the objects of a separate and distinct company. 4. The liability of the members is limited. 5. The share capital of the Company is(pound)100 divided into 100 shares of(pound)1 each. WE, the several persons whose names and addresses are subscribed, are desirous of being formed into a Company in pursuance of this Memorandum of Association, and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. - -------------------------------------------------------------------------------- Names, Addresses and Descriptions of Subscribers Number of Shares taken of Subscribers - -------------------------------------------------------------------------------- 4 5 STEPHEN MABBOTT 82 MITCHELL STREET GLASGOW G1 3NA Company Registration Agent PETER JOHN TRAINER 88a GEORGE STREET EDINBURGH EH2 3DF Company Registration Agent - -------------------------------------------------------------------------------- DATED the 11-2-1994 Witness to the above Signatures: JOANNE FAIRGRIEVE 88a GEORGE STREET EDINBURGH EH2 3DF Company Registration Agent 5 6 NATURAL WATER LIMITED (Incorporated in Scotland No. 149165) At an Extraordinary General Meeting of NATURAL WATER LIMITED held at Pacific House, 70 Wellington Street, Glasgow G2 6SB on 26th July 1994 the following resolution was duly passed as a Special Resolution: SPECIAL RESOLUTION THAT:- (1) "the authorized share capital of the Company be and is hereby increased from (pound)100 to (pound)25,100 divided into 100 Ordinary Shares of (pound)1 each and 25,000 Redeemable Non-Voting Preference Shares of (pound)1 each ("the Preference Shares") by the creation of an additional 25,000 Preference Shares of (pound)1 each all having the rights and privileges and being subject to the restrictions contained in the Articles of Association of the Company adopted by paragraph (2) below. (2) "the regulations contained in the document submitted to this Meeting and for the purposes of identification signed by the Chairman thereof as relative to this paragraph of this Resolution be and are hereby approved and adopted as the new Articles of Association of the Company in substitution for and to the exclusion of the existing Articles of Association of the Company." ------------------------------------- Director EX-3.34 35 ARTICLES OF ASSOCIATION 1 Exhibit 3.34 This document contains a print of the New Article of Association of Natural Water Limited as adopted by Special Resolution passed on 26th July 1994. ------------------------------ Director THE COMPANIES ACTS 1985 AND 1989 P R I V A T E C O M P A N Y L I M I T E D B Y S H A R E S COMPANY NUMBER 149165 - -------------------------------------------------------------------------------- NEW ARTICLES OF ASSOCIATION OF NATURAL WATER LIMITED (Incorporated 21 February, 1994) - -------------------------------------------------------------------------------- McGRIGOR DONALD Pacific House 70 Wellington Street Glasgow G2 6SB 2 THE COMPANIES ACTS 1985 AND 1989 P R I V A T E C O M P A N Y L I M I T E D B Y S H A R E S NEW ARTICLES OF ASSOCIATION OF NATURAL WATER LIMITED (Adopted by Special Resolution passed on 26th July 1994) - -------------------------------------------------------------------------------- PRELIMINARY 1. The Regulations contained in Table A in the Schedule to the Companies (Tables A to F Regulations 1985 as amended by the Companies (Tables A to F) (Amendment) Regulations 1985 ("Table A") so far as not excluded or modified by the following Articles shall apply to the Company. 2. Regulations 5, 8, 24, 33, 64, 73 to 75 inclusive, 80, 94, 95 and 118 of Table A shall not apply to the Company and the following Regulations thereof shall be modified. Regulation 6 by the deletion of the words "sealed with the seal" and the substitution of the words "executed in terms of section 36B of the Act"; Regulation 32 by the deletion of paragraph (a) and the consequential re-lettering of the subsequent paragraphs and the addition to the original paragraph (b) of the words "but so that any such consolidation and/or division shall not result in any member becoming entitled to fractions of a share"; Regulation 32 by the deletion of paragraph (a) and the consequential re-lettering of the subsequent paragraphs and the addition to the original paragraph (b) of the words "but so that any such consolidation and/or division shall not result in any member becoming entitled to fractions of a share; 3 Regulation 40 by the addition at the end of the second sentence of the words "provided that if the Company shall have duly one member, one member present in person or by proxy shall be a quorum"; Regulation 46 by the deletion of paragraphs (a) to (d) inclusive and the substitution of the words "by the chairman or by any person present entitled to vote upon the business to be transacted;"; Regulation 50 by the addition of the word "not" between the words "shall" and "be"; Regulation 54 by the addition of the words "or by proxy" between the words "vote," and "shall" and the words "fully paid" between the words "every" and "share"; Regulation 66 by the addition of the words "(subject to his giving the Company an address within the United Kingdom at which notice may be served upon him)" between the words "shall" and "be"; Regulation 67 by the deletion of the words from "but" until the end; Regulation 72 by the addition of the words "Any committee shall have power, unless the Directors direct otherwise, to co-opt as a member or members of the committee for any specific purpose any person, or persons, not being a Director of the company." At the end; Regulation 76 by the deletion of the words "other than a director retiring by rotation", "or reappointed" and "or reappointment" each time they appear; Regulation 77 by the deletion that the words "(other than a director retiring by rotation at the meeting)", "or reappointment" and "or reappointed" each time they appear; Regulation 78 by the deletion of the words "and may also determine the rotation in which any additional directors are to retire"; Regulation 79 by the deletion of the second and third sentences; Regulation 82 by the addition of the words "by way of directors' fees" between the words "remuneration" and "as"; -2- 4 Regulation 84 by the addition of the words "Unless the contrary shall be provided in the terms of his appointment" at the beginning of the third sentence and the deletion of the fourth sentence; Regulation 85(c) by the addition of the words ", subject to the terms of any contract of employment between the Company and the Director," between the words "shall and "not"; and Regulation 88 by the addition of the word "not" between the words "shall" and "have" in the fifth sentence; and Regulation 115 by the deletion of the number "48" and the substitution of the number "24". Unless otherwise required by the context of the Articles, words or expressions which are defined in Table A shall have the same meaning in the Articles. Unless otherwise required by the context of the Articles, words importing the singular only shall include the plural and vice versa; words importing any gender shall include the other genders; and words importing natural persons shall include corporations and vice versa. SHARE CAPITAL 2.1 The share capital of the Company as at the date of adoption of these Articles is #25,110 divided into 100 Ordinary Shares of #1 each ("the Ordinary Shares") and 25,000 Redeemable Non-Voting Preference Shares of #1 each ("the Preference Shares"). The rights attaching to the Ordinary Shares and the Preference Shares respectively shall be as follows: (A) AS REGARDS INCOME -3- 5 (i) The distributable profits of the company in respect of any financial year (insofar as they are sufficient) shall be applied first in paying to the holders of the Preference Shares a fixed noncumulative preferential net cash dividend (hereinafter called "the Preference Dividend") at the rate (calculated on the nominal amount paid up thereon) of eight per centum per annum of the nominal value of each of the Preference Shares held by them. Such Preference Dividend shall accrue from day to day with effect from the date of issue and shall be paid annually on 31st April ("the due date") in respect of the financial year to 31st January preceding, the first Preference dividend to be paid on 31st April, 1995 in respect of the financial year to 31st January, 1995. The Preference Dividend shall (notwithstanding any other provisions of these Articles and in particular notwithstanding that there has not been a recommendation of the Directors or resolution in General Meeting) immediately on the due date become a debt due by the Company and shall forthwith be paid to the holders of the Preference Shares unless the company has insufficient profits available for distribution and is thereby prohibited from paying dividends by the Act in which circumstances, such profits available for distribution as at the due date will be distributed among the holders of the Preference Shares pro rata and thereafter the entitlement of the holders of the Preference Shares to any further dividend will lapse. (ii) The Ordinary Shares shall confer on the holders thereof the right, in respect of any financial period of the Company, to participate in any surplus profits of the Company available for distribution and resolved to be distributed as shall remain after paying the Preference Dividend. (B) CAPITAL On a return of assets on liquidation or otherwise, the assets of the Company remaining after the payment of its liabilities shall be applied first in paying to the holders of the Preference Shares the amount paid up or credited as paid up on such shares together with any sums due under paragraph (a)(i) above and accruals of the Preference Dividend calculated down to the date of return of capital and payable irrespective of whether such Preference Dividend has been declared or earned or not, and subject thereto, the balance of such assets shall be distributed -4- 6 amongst the holders of the Ordinary Shares ratably according to the amount paid up or credited as paid up on such shares. (C) AS TO VOTING (i) The holders of Preference Shares shall be entitled to receive notice of all General Meetings of the Company but shall not be entitled to attend or vote at any General Meeting of the Company. (ii) The holders of the Ordinary Shares shall be entitled to receive notice of and to attend and vote at any General Meeting of the Company. (D) AS REGARDS REDEMPTION The following provisions shall have effect with regard to the redemption of the Preference Shares: (i) Subject to the provisions of the Act, by notice in writing ("the Redemption Notice") the Company shall redeem all but not less than all the Preference Shares held by any holder of Preference Shares on 31st December 1996. (ii) Any Redemption Notice shall specify the particular shares to be redeemed, the date of redemption and the place in the United Kingdom at which the certificates for such shares are to be presented for redemption whereupon each of the holders of the shares concerned shall be bound to deliver to the Company at such place the certificates for such of the shares concerned as are held by him in order that the same may be canceled. Upon such delivery, the Company shall pay to such holder the amount due to him in respect of such redemption. (iii) There shall be paid on each of the Preference Shares redeemed the sum of #1 per share together with a sum equal to any arrears or accruals of the Preference Dividend calculated on a daily basis down tot he date of redemption whether such dividends have been declared or earned or not and the Preference Dividend shall cease to accrue from that date unless -5- 7 upon delivery up of the certificate for such shares payment of the redemption monies shall be refused. (iv) If the Company shall be unable, in compliance with the provisions of the Act, to redeem all or any of the Preference Shares in accordance with the provisions of this Article on the date specified in this Article then the Company shall redeem such shares as soon after such date or dates as the Company shall be able to comply with the provisions of the Act; and for so long as any Preference Shares remain unredeemed after their due date for redemption because of the Company's inability to comply with the provisions of the Act as aforesaid the Company shall not pay any dividend or make any distribution to the holders of Ordinary Shares. (v) Upon each occasion where redemption is to be made amongst more than one holder of Preference Shares, redemption shall be made amongst the holders of the Preference Shares pro rata according to the number of shares held by such holders at the date of redemption. ALLOTMENT OF SHARES 4.1 The Directors are generally and unconditionally authorized to allot relevant securities (within the meaning of Section 80(2) of the Act) on such terms and at such time or times as they may in their discretion think fit; provided that: (a) the maximum nominal amount of relevant securities to be allotted in pursuance of such authority shall be the aggregate nominal amount of the unissued shares in the capital of the Company from time to time while this authority is in favor; and (b) this authority shall expire, unless sooner revoked or altered by the Company in general meeting, on the expiry of the period of five years from the date of the passing of the resolution by virtue of which this Article was adopted as part of the Articles provided that the company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of such offer or agreement as if the power conferred hereby had not expired. -6- 8 4.2 Section 89(1) of the Act shall not apply to any allotment of shares in the Company: INCREASE IN CAPITAL 5. The Company may by Special Resolution increase its share capital by new shares of such amount as the resolution prescribes. 6. The Company shall be entitled, but shall not be bound, to recognize in such manner and to such extent as it may think fit any trusts in respect of any of the shares of the Company.. Notwithstanding any such recognition, the Company shall not be bound to see to the execution, administration or observance of any trust (whether express, implied or constructive) in respect of any shares of the Company and shall be entitled to recognize and give effect to the acts and deeds of the holders of such shares as if they were the absolute owners thereof. For the purpose of this Article, "trust" includes any right in respect of any shares of the Company other than an absolute right thereto in the holder thereof for the time being or such other rights in case of transmission thereof as are mentioned in Table A. LIEN 7. The Company shall have a first and paramount lien on every share for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share, ad the Company shall also have a first and paramount lien on all shares registered in the name of any person (whether solely or jointly with others) for all moneys owing to the Company from him or his estate either alone or jointly with any other person whether as a member or not and whether such moneys are presently payable or not. The Directors may at any time declare any share to be wholly or partly exempt from the provisions of this Article. The Company's lien on a share shall extend to all dividends and other payments or distributions payable or distributable thereon or in respect thereof. 8.1 Except with the consent in writing of all the members of the Company, any Shares in the capital of the Company which are from time to time unissued shall, before issue, be offered by the Directors in the first instance to all members of the Company holding shares of the same class at the date of the offer and thereafter to members then holding shares of every other class and that in each case in proportion as nearly may be tot he aggregate amounts paid up or credited as paid up on the shares of the class or classes held by such -7- 9 members respectively. Every such offer shall be in writing, shall be on identical terms for each holder, shall state the number of the shares to be issued, the terms of issue, and shall be subject to the following conditions, which shall be incorporated in such offer: (a) that any acceptance thereof (which may be as regards all or ______ of the shares offered) shall be in writing and be delivered to the office within a period of 14 days from the date of __________ of the said offer; (b) that in the event of the aggregate number of shares accepted ______ exceeding the number of shares included in such offer, the _____ holders accepting shall be entitled to receive, and bounds ____ accept, an allocation of either the number of shares accepted ________ by them respectively or a proportionate number of the ________ offered according to the proportion which the number of __________ paid Ordinary Shares held by the accepting holder bears ________ aggregate number of fully paid Ordinary Shares held by _________ accepting holders at the date of the offer, whichever ____ less; and (c) that any holders to whom such offer shall have been made ________ whose requirements shall not have been fully met by such _______ allocation shall further be entitled to receive, and bound ______ accept, an allocation among them of any surplus shares _______ proportion, as nearly as may be, to the number of shares ______ accepted by them respectively in excess of the number of to which they may respectively be entitled on the first allocation thereof as aforesaid. The regulations regarding the service of notices contained in _____________ shall apply to any offers made by the Directors in the terms of _________ Article. 8.2 If any such offer shall not be accepted in full, the Directors _______ within three months after the date of such offer dispose of any ________ ordinary shares comprised therein and no accepted as aforesaid _______ such person or persons as they may think fit but only at the ________ price upon the same terms as to payment, if any, as were specified in such offer. TRANSFER OF SHARES -8- 10 9. The Directors may, in their absolute discretion and without assigning any reason therefor, decline to register a transfer of any share whether or not it is a fully paid share. NUMBER OF DIRECTORS 10. Unless otherwise determined by Ordinary Resolution the number of Directors (other than alternate Directors) shall not be less than one and shall not be subject to any maximum. In the event of there being a sole Director the Articles shall be construed accordingly. POWERS OF DIRECTORS 11. The Directors may exercise the voting power conferred by the shares in any other company held or owned by the Company in such manner as they think fit, including the exercise thereof in favor of any resolution appointing them or any of their number directors or officers of such other company or voting or providing for the payment of remuneration to the directors or officers of such other company. PROCEEDINGS OF DIRECTORS 12. A Director may as a Director vote and be counted as one of a quorum upon a motion in respect of any contract, matter or arrangement which he shall make with the Company or in which he shall be in any way interested provided that he shall first have disclosed the nature of his interest to the Directors. 13. Any Director (including an alternate Director) or member of a committee of the Directors, may participate i a meeting of the Directors, or such committee, by means of a conference telephone or similar communicating equipment whereby all persons participating in the meeting can hear each other and participation in a meeting in this manner shall be deemed to constitute presence in person at such meeting. INDEMNITY 14. Subject to the provisions of the Act every Director or other officer of the Company shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses and liabilities which he may sustain or incur: -9- 11 (a) in defending any proceedings, whether civil or criminal, in which decree is given in his favor or in which he is acquitted or which are otherwise disposed of without any finding or admission of any material breach of duty of his part, or (b) in connection with any application under Section 144(3) or (4) or Section 727 of the Act in which relief is granted to him by the court from liability in respect of any act or omission done or alleged to be done by him as an officer or employee of the Company. -10- EX-4 36 INDENTURE 1 Exhibit 4 - -------------------------------------------------------------------------------- SPARKLING SPRING WATER GROUP LIMITED, as Issuer, the SUBSIDIARY GUARANTORS named herein, and BANKERS TRUST COMPANY, as Trustee ----------------- INDENTURE Dated as of November 19, 1997 ----------------- $100,000,000 11 1/2% Senior Subordinated Notes due 2007 - -------------------------------------------------------------------------------- 2 CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- ------- 310(a)(1)..................................................................7.10 (a)(2)..................................................................7.10 (a)(3)............................................................... N.A. (a)(4)..................................................................N.A. (a)(5)............................................................7.10; 7.11 (b)........................................................7.08; 7.10; 11.02 (c).....................................................................N.A. 311(a).....................................................................7.11 (b).....................................................................7.11 (c).....................................................................N.A. 312(a).....................................................................2.05 (b)....................................................................11.03 (c)....................................................................11.03 313(a).................................................................... 7.06 (b)(1)................................................................. 7.06 (b)(2)..................................................................7.06 (c)..............................................................7.06; 11.02 (d).....................................................................7.06 314(a)........................................................4.06; 4.08; 11.02 (b).....................................................................N.A. (c)(1).......................................................... 7.02; 11.04 (c)(2).......................................................... 7.02; 11.04 (c)(3)................................................................. N.A. (d).................................................................... N.A. (e)....................................................................11.05 (f).................................................................... N.A. 315(a)................................................................. 7.01(b) (b)............................................................. 7.05; 11.02 (c)................................................................. 7.01(a) (d)........................................................... 6.05; 7.01(c) (e).................................................................... 6.11 316(a)(last sentence)..................................................... 2.09 (a)(1)(A).............................................................. 6.05 (a)(1)(B).............................................................. 6.04 (a)(2)................................................................. N.A. (b).................................................................... 6.07 (c).................................................................... 9.04 317(a)(1)..................................................................6.08 (a)(2)................................................................. 6.09 (b).................................................................... 2.04 318(a)....................................................................11.01 (c)................................................................... 11.01 - ---------- N.A. means Not Applicable NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture. 3 TABLE OF CONTENTS ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE...............................1 SECTION 1.01. Definitions..........................................1 SECTION 1.02. Incorporation by Reference of TIA...................22 SECTION 1.03. Rules of Construction...............................22 ARTICLE TWO THE NOTES........................................................23 SECTION 2.01. Form and Dating.....................................23 SECTION 2.02. Execution and Authentication; ...................... SECTION 2.03. Registrar and Paying Agent..........................25 SECTION 2.04. Paying Agent To Hold Assets in Trust................26 SECTION 2.05. Holder Lists........................................26 SECTION 2.06. Transfer and Exchange...............................26 SECTION 2.07. Replacement Notes...................................27 SECTION 2.08. Outstanding Notes...................................27 SECTION 2.09. Treasury Notes......................................28 SECTION 2.10. Temporary Notes.....................................28 SECTION 2.11. Cancellation........................................28 SECTION 2.12. Defaulted Interest..................................28 SECTION 2.13. CUSIP Number........................................29 SECTION 2.14. Deposit of Monies...................................29 SECTION 2.15. Restrictive Legends.................................30 SECTION 2.16. Book-Entry Provisions for Global Security...........30 SECTION 2.17. Special Transfer Provisions.........................31 SECTION 2.18. Liquidated Damages Under ........................... ARTICLE THREE REDEMPTION.....................................................34 SECTION 3.01. Notices to Trustee..................................34 SECTION 3.02. Selection of Notes To Be Redeemed...................34 SECTION 3.03. Optional Redemption.................................35 SECTION 3.04. Notice of Redemption................................35 SECTION 3.05. Effect of Notice of Redemption......................36 SECTION 3.06. Deposit of Redemption Price.........................37 SECTION 3.07. Notes Redeemed in Part..............................37 ARTICLE FOUR COVENANTS.......................................................37 SECTION 4.01. Payment of Notes....................................37 SECTION 4.02. Maintenance of Office or Agency.....................38 i 4 SECTION 4.03. Corporate Existence.................................38 SECTION 4.04. Payment of Taxes and Other Claims...................38 SECTION 4.05. Maintenance of Properties and Insurance.............38 SECTION 4.06. Compliance Certificate; Notice of Default...........39 SECTION 4.07. Compliance with Laws................................40 SECTION 4.08. Reports to Holders..................................40 SECTION 4.09. Waiver of Stay, Extension or Usury Laws.............41 SECTION 4.10. Limitation on Restricted Payments...................41 SECTION 4.11. Limitation on Transactions with Affiliates..........43 SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.44 SECTION 4.13. Limitation on Dividend and Other ................... SECTION 4.14. Change of Control...................................45 SECTION 4.15. Limitation on Asset Sales...........................47 SECTION 4.16. Limitation on Preferred Stock of Subsidiaries.......50 SECTION 4.17. Limitation on Liens.................................50 SECTION 4.18. Conduct of Business.................................51 SECTION 4.19. Additional Subsidiary Guarantees....................51 SECTION 4.20. Prohibition on Incurrence .......................... SECTION 4.21. Payment of Additional Amounts.......................52 ARTICLE FIVE SUCCESSOR CORPORATION...........................................54 SECTION 5.01. Merger, Consolidation and Sale of Assets............54 SECTION 5.02. Successor Corporation Substituted...................55 ARTICLE SIX REMEDIES.........................................................56 SECTION 6.01. Events of Default ..................................56 SECTION 6.02. Acceleration........................................57 SECTION 6.03. Other Remedies......................................58 SECTION 6.04. Waiver of Past Defaults.............................59 SECTION 6.05. Control by Majority.................................59 SECTION 6.06. Limitation on Suits.................................59 SECTION 6.07. Right of Holders To Receive Payment.................60 SECTION 6.08. Collection Suit by Trustee..........................60 SECTION 6.09. Trustee May File Proofs of Claim....................60 SECTION 6.10. Priorities..........................................61 SECTION 6.11. Undertaking for Costs...............................61 SECTION 6.12. Restoration of Rights and Remedies..................61 ARTICLE SEVEN TRUSTEE.......................................................62 SECTION 7.01. Duties of Trustee...................................62 SECTION 7.02. Rights of Trustee...................................63 ii 5 SECTION 7.03. Individual Rights of Trustee........................64 SECTION 7.04. Trustee's Disclaimer................................64 SECTION 7.05. Notice of Default...................................64 SECTION 7.06. Reports by Trustee to Holders.......................65 SECTION 7.07. Compensation and Indemnity..........................65 SECTION 7.08. Replacement of Trustee..............................66 SECTION 7.09. Successor Trustee by Merger, Etc....................67 SECTION 7.10. Eligibility; Disqualification.......................67 SECTION 7.11. Preferential Collection of ......................... Claims Against the Company..........................68 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE.............................68 SECTION 8.01. Termination of Company's Obligations................68 SECTION 8.02. Application of Trust Money..........................70 SECTION 8.03. Repayment to the Company............................71 SECTION 8.04. Reinstatement.......................................71 SECTION 8.05. Acknowledgment of Discharge by Trustee..............71 ARTICLE NINE MODIFICATION OF THE INDENTURE...................................72 SECTION 9.01. Without Consent of Holders..........................72 SECTION 9.02. With Consent of Holders.............................72 SECTION 9.03. Compliance with TIA.................................73 SECTION 9.04. Revocation and Effect of Consents...................73 SECTION 9.05. Notation on or Exchange of Notes....................73 SECTION 9.06. Trustee To Sign Amendments, Etc.....................74 SECTION 9.07. Trustee To Sign Consents............................74 ARTICLE TEN SUBORDINATION....................................................74 SECTION 10.01. Notes Subordinated to Senior Indebtedness..........74 SECTION 10.02. Suspension of Payment When......................... SECTION 10.03. Notes Subordinated to Prior Payment of All......... SECTION 10.04. Holders To Be Subrogated to Rights ................ SECTION 10.05. Obligations of the Company Unconditional...........78 SECTION 10.06. Trustee Entitled to Assume Payments................ SECTION 10.07. Application by Trustee............................. SECTION 10.08. No Waiver of Subordination Provisions..............79 SECTION 10.09. Holders Authorize Trustee To....................... SECTION 10.10. Right of Trustee to Hold Senior Indebtedness.......80 SECTION 10.11. This Article Ten Not To ........................... SECTION 10.12. No Fiduciary Duty of Trustee to ................... ARTICLE ELEVEN MISCELLANEOUS.................................................81 iii 6 SECTION 11.01. TIA Controls.......................................81 SECTION 11.02. Notices............................................82 SECTION 11.03. Communications by Holders with Other Holders.......83 SECTION 11.04. Certificate and Opinion ........................... SECTION 11.05. Statements Required in Certificate or Opinion......83 SECTION 11.06. Rules by Trustee, Paying Agent, Registrar..........83 SECTION 11.07. Legal Holidays.....................................84 SECTION 11.08. Governing Law......................................84 SECTION 11.09. No Adverse Interpretation of Other Agreements......84 SECTION 11.10. No Personal Liability..............................84 SECTION 11.11. Successors.........................................84 SECTION 11.12. Duplicate Originals................................85 SECTION 11.13. Severability.......................................85 SECTION 11.14 Agent for Service; Submission to Jurisdiction;..... ARTICLE TWELVE GUARANTEE OF NOTES............................................86 SECTION 12.01. Unconditional Guarantee............................86 SECTION 12.02. Limitations on Guarantees..........................87 SECTION 12.03. Execution and Delivery of Guarantee................87 SECTION 12.04. Release of a Subsidiary Guarantor..................88 SECTION 12.05. Waiver of Subrogation..............................89 SECTION 12.06. No Set-Off.........................................89 SECTION 12.07. Obligations Absolute...............................89 SECTION 12.08. Obligations Continuing.............................90 SECTION 12.09. Obligations Not Reduced............................90 SECTION 12.10. Obligations Reinstated.............................90 SECTION 12.11. Obligations Not Affected...........................90 SECTION 12.12. Waiver.............................................92 SECTION 12.13. No Obligation To Take ............................. SECTION 12.14. Dealing with the Company and Others................92 SECTION 12.15. Default and Enforcement............................93 SECTION 12.16. Amendment, Etc.....................................93 SECTION 12.17. Acknowledgment.....................................93 SECTION 12.18. Costs and Expenses.................................93 SECTION 12.19. No Merger or Waiver; Cumulative Remedies...........93 SECTION 12.20. Survival of Obligations............................94 SECTION 12.21. Guarantee in Addition to Other Obligations.........94 SECTION 12.22. Severability.......................................94 SECTION 12.23. Successors and Assigns.............................94 ARTICLE THIRTEEN SUBORDINATION OF GUARANTEE..................................95 iv 7 SECTION 13.01. Obligations of Guarantors Subordinated ............ SECTION 13.02. Suspension of Guarantee Obligations When........... SECTION 13.03. Guarantee Obligations Subordinated to Prior........ SECTION 13.04. Holders of Guarantee Obligations To................ SECTION 13.05. Obligations of the Subsidiary ..................... SECTION 13.06. Trustee Entitled To Assume Payments................ SECTION 13.07. Application by Trustee of Assets Deposited......... SECTION 13.08. No Waiver of Subordination Provisions.............100 SECTION 13.09. Holders Authorize Trustee To Effectuate........... SECTION 13.10. Right of Trustee to Hold ......................... SECTION 13.11. No Suspension of Remedies.........................101 SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor Senior Indebtness............102 SIGNATURES..................................................................103 EXHIBIT A Form of Initial Note.............................................A-1 EXHIBIT B Form of Exchange Note............................................B-1 EXHIBIT C Form of Legend for Global Note...................................C-1 EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors...................D-1 EXHIBIT E Form of Certificate to Be Delivered in Connection with Transfers Pursuant To Regulation S..........................E-1 EXHIBIT F Form of Guarantee................................................F-1 v 8 INDENTURE, dated as of November 19, 1997, among Sparkling Spring Water Group Limited, a corporation organized under the laws of Nova Scotia (the "Company"), each of the Subsidiary Guarantors named herein, as guarantors, and Bankers Trust Company, a New York banking corporation, as Trustee (the "Trustee"). The Company has duly authorized the creation of an issue of 11 1/2% Senior Subordinated Notes due 2007 (the "Initial Notes") and an issue of 11 1/2% Senior Subordinated Notes due 2007 to be issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement (the "Exchange Notes", and together with the Initial Notes, the "Notes"). All things necessary to make the Notes, when duly issued and executed by the Company and authenticated and delivered hereunder, the valid and binding obligations of the Company and to make this Indenture a valid and binding agreement of the Company, have been done. Each party hereto agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Notes: ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" of a Person means Indebtedness of another Person or any of its Subsidiaries existing at the time such other Person becomes a Subsidiary of the referent Person or at the time it merges or consolidates with the referent Person or any of the referent Person's Subsidiaries or is assumed by the referent Person or any Subsidiary of the referent Person in connection with the acquisition of assets from such other Person and in each case not incurred by such other Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of the referent Person or such acquisition, merger or consolidation. "Additional Interest" shall have the meaning set forth in the Registration Rights Agreement. "Affiliate" means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls or is controlled by, or is under common control with, such specified Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise (and the terms "controlling" and "controlled" have meanings correlative of the foregoing); provided, however, that beneficial ownership of 10% or more of the voting securities of a Person shall be 1 9 deemed to constitute control. "Agent" means any Registrar, Paying Agent or co-Registrar. "Agent Members" has the meaning provided in Section 2.16. "Asset Acquisition" means (a) an Investment by the Company or any Subsidiary of the Company in any other Person pursuant to which such Person shall become a Subsidiary of the Company or any Subsidiary of the Company, or shall be merged with or into the Company or any Subsidiary of the Company, or (b) the acquisition by the Company or any Subsidiary of the Company of the assets of any Person (other than a Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Subsidiary of the Company of (a) any Capital Stock of any Subsidiary of the Company; or (b) any other property or assets of the Company or any Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sale shall not include (i) any transaction or series of related transactions for which the Company or its Subsidiaries receive aggregate consideration of less than $2.0 million in any twelve-month period, (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01 or any disposition that constitutes a Change of Control, and (iii) the sale, lease, conveyance, disposition or other transfer by the Company or any Subsidiary of assets or property to one or more Wholly Owned Subsidiaries in connection with Investments permitted under Section 4.10. "Authenticating Agent" has the meaning provided in Section 2.02. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors. "Blockage Period" has the meaning provided in Section 10.02. "Board of Directors" means, as to any Person, the board of directors (or equivalent body under applicable law) of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee. 2 10 "Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in the city of New York or the Corporate Trust Office of the Trustee are required or authorized by law or other governmental action to be closed. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or the Canadian Government or issued by any agency thereof and backed by the full faith and credit of the United States or Canada, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or province of Canada or any political subdivision of any such state or province or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or Canada or any province thereof or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means (i) any sale, lease, exchange, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture); (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or 3 11 dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (iii) any Person or Group other than the Permitted Holders or a Group controlled by the Permitted Holders shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company; or (iv) the replacement of a majority of the Board of Directors of the Company from the directors who constituted the Board of Directors of the Company on the Issue Date, and such replacement shall not have been approved by a vote of at least a majority of the Board of Directors of the Company then still in office who either were members of such Board of Directors on the Issue Date or whose election as a member of such Board of Directors was previously so approved. "Change of Control Offer" has the meaning provided in Section 4.14. "Change of Control Payment Date" has the meaning provided in Section 4.14. "Commission" means the Securities and Exchange Commission. "Common Stock" of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person's common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor and also includes for the purposes of any provision contained herein and required by the TIA any other obligor on the Notes. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business), (B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for such Person and its Subsidiaries in accordance with GAAP. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the 4 12 foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence or repayment of any Indebtedness of such Person or any of its Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Securities Act as in effect on the Issue Date) (provided that such Consolidated EBITDA shall be included only to the extent includable pursuant to the definition of "Consolidated Net Income") attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense, plus (ii) the product of (x) the amount 5 13 of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication: (i) the aggregate of the interest expense of such Person and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, including without limitation, (a) any amortization of debt discount, (b) the net costs under Interest Swap Obligations, (c) all capitalized interest and (d) the interest portion of any deferred payment obligation; and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP, minus amortization or write off of deferred financing costs. "Consolidated Net Income" means, with respect to any Person, for any period, the aggregate net income (or loss) of such Person and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided, however, that there shall be excluded therefrom (a) gains (and losses) on an after tax effected basis from asset sales or abandonments or reserves relating thereto, (b) items classified as extraordinary or nonrecurring gains or losses on an after tax effected basis, (c) the net income or loss of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Subsidiary of the referent Person or is merged or consolidated with the referent Person or any Subsidiary of the referent Person, (d) the net income (but not loss) of any Subsidiary of the referent Person for such period to the extent that the declaration of dividends or similar distributions by that Subsidiary to the referent Person or any Subsidiary thereof of that income is restricted, directly or indirectly, by operation of the terms of its charter or constituent documents or any agreement, instrument, judgment, decree, law, order, statute, rule, governmental regulation or for any other reason whatsoever, (e) the net income or loss of any other Person, other than a Subsidiary of the referent Person, except to the extent (in the case of net income) of cash dividends or distributions paid to the referent Person, or to a Wholly Owned Subsidiary of the referent Person, by such other Person, (f) any restoration to income of any contingency reserve of an extraordinary, nonrecurring or unusual nature, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, (g) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), and (h) in the case of a successor to the referent Person by consolidation or merger or as a transferee of the referent Person's assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets. 6 14 "Consolidated Net Worth" of any Person means the consolidated stockholders' equity of such Person, determined on a consolidated basis in accordance with GAAP, less (without duplication) amounts attributable to Disqualified Capital Stock of such Person. "Consolidated Non-cash Charges" means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Subsidiaries reducing Consolidated Net Income of such Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charge which requires an accrual of or a reserve for cash charges for any future period). "consolidation" means, with respect to any Person, the consolidation of the accounts of the Subsidiaries of such Person with those of such Person, all in accordance with GAAP; provided, however, that "consolidation" will not include consolidation of the accounts of any Subsidiary of such Person with the accounts of such Person. The term "consolidated" has a correlative meaning to the foregoing. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at Four Albany Street, New York, New York 10006, Attention: Corporate Market Services. "Covenant Defeasance" has the meaning set forth in Section 8.01. "Credit Agreement" means any credit agreement or facility entered into on or after the Issue Date between the Company and/or any Subsidiary of the Company and one or more financial institutions that provides borrowing availability to the Company and its Subsidiaries on a senior secured basis, as any such agreement or facility may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder (provided, however, that such increase in borrowings is permitted by Section 4.12) or adding Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Subsidiary of the Company against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. 7 15 "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Defeasance Payment" means any distribution from any defeasance trust described under Section 8.01. "Depository" means The Depository Trust Company, its nominees and successors. "Designated Senior Indebtedness" means (i) Indebtedness under or in respect of the Credit Agreement and (ii) any other Indebtedness constituting Senior Indebtedness or Guarantor Senior Indebtedness which, at the time of determination, has an aggregate principal amount of at least $5.0 million and is specifically designated in the instrument evidencing such Senior Indebtedness or Guarantor Senior Indebtedness as "Designated Senior Indebtedness" by the Company or the applicable Subsidiary Guarantor, as the case may be. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof on or prior to the final maturity date of the Notes. "Event of Default" has the meaning provided in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. "Exchange Notes" has the meaning provided in the preamble to this Indenture. "Exchange Offer" has the meaning provided in the Registration Rights Agreement. "fair market value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Except as otherwise specified in this Indenture, fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or 8 16 in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect on the Issue Date. "Global Note" has the meaning provided in Section 2.01. "guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part) (but if in part, only to the extent thereof); provided, however, that the term "guarantee" shall not include (A) endorsements for collection or deposit in the ordinary course of business and (B) guarantees (other than guarantees of Indebtedness) by the Company in respect of assisting one or more Subsidiaries in the ordinary course of their respective businesses, including without limitation guarantees of trade obligations and operating leases, on ordinary business terms. The term "guarantee" used as a verb has a corresponding meaning. "Guarantee" means the guarantee of the obligations under this Indenture and the Notes by each of the Subsidiary Guarantors as set forth in Article Twelve. "Guarantor Senior Indebtedness" means, with respect to any Subsidiary Guarantor, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of such Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantees. Without limiting the generality of the foregoing, "Guarantor Senior Indebtedness" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, to the extent such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations of every nature of a Subsidiary Guarantor under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all obligations under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" 9 17 shall not include (i) any Indebtedness of a Subsidiary Guarantor to a Subsidiary of such Subsidiary Guarantor or any Affiliate of such Subsidiary Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability for federal, state, local or other taxes owed or owing by a Subsidiary Guarantor, (vi) Indebtedness incurred in violation of Section 4.12, (vii) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code is without recourse to a Subsidiary Guarantor and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of a Subsidiary Guarantor. "Holder" means any holder of Notes. "IAI Global Note" means, a permanent global note in registered form representing the aggregate principal amount of Notes sold to Institutional Accredited Investors. "incur" has the meaning set forth in Section 4.12. "Indebtedness" means with respect to any Person, without duplication, (i) all Obligations of such Person for borrowed money, (ii) all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 60 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted), (v) all Obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below, (vii) all Obligations of any other Person of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured, (viii) all Obligations under currency agreements and interest swap agreements of such Person and (ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on 10 18 any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock. "Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof. "Independent Financial Advisor" means a firm (i) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in the Company and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent and qualified to perform the task for which it is to be engaged. "Initial Notes" means the Company's 11 1/2% Senior Subordinated Notes due 2007 issued on the Issue Date. "Initial Purchasers" means BT Alex. Brown Incorporated and NatWest Capital Markets Limited. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "interest" means, when used with respect to any Note, the amount of all interest accruing on such Note, including any applicable defaulted interest pursuant to Section 2.12 and any Additional Interest pursuant to the Registration Rights Agreement. "Interest Payment Date" means the stated maturity of an installment of interest on the Notes. "Interest Swap Obligations" means the obligations of any Person pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "Investment" means, with respect to any Person, any direct or indirect loan or other 11 19 extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Subsidiary, as the case may be. For the purposes of Section 4.10, the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or writeoffs with respect to such Investment, reduced by the payment of dividends or distributions in connection with such Investment or any other amounts received in respect of such Investment; provided, however, that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, greater than 50% of the outstanding Common Stock of such Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such former Subsidiary not sold or disposed of. "Issue Date" means November 19, 1997. "Legal Defeasance" has the meaning set forth in Section 8.01. "Legal Holiday" has the meaning provided in Section 11.07. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Management Agreement" means the Management Agreement, dated December 16, 1993, as amended on October 22, 1997, among the Company, C.F. Capital Corporation, G. John Krediet and Stephen L. Larson. "Maturity Date" means November 15, 2007. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Subsidiaries from such Asset 12 20 Sale net of (a) reasonable out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c)repayment of Indebtedness that is required to be repaid in connection with such Asset Sale and (d) appropriate amounts to be provided by the Company or any Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by the Company or any Subsidiary, as the case may be, after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale. "Net Proceeds Offer" has the meaning set forth in Section 4.15. "Net Proceeds Offer Amount" has the meaning set forth in Section 4.15. "Net Proceeds Offer Payment Date" has the meaning set forth in Section 4.15. "Net Proceeds Offer Trigger Date" has the meaning set forth in Section 4.15. "Non-U.S. Person" means a person who is not a U.S. person, as defined in Regulation S. "Notes" means, collectively, the Initial Notes, the Private Exchange Notes, if any, and the Unrestricted Notes, treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms of this Indenture, that are issued pursuant to this Indenture. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board of Directors, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of such Person, or any other officer designated by the Board of Directors serving in a similar capacity and with respect to the Trustee or any agent of the Trustee, a Trust Officer. "Officer's Certificate" means, with respect to any Person, a certificate signed by the Chairman, Vice Chairman, Chief Executive Officer, the President or any Vice President and the Chief Financial Officer, Controller or any Treasurer or Assistant Secretary of such Person that shall comply with applicable provisions of this Indenture. 13 21 "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee complying with the requirements of Sections 11.04 and 11.05, as they relate to the giving of an Opinion of Counsel. "Paying Agent" has the meaning provided in Section 2.03. "Permitted Holders" means: (i) G. John Krediet, Stephen L. Larson, Stewart E. Allen, any trust solely for the benefit of G. John Krediet, Stephen L. Larson or Stewart E. Allen or any of their respective immediate family members, and any partnership all the partnership interests in which are, or holding company all the Capital Stock of which is, beneficially owned by any of the foregoing (including, without limitation, Gaspar Limited); provided that with respect to (a) any such partnership or holding company, G. John Krediet, Stephen L. Larson or Stewart E. Allen, as applicable, shall at all times have the exclusive power to direct, directly or indirectly, the voting of the Capital Stock of the Company held by such partnership or holding company and (b) any such trust, G. John Krediet, Stephen L. Larson or Stewart E. Allen or their immediate family members shall at all times either have the exclusive power to direct, directly or indirectly, the voting of the Capital Stock of the Company held by such trust or be the sole beneficiaries of such trust; and (ii) Clairvest Group Inc. ("Clairvest"). "Permitted Indebtedness" means, without duplication, each of the following: (i) Indebtedness under the Notes, this Indenture and the Guarantees; (ii) Indebtedness of the Company or any of its Subsidiaries incurred pursuant to the Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $30.0 million in the aggregate reduced by any required permanent repayments pursuant to the provisions set forth in Section 4.15 (which are accompanied by a corresponding permanent commitment reduction) thereunder (it being recognized that a reduction in a borrowing base in and of itself shall not be deemed a required permanent repayment); (iii) Interest Swap Obligations of the Company covering Indebtedness of the Company or any of its Subsidiaries; provided, however, that such Interest Swap Obligations are entered into to protect the Company and its Subsidiaries from fluctuations in interest rates on Indebtedness incurred in accordance with this Indenture to the extent the notional principal amount of such Interest Swap Obligation does not exceed the principal amount of the Indebtedness to which such Interest Swap Obligation relates; (iv) Indebtedness under Currency Agreements; provided, however, that in the case of Currency Agreements which relate to Indebtedness, such Currency Agreements do not increase the Indebtedness of the Company and its Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and 14 22 compensation payable thereunder; (v) Indebtedness of a Subsidiary to the Company or to a Wholly Owned Subsidiary of the Company for so long as such Indebtedness is held by the Company or a Wholly Owned Subsidiary of the Company, in each case subject to no Liens held by any Person other than the Company or a Wholly Owned Subsidiary of the Company; provided, however, that if as of any date any Person other than the Company or a Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the issuer of such Indebtedness; (vi) Indebtedness of the Company to a Wholly Owned Subsidiary of the Company for so long as such Indebtedness is held by a Wholly Owned Subsidiary of the Company, in each case subject to no Lien; provided, however, that (a) any Indebtedness of the Company to any Wholly Owned Subsidiary of the Company is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under this Indenture and the Notes and (b) if as of any date any Person other than a Wholly Owned Subsidiary of the Company owns or holds any such Indebtedness or a Lien in respect of such Indebtedness, such date shall be deemed the incurrence of Indebtedness not constituting Permitted Indebtedness by the Company; (vii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within two business days of incurrence; (viii) Indebtedness of the Company or any of its Subsidiaries represented by letters of credit for the account of the Company or such Subsidiary, as the case may be, in order to provide security for workers' compensation claims, payment obligations in connection with self-insurance or similar requirements in the ordinary course of business; (ix) Indebtedness existing on the date hereof; (x) Refinancing Indebtedness; (xi) Indebtedness permitted by clause (viii) of the definition of "Permitted Investments"; and (xii) additional Indebtedness of the Company or any of its Subsidiaries in an aggregate principal amount not to exceed $10.0 million at any one time outstanding. "Permitted Investments" means (i) Investments by the Company or any Subsidiary of the 15 23 Company in any Person that is or will become immediately after such Investment a Wholly-Owned Subsidiary of the Company or that will merge or consolidate into the Company or a Wholly-Owned Subsidiary of the Company; (ii) Investments in the Company by any Subsidiary of the Company; provided, however, that any Indebtedness evidencing such Investment by a Subsidiary is unsecured and subordinated, pursuant to a written agreement, to the Company's obligations under the Notes and this Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans and advances to employees and officers of the Company and its Subsidiaries in the ordinary course of business for bona fide business purposes not in excess of $500,000 at any one time outstanding; (v) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Subsidiaries' businesses and otherwise in compliance with this Indenture; (vi) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (vii) Investments made by the Company or its Subsidiaries as a result of non-cash consideration received in connection with an Asset Sale made in compliance with Section 4.16; and (viii) additional Investments in an amount outstanding at any one time not to exceed $2.5 million. "Permitted Liens" means the following types of Liens: (i) Liens in favor of the Trustee in its capacity as trustee for the Holders; (ii) Liens securing Indebtedness outstanding under the Credit Agreement; (iii) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (iv) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (v) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); 16 24 (vi) judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (vii) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (viii) any interest or title of a lessor under any Capitalized Lease Obligation; provided, however, that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation; (ix) Liens to secure Purchase Money Indebtedness of the Company or any Subsidiary not to exceed $5.0 million in the aggregate at any one time outstanding; provided, however, that (A) the related Purchase Money Indebtedness is permitted to be incurred in accordance with Section 4.12, (B) the related Purchase Money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Subsidiary of the Company other than the property and assets so acquired and (C) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (x) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods; (xi) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (xii) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Company or any of its Subsidiaries, including rights of offset and set-off; (xiii) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (xiv) Liens securing Indebtedness under Currency Agreements; and (xv) Liens securing Acquired Indebtedness incurred in accordance with Section 4.12; provided, however, that (A) such Liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the 17 25 Company and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company and (B) such Liens do not extend to or cover any property or assets of the Company or of any of its Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Subsidiary of the Company and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Company or a Subsidiary of the Company. "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Notes" has the meaning provided in Section 2.01. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "principal" of any Indebtedness (including the Notes) means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "Private Exchange Notes" shall have the meaning provided in the Registration Rights Agreement. "Private Placement Legend" means the legend set forth on the Initial Notes in the form set forth in the first two paragraphs contained on Exhibit A. "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act. "Property" means, with respect to any Person, any interests of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock, partnership interests and other equity or ownership interests in any other Person. "Public Equity Offering" means an underwritten public offering of Qualified Capital Stock of the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act, or a comparable filing under the laws of any province of Canada, in either case yielding gross proceeds to the Company of at least $35 million. "Purchase Money Indebtedness" means Indebtedness the net proceeds of which are used 18 26 to finance the cost (including the cost of construction) of property or assets acquired in the normal course of business by the Person incurring such Indebtedness. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Qualified Institutional Buyer" or "QIB" shall have the meaning specified in Rule 144A. "Receivables" means any right of payment from or on behalf of any obligor, whether constituting an account, chattel paper, instrument, general intangible or otherwise, arising from the financing by the Company or any Subsidiary of the Company of merchandise or services, and monies due thereunder, security in the merchandise and services financed thereby, records related thereto, and the right to payment of any interest or finance charges and other obligations with respect thereto, proceeds from claims on insurance policies related thereto, any other proceeds related thereto, and any other related rights. "Record Date" means the Record Dates specified in the Notes. "Redemption Date" means, when used with respect to any Note to be redeemed, the date fixed for such redemption pursuant to this Indenture and the Notes. "Redemption Price" means, when used with respect to any Note to be redeemed, the price fixed for such redemption, including principal and premium, if any, pursuant to this Indenture and the Notes. "Reference Date" has the meaning set forth in Section 4.10. "Refinance" means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means any Refinancing by the Company or any Subsidiary of the Company of Indebtedness incurred in accordance with Section 4.12 (provided that Refinancing Indebtedness shall not include Indebtedness described in clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (x), (xi) or (xii) of the definition of Permitted Indebtedness), in each case that does not (1) result in an increase in the aggregate principal amount of Indebtedness of such Person as of the date of such proposed Refinancing (plus the amount of any premium required to be paid under the terms of the instrument governing such Indebtedness and plus the amount of reasonable expenses incurred by the Company or such Subsidiary, as the case may be, in connection with such Refinancing), except to the extent that any such increase in Indebtedness is otherwise permitted by this Indenture or (2) create Indebtedness with (A) a Weighted Average 19 27 Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being Refinanced; provided, however, that (x) if such Indebtedness being Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness shall be Indebtedness solely of the Company and (y) if such Indebtedness being Refinanced is subordinate or junior to the Notes or the Guarantees, then such Refinancing Indebtedness shall be subordinate to the Notes or the Guarantees, as the case may be, at least to the same extent and in the same manner as the Indebtedness being Refinanced. "Registrar" has the meaning provided in Section 2.03. "Registration Rights Agreement" means the Registration Rights Agreement dated the Issue Date among the Company, the Subsidiary Guarantors and the Initial Purchasers. "Regulation S" means Regulation S under the Securities Act. "Regulation S Global Note" means a permanent global note in registered form representing the aggregate principal amount of Notes sold in reliance on Regulation S under the Securities Act. "Replacement Assets" shall have the meaning set forth in Section 4.15. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Indebtedness; provided, however, that if, and for so long as, any Designated Senior Indebtedness lacks such a representative, then the Representative for such Designated Senior Indebtedness shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Indebtedness in respect of any Designated Senior Indebtedness. "Restricted Payment" shall have the meaning set forth in Section 4.10. "Restricted Security" has the meaning assigned to such term in Rule 144(a)(3) under the Securities Act; provided, however, that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "Rule 144A" means Rule 144A under the Securities Act. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of the Company of any property, whether owned by the Company or any Subsidiary of the Company at the Issue Date or later acquired, which has been or is to be sold or transferred by 20 28 the Company or such Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Senior Indebtedness" means, the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Indebtedness" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, to the extent such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations of every nature of the Company under the Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (y) all Interest Swap Obligations and (z) all obligations under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i) any Indebtedness of the Company to a Subsidiary of the Company or any Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (iii) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (iv) Indebtedness represented by Disqualified Capital Stock, (v) any liability for federal, state, local or other taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of Section 4.12, (vii) Indebtedness which, when incurred and without respect to any election under Section 1111 (b) of Title 11, United States Code is without recourse to the Company and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company. "Shareholder Agreement" means the Shareholder Agreement, dated as of October 22, 1997, among the Company, Sparkling Spring Water Limited ("SSWL"), Clairvest, Gaspar Limited, C. Sean Day, Stephen L. Larson, Kevin Newman, Mark Stitzer, Lucy Stitzer and Stewart E. Allen. "Significant Subsidiary" shall have the meaning set forth in Rule 1-02(w) of Regulation S-X under the Securities Act. 21 29 "Subsidiary", with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Subsidiary Guarantor" means (a) each of the Company's Subsidiaries as of the Issue Date and (b) each of the Company's Subsidiaries that in the future executes a supplemental indenture in which such Subsidiary agrees to be bound by the terms of this Indenture as a Subsidiary Guarantor; provided, however, that any Person constituting a Subsidiary Guarantor as described above shall cease to constitute a Subsidiary Guarantor when its Guarantee is released in accordance with the terms of this Indenture. "Surviving Entity" shall have the meaning set forth in Section 5.01. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as otherwise provided in Section 9.03. "Trustee" means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Trust Officer" means any officer in the Corporate Trust Office of the Trustee, including any managing director, vice president, assistant vice president, assistant treasurer, assistant secretary, or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject. "U.S. Government Obligations" means direct obligations of, and obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. "U.S. Legal Tender" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "Unrestricted Notes" means one or more Notes that do not and are not required to bear the Private Placement Legend in the form set forth in Exhibit A. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal 22 30 amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking, fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person of which all the outstanding voting securities normally entitled to vote in the election of directors are owned by such Person or any Wholly Owned Subsidiary of such Person. SECTION 1.02. Incorporation by Reference of TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes. "indenture security holder" means a Holder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP on any date of determination; (3) "or" is not exclusive; 23 31 (4) words in the singular include the plural, and words in the plural include the singular; (5) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (6) any reference to a statute, law or regulation means that statute, law or regulation as amended and in effect from time to time and includes any successor statute, law or regulation; provided, however, that any reference to the Bankruptcy Law shall mean the Bankruptcy Law as applicable to the relevant case. ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. The Initial Notes and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit A hereto. The Exchange Notes, the notation thereon relating to the Guarantees and the Trustee's certificate of authentication relating thereto shall be substantially in the form of Exhibit B hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or depository rule or usage. The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its issuance and shall show the date of its authentication. Each Note shall have an executed Guarantee endorsed thereon substantially in the form of Exhibit F hereto. The terms and provisions contained in the Notes and the Guarantees annexed hereto as Exhibits A and F, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Subsidiary Guarantors, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A, Notes offered and sold to institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and Notes offered and sold in reliance on Regulation S shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "Global Note"), deposited with the Trustee, as custodian for the Depository, duly executed by the Company (and having an executed Guarantee endorsed thereon) and authenticated by the Trustee as hereinafter provided and shall bear the legend set forth in Exhibit C. The aggregate 24 32 principal amount of the Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Notes issued in exchange for interests in a Global Note pursuant to Section 2.16 may be issued and Notes offered and sold in reliance on any other exemption from registration under the Securities Act other than as described in the preceding paragraph shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "Physical Notes"). All Notes offered and sold in reliance on Regulation S shall remain in the form of a Global Note until the consummation of the Exchange Offer pursuant to the Registration Rights Agreement; provided, however, that all of the time periods specified in the Registration Rights Agreement to be complied with by the Company and the Subsidiary Guarantors have been so complied with. SECTION 2.02. Execution and Authentication; Aggregate Principal Amount. Two Officers, or an Officer and an Assistant Secretary of the Company, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall attest to, the Notes for the Company by manual or facsimile signature. If an Officer or Assistant Secretary whose signature is on a Note or a Guarantee was an Officer or Assistant Secretary at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Notes for original issue in the aggregate principal amount of $100,000,000, (ii) Private Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes and (iii) Unrestricted Notes from time to time only (A) in exchange for a like principal amount of Initial Notes or (B) in an aggregate principal amount of not more than the excess of $100,000,000 over the sum of the aggregate principal amount of (x) Initial Notes then outstanding, (y) Private Exchange Notes then outstanding and (z) Unrestricted Notes issued in accordance with (iii)(A) above, in each case upon a written order of the Company in the form of an Officer's Certificate of the Company. Each such written order shall specify the amount of Notes to be authenticated and the date on which the Notes are to be 25 33 authenticated, whether the Notes are to be Initial Notes, Private Exchange Notes or Unrestricted Notes and whether the Notes are to be issued as Physical Notes or Global Notes or such other information as the Trustee may reasonably request. The aggregate principal amount of Notes outstanding at any time may not exceed $100,000,000, except as provided in Sections 2.07 and 2.08. Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matters (as to which any of such Notes may vote or consent) as one class and no series of Notes will have the right to vote or consent as a separate class on any matter. The Trustee may appoint an authenticating agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate Notes. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with the Company or with any Affiliate of the Company. The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in the City of New York, State of New York) where (a) Notes may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional Paying Agent. The Company may act as its own Paying Agent, except that for the purposes of payments on the Notes pursuant to Sections 4.14 and 4.15, neither the Company nor any Affiliate of the Company may act as Paying Agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA and implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company shall fail to maintain a Registrar or Paying Agent the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of demands and notices in connection with the Notes, until such time as the Trustee has 26 34 resigned or a successor has been appointed. Any of the Registrar, the Paying Agent or any other agent may resign upon 30 days' notice to the Company. SECTION 2.04. Paying Agent To Hold Assets in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, premium, if any, or interest on, the Notes (whether such assets have been distributed to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any Default by the Company (or any other obligor on the Notes) in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee within five (5) Business Days after each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee, and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. Transfer and Exchange. Subject to Sections 2.16 and 2.17, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes or other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registration of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes and the Subsidiary Guarantors shall execute Guarantees thereon at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the 27 35 Company may require payment of a sum sufficient to cover any transfer tax, fee or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.10, 3.04, 4.14, 4.15 or 9.05, in which event the Company shall be responsible for the payment of such taxes). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part. Any Holder of a beneficial interest in a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry system. SECTION 2.07. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note and the Subsidiary Guarantors shall execute a Guarantee thereon if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity of reasonable tenor, sufficient in the reasonable judgment of the Company, the Subsidiary Guarantors and the Trustee, to protect the Company, the Subsidiary Guarantors, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. Every replacement Note shall constitute an additional obligation of the Company and the Subsidiary Guarantors. SECTION 2.08. Outstanding Notes. Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to the provisions of Section 2.09, a Note does not cease to be outstanding because the Company or any of its Affiliates holds the Note. If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. 28 36 If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal, premium, if any, and interest due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes shall be deemed not to be outstanding and interest on them shall cease to accrue. SECTION 2.09. Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so considered. The Company shall notify the Trustee, in writing, when either it or, to its knowledge, any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired and such other information as the Trustee may reasonably request and the Trustee shall be entitled to rely thereon. SECTION 2.10. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Company in the form of an Officer's Certificate. The Officer's Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company consider appropriate for temporary Notes and so indicate in the Officer's Certificate. Without unreasonable delay, the Company shall prepare, the Trustee shall authenticate and the Subsidiary Guarantors shall execute Guarantees on, upon receipt of a written order of the Company pursuant to Section 2.02, definitive Notes in exchange for temporary Notes. SECTION 2.11. Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose, in its customary manner, of all Notes surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that they have paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness 29 37 represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. The Company will pay interest on overdue principal from time to time on demand at the rate of interest then borne by the Notes. The Company shall, to the extent lawful, pay interest on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate of interest then borne by the Notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months, and, in the case of a partial month, the actual number of days elapsed. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, which special record date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment (a "Default Interest Payment Date"), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section; provided, however, that in no event shall the Company deposit monies proposed to be paid in respect of defaulted interest later than 11:00 a.m. New York City time of the proposed Default Interest Payment Date. At least 15 days before the subsequent special record date, the Company shall mail (or cause to be mailed) to each Holder, as of a recent date selected by the Company, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.01(i) shall be paid to Holders as of the regular record date for the Interest Payment Date for which interest has not been paid. Notwithstanding the foregoing, the Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange. SECTION 2.13. CUSIP Number. The Company in issuing the Notes may use a "CUSIP" number, and, if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that no representation is hereby deemed to be made by the Trustee as to the 30 38 correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in the CUSIP number. SECTION 2.14. Deposit of Monies. Prior to 11:00 a.m. New York City time on each Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date, Maturity Date, Redemption Date, Change of Control Payment Date and Net Proceeds Offer Payment Date, as the case may be. SECTION 2.15. Restrictive Legends. Each Global Note and Physical Note that constitutes a Restricted Security shall bear the Private Placement Legend on the face thereof until after the second anniversary of the later of the Issue Date and the last date on which the Company or any Affiliate of the Company was the owner of such Note (or any predecessor security) (or such shorter period of time as permitted by Rule 144(k) under the Securities Act or any successor provision thereunder) (or such longer period of time as may be required under the Securities Act or applicable state securities laws in the opinion of counsel for the Company, unless otherwise agreed by the Company and the Holder thereof). Each Global Note shall also bear the legend as set forth in Exhibit C. SECTION 2.16. Book-Entry Provisions for Global Security. (a) The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear the legend as set forth in Exhibit C. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Notes, and the Depository may be treated by the Company, the Trustee and any Agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any Agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or 31 39 impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfers of a Global Note shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.17. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Note if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Notes and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes. (c) In connection with any transfer or exchange of a portion of the beneficial interest in a Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, the Subsidiary Guarantors shall execute Guarantees on, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount. (d) In connection with the transfer of an entire Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.16, such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, the Subsidiary Guarantors shall execute Guarantees on and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in a Global Note pursuant to paragraph (b) or (c) of this Section 2.16 shall, except as otherwise provided by paragraphs (a)(i)(x) and (d) of Section 2.17, bear the Private Placement Legend. (f) The Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.17. Special Transfer Provisions. (a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. Persons. The following provisions shall apply with respect to the registration of any proposed transfer of a 32 40 Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non- U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time on or prior to the second anniversary of the Issue Date) or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit E hereto; and (ii) if the proposed transferee is an Agent Member and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the IAI Global Note or Regulation S Global Note, as the case may be, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, the Registrar shall register the transfer and reflect on its books and records the date and an increase in the principal amount of the IAI Global Note or Regulation S Global Note, as to case may be, in an amount equal to the principal amount of Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred; and (iii) if the proposed transferor is an Agent Member seeking to transfer an interest in a Global Note, upon receipt by the Registrar of (x) written instructions given in accordance with the Depository's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which such interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the IAI Global Note or the Regulation S Global Note, as the case may be, in an amount equal to the principal amount of the Notes to be transferred. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer of any Restricted Security if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company 33 41 and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in a Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of such Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred; and (iii) if the proposed transferor is an Agent Member seeking to transfer an interest in the IAI Global Note or the Regulation S Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the IAI Global Note or the Regulation S Global Note, as the case may be, in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the Global Note in an amount equal to the principal amount of the Notes to be transferred. (c) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (d) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the requested transfer is after the second anniversary of the Issue Date (provided, however, that neither the Company nor any Affiliate of the Company has held any beneficial interest in such Note, or portion thereof, at any time prior to or on the second anniversary of the Issue Date), or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. 34 42 (e) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.16 or this Section 2.17. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time during the Registrar's normal business hours upon the giving of reasonable written notice to the Registrar. (f) Transfers of Notes Held by Affiliates. Any certificate (i) evidencing a Note that has been transferred to an Affiliate of the Company within two years after the Issue Date, as evidenced by a notation on the Assignment Form for such transfer or in the representation letter delivered in respect thereof or (ii) evidencing a Note that has been acquired from an Affiliate (other than by an Affiliate) in a transaction or a chain of transactions not involving any public offering, shall, until two years after the last date on which the Company or any Affiliate of the Company was an owner of such Note, in each case, bear the Private Placement Legend, unless otherwise agreed by the Company (with written notice thereof to the Trustee). SECTION 2.18. Liquidated Damages Under Registration Rights Agreement. Under certain circumstances, the Company shall be obligated to pay certain liquidated damages to the Holders, all as set forth in Section 4 of the Registration Rights Agreement. The terms thereof are hereby incorporated herein by reference. ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. If the Company elects to redeem Notes pursuant to Paragraph (5) of the Notes, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of the Notes to be redeemed. The Company shall give each notice provided for in this Section 3.01 45 days before the Redemption Date (unless a shorter notice period shall be satisfactory to the Trustee, as evidenced 35 43 in a writing signed on behalf of the Trustee), together with an Officer's Certificate stating that such redemption shall comply with the conditions contained herein and in the Notes. Any such notice may be canceled at any time prior to notice of such redemption being mailed to any Holder and shall thereby be void and of no effect. SECTION 3.02. Selection of Notes To Be Redeemed. In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed (subject to DTC procedures) or, if such Notes are not then listed on a national securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; provided, further, however, that if a partial redemption is made with the proceeds of a Public Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable Redemption Price. SECTION 3.03. Optional Redemption. (a) The Notes will be redeemable at the Company's option, in whole at any time or in part from time to time, on and after November 15, 2002, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on November 15 of the year set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption: Year Percentage ---- ---------- 2002 . . . . . . . . . . . . . . . . . . . . . 105.750% 2003 . . . . . . . . . . . . . . . . . . . . . 103.833% 2004 . . . . . . . . . . . . . . . . . . . . . 101.917% 2005 and thereafter. . . . . . . . . . . . . . 100.000% 36 44 (b) Notwithstanding the foregoing, at any time, or from time to time, on or prior to November 15, 2000, the Company may, at its option, redeem up to $30.0 million aggregate principal amount of the Notes originally issued with the net cash proceeds of one or more Public Equity Offerings by the Company at a redemption price equal to 111.50% of the principal amount thereof, plus accrued interest to the date of redemption, provided that at least $70.0 million in aggregate principal amount of the Notes originally issued remains outstanding immediately following such redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 60 days after the consummation of any such Public Equity Offering. SECTION 3.04. Notice of Redemption. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first class mail to each Holder of Notes to be redeemed at its registered address, with a copy to the Trustee and any Paying Agent. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. The Company shall provide such notices of redemption to the Trustee at least five days before the intended mailing date. Each notice of redemption shall identify (including the CUSIP number) the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) the subparagraph of the Notes pursuant to which such redemption is being made; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (6) that, unless the Company defaults in making the redemption payment, interest on Notes or applicable portions thereof called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price plus accrued interest as of the Redemption Date, if any, upon surrender to the Paying Agent of the Notes redeemed; (7) if any Note is being redeemed in part, the portion of the principal amount of such 37 45 Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued; and (8) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes. SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.04, such notice of redemption shall be irrevocable and Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price plus accrued interest as of such date, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price plus accrued interest thereon to the Redemption Date, but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant record dates referred to in the Notes. Interest shall accrue on or after the Redemption Date and shall be payable only if the Company defaults in payment of the Redemption Price. SECTION 3.06. Deposit of Redemption Price. On or before the Redemption Date and in accordance with Section 2.14, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Notes to be redeemed on that date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. Unless the Company fails to comply with the preceding paragraph and defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment. SECTION 3.07. Notes Redeemed in Part. 38 46 Upon surrender of a Note that is to be redeemed in part, the Trustee shall authenticate for the Holder a new Note or Notes equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. (a) The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. (b) An installment of principal of or interest on the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or any of its Affiliates) holds, prior to 11:00 a.m. New York City time on that date, U.S. Legal Tender designated for and sufficient to pay the installment in full and is not prohibited from paying such money to the Holders pursuant to the terms of this Indenture or the Notes. (c) Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 4.02. Maintenance of Office or Agency. The Company shall maintain the office or agency required under Section 2.03. The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. SECTION 4.03. Corporate Existence. Except as otherwise permitted by Article Five, the Company shall do or cause to be done, at its own cost and expense, all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Subsidiaries in accordance with the respective organizational documents of each such Subsidiary and the material rights (charter and statutory) and franchises of the Company and each such Subsidiary; provided, however, that the Company shall not be required to preserve, with respect to itself, any material right or franchise 39 47 and, with respect to any of its Subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not, and will not be, adverse in any material respect to the Holders. SECTION 4.04. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any of its Subsidiaries; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate negotiations or proceedings properly instituted and diligently conducted for which adequate reserves, to the extent required under GAAP, have been taken. SECTION 4.05. Maintenance of Properties and Insurance. (a) The Company shall, and shall cause each of its Subsidiaries to, maintain all properties used or useful in the conduct of its business in good working order and condition (subject to ordinary wear and tear) and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto and actively conduct and carry on its business; provided, however, that nothing in this Section 4.05 shall prevent the Company or any of the Subsidiaries of the Company from discontinuing the operation and maintenance of any of its properties, if such discontinuance is (i) in the ordinary course of business pursuant to customary business terms or (ii) in the good faith judgment of the respective Boards of Directors or other governing body of the Company or Subsidiary, as the case may be, desirable in the conduct of their respective businesses and is not disadvantageous in any material respect to the Holders. (b) The Company shall provide or cause to be provided, for itself and each of the Subsidiaries of the Company, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of the Company, are adequate and appropriate for the conduct of the business of the Company and its Subsidiaries in a prudent manner, with reputable insurers. SECTION 4.06. Compliance Certificate; Notice of Default. (a) The Company shall deliver to the Trustee, within 120 days after the end of each of 40 48 the Company's fiscal years, an Officer's Certificate (provided, however, that one of the signatories to each such Officer's Certificate shall be the Company's principal executive officer, principal financial officer or principal accounting officer), as to such Officers' knowledge, without independent investigation, of the Company's compliance with all conditions and covenants under this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and in the event any Default of the Company's exists, such Officers shall specify the nature of such Default. Each such Officer's Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year-end. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the annual financial statements delivered pursuant to Section 4.08 shall be accompanied by a written report of the Company's independent certified public accountants (who shall be a firm of established national reputation) stating (A) that their audit examination has included a review of the terms of this Indenture and the form of the Notes as they relate to accounting matters, and (B) whether, in connection with their audit examination, any Default or Event of Default has come to their attention and if such a Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided, however, that, without any restriction as to the scope of the audit examination, such independent certified public accountants shall not be liable by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards. (c) (i) If any Default or Event of Default has occurred and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Notes, the Company shall deliver to the Trustee, at its address set forth in Section 11.02, by registered or certified mail or by facsimile transmission followed by hard copy by registered or certified mail an Officer's Certificate specifying such event, notice or other action within 10 days of its becoming aware of such occurrence. SECTION 4.07. Compliance with Laws. The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, Canada, the United Kingdom and each other country in which they conduct business, all states, provinces, and municipalities and other political subdivisions of the foregoing, and any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as could not singly or in the aggregate reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Company and its Subsidiaries taken as a whole. 41 49 SECTION 4.08. Reports to Holders. The Company will file with the Commission all information, documents and reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such filing requirements. The Company will file with the Trustee, within 15 days after it files them with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Company files with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. Regardless of whether the Company is required to furnish such reports to its stockholders pursuant to the Exchange Act, the Company will cause its consolidated financial statements, comparable to that which would have been required to appear in annual or quarterly reports, to be delivered to the Trustee and the Holders. The Company will also make such reports available to prospective purchasers of the Notes or the Exchange Notes, as applicable, securities analysts and broker-dealers upon their request. In addition, for so long as any of the Notes remain outstanding the Company will make available to any prospective purchaser of the Notes or beneficial owner of the Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act, until such time as the Company has either exchanged the Notes for securities identical in all material respects which have been registered under the Securities Act or until such time as the holders thereof have disposed of such Notes pursuant to an effective registration statement filed by the Company. The Company will also comply with the other provisions of TIA ss. 314(a). SECTION 4.09. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.10. Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make any distribution (other than dividends 42 50 or distributions made to the Company or any Wholly-Owned Subsidiary of the Company and other than any dividend or distribution payable solely in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock; (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock (other than the exchange of such Capital Stock or any warrants, rights or options to acquire shares of any class of Capital Stock of the Company for Qualified Capital Stock of the Company); (c) make any principal payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Indebtedness of the Company or a Subsidiary Guarantor that is subordinate or junior in right of payment to the Notes or such Subsidiary Guarantor's Guarantee; or (d) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing, or (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12, or (iii) the aggregate amount of all Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of Directors of the Company) shall exceed the sum of: (v) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned during the period beginning on the first day of the fiscal quarter including the Issue Date and ending on the last day of the fiscal quarter ending at least 30 days prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (w) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company, including treasury stock; plus 43 51 (x) without duplication of any amounts included in clause (iii) (w) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding, in the case of clauses (iii) (w) and (x), any net cash proceeds from a Public Equity Offering to the extent used to redeem the Notes and any net cash proceeds received by the Company from the sale of Qualified Capital Stock of the Company or equity contribution which has been financed, directly or indirectly, using funds (1) borrowed from the Company or any of its Subsidiaries, unless and until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by the Company or by any of its Subsidiaries); plus (y) to the extent that any Investment made after the Issue Date has been treated as a Restricted Payment and such Investment is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Investment (less the cost of disposition, if any) (but only to the extent not included in clause (iii)(v) above), and (B) the initial amount of such Investment. Notwithstanding the foregoing, the provisions set forth above shall not prohibit: (1) the payment of any dividend or consummation of irrevocable redemption within 60 days after the date of declaration of such dividend or giving of irrevocable redemption notice if the dividend or redemption would have been permitted on the date of declaration or giving of irrevocable redemption notice; (2) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) if no Default or Event of Default shall have occurred and be continuing, the acquisition of any Indebtedness of the Company that is subordinate or junior in right of payment to the Notes either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of (A) shares of Qualified Capital Stock of the Company or (B) Refinancing Indebtedness; (4) if no Default or Event of Default shall have occurred and be continuing, payments by the Company to repurchase Capital Stock or other securities of the Company from shareholders of the Company (other than Permitted Holders) in an aggregate amount not to exceed $500,000 in any calendar year and $2,500,000 in the aggregate; and 44 52 (5) during the period ending 60 days after the Issue Date, the application of the proceeds of the offering of the Notes (in the manner contemplated in the section of that certain offering memorandum with respect to the Notes dated November 14, 1997 titled "Use of Proceeds") in connection with the exchange by certain shareholders of SSWL of their shares of Common Stock of SSWL for an equivalent number of shares of Common Stock of the Company or a combination of shares of Common Stock of the Company and the right to receive cash in an amount not to exceed $15,000,000 in the aggregate. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, amounts expended pursuant to clauses (1), (2) (ii), and (3) (ii) (A) shall be included in such calculation. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officer's Certificate stating that such Restricted Payment complies with this Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed, which calculations may be based upon the Company's latest available internal quarterly financial statements. SECTION 4.11. Limitation on Transactions with Affiliates. (a) The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) of this Section 4.11 and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained or are obtainable in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate of the Company or such Subsidiary. All Affiliate Transactions (and each series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $1.0 million shall be evidenced by an Officer's Certificate certifying that such transaction complies with the foregoing provisions. If the Company or any Subsidiary of the Company enters into an Affiliate Transaction (or a series of related Affiliate Transactions which are similar or part of a common plan) involving aggregate payments or other property with a fair market value in excess of $10.0 million, the Company or such Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such transaction or series of related transactions to the Company or the relevant Subsidiary, as the case may be, from a financial point of view, from an Independent Financial Advisor and file the same with the Trustee. (b) The restrictions set forth in paragraph (a) shall not apply to (i) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees, 45 53 consultants or agents of the Company or any Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Wholly Owned Subsidiaries or exclusively between or among such Wholly Owned Subsidiaries, provided such transactions are not otherwise prohibited by this Indenture; (iii) any agreement as in effect as of the Issue Date (including, without limitation, the Management Agreement and the Shareholder Agreement) or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) or in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; and (iv) Restricted Payments permitted by this Indenture. SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur"), any Indebtedness (including, without limitation, Acquired Indebtedness) other than Permitted Indebtedness. Notwithstanding the foregoing, if no Default or Event of Default shall have occurred and be continuing at the time of or as a consequence of the incurrence of any such Indebtedness, (x) the Company may incur Senior Indebtedness (including, without limitation, Acquired Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.25 to 1.0 if such incurrence occurs on or prior to December 31, 1999 and 2.50 to 1.0 if such incurrence occurs thereafter and (y) the Company may otherwise incur Indebtedness (which does not constitute Senior Indebtedness) if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0 if such incurrence occurs on or prior to December 31, 1999 and 2.25 to 1.0 if such incurrence occurs thereafter. Prior to any incurrence of Indebtedness pursuant to the last sentence of the preceding paragraph (other than Permitted Indebtedness), the Company shall deliver to the Trustee an Officer's Certificate setting forth the calculations by which such incurrence was determined to be permitted. SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of the Company to (a) pay dividends or make any other 46 54 distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Subsidiary of the Company; or (c) transfer any of its property or assets to the Company or any other Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) this Indenture; (3) the Credit Agreement; (4) non-assignment provisions of any contract or any lease governing a leasehold interest of any Subsidiary of the Company; (5) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (6) agreements existing on the Issue Date to the extent and in the manner such agreements are in effect on the Issue Date; or (7) an agreement governing Indebtedness incurred to Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (3), (5) or (6) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such Indebtedness are no less favorable to the Company or to the Holders in any material respect as determined by the Board of Directors of the Company in its reasonable and good faith judgment than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (3), (5) or (6), respectively. SECTION 4.14. Change of Control. (a) Upon the occurrence of a Change of Control, each Holder will have the right to require that the Company purchase all or a portion of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. (b) Prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full all indebtedness, and terminate all commitments, under the Credit Agreement and all other Senior Indebtedness the terms of which require repayment upon a Change of Control or offer to repay in full all indebtedness, and terminate all commitments, under the Credit Agreement and all other such Senior Indebtedness and to repay the Indebtedness owed to each lender which has accepted such offer or (ii) obtain the requisite consents under the Credit Agreement and all other Senior Indebtedness to permit the repurchase of the Notes as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described below. The Company's failure to comply with the second preceding sentence shall be governed by Section 6.01(iii) and not Section 6.01(iv). (c) Within 30 days following the date upon which a Change of Control occurs, the Company shall send, by first class mail, a notice to each Holder at such Holder's last registered address, with a copy to the Trustee, which notice shall govern the terms of the Change of Control 47 55 Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Change of Control Offer. Such notice shall state: (i) that the Change of Control Offer is being made pursuant to this Section 4.14, that all Notes tendered and not withdrawn will be accepted for payment and that the Change of Control Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law; (ii) the purchase price (including the amount of accrued interest) and the purchase date (which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law) (the "Change of Control Payment Date"); (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (v) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Notes purchased; (vii) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof; and (viii) the circumstances and relevant facts regarding such Change of Control. On or before the Change of Control Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Notes so tendered and (iii) deliver to the Trustee 48 56 Notes so accepted together with an Officer's Certificate stating the Notes or portions thereof being purchased by the Company. Upon receipt by the Paying Agent of the monies specified in clause (ii) above and a copy of the Officer's Certificate specified in clause (iii) above, the Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and the Trustee shall promptly authenticate and mail to such Holders new Notes equal in principal amount to any unpurchased portion of the Notes surrendered. For purposes of this Section 4.14, the Trustee shall act as the Paying Agent. Neither the Board of Directors of the Company nor the Trustee may waive the provisions of this Section 4.14 relating to the Company's obligation to make a Change of Control Offer. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.14, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the provisions of this Section 4.14 by virtue thereof. SECTION 4.15. Limitation on Asset Sales. (a) The Company will not, and will not cause or permit any of its Subsidiaries to, consummate an Asset Sale unless: (i) the Company or the applicable Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors); (ii) at least 75% of the consideration received by the Company or the Subsidiary, as the case may be, from such Asset Sale shall be in the form of cash or Cash Equivalents and is received at the time of such disposition; and (iii) upon the consummation of an Asset Sale, the Company shall apply, or cause such Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either (A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness and, in the case of any Senior Indebtedness or Guarantor Senior Indebtedness under any revolving credit facility, effect a permanent reduction in the commitment available under such revolving credit facility, (B) to make an investment in properties and assets that replace the properties and assets that were the subject of such Asset Sale or in properties and assets that will be used in the business of the Company and its Subsidiaries as existing on the Issue Date or in businesses reasonably related thereto (as determined in good faith by the Company's Board of Directors) 49 57 ("Replacement Assets"), or (C) a combination of prepayment and investment permitted by the foregoing clauses (iii) (A) and (iii) (B). Pending final application, the Company or the applicable Subsidiary may temporarily reduce Indebtedness under any revolving credit facility or invest in cash or Cash Equivalents. On the 361st day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii) (A), (iii) (B) and (iii) (C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which the Company or such Subsidiary has failed to apply on or before such Net Proceeds Offer Trigger Date as permitted in clauses (iii) (A), (iii) (B) and (iii) (C) of the next preceding sentence (each, a "Net Proceeds Offer Amount") shall be applied by the Company or such Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this Section 4.15. The Company or any such Subsidiary of the Company, as the case may be, may defer the Net Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess of $5.0 million resulting from one or more Asset Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not just the amount in excess of $5.0 million, shall be applied as required pursuant to this paragraph). (b) Notwithstanding the immediately preceding paragraph, the Company and its Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraph to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Replacement Assets and/or Cash Equivalents and (ii) such Asset Sale is for fair market value; provided, however, that any consideration not constituting Replacement Assets received by the Company or any of its Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds subject to the provisions of the preceding paragraph. (c) Subject to the deferral of the Net Proceeds Offer contained in clause (a)(iii) above, each notice of a Net Proceeds Offer pursuant to this Section 4.15 shall be mailed or caused to be mailed, by first class mail, by the Company not more than 25 days after the Net Proceeds Offer Trigger Date to all Holders at their last registered addresses, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall state the following terms: 50 58 (i) that the Net Proceeds Offer is being made pursuant to this Section 4.15, that all Notes tendered will be accepted for payment; provided, however, that if the aggregate principal amount of Notes tendered in a Net Proceeds Offer plus accrued interest at the expiration of such offer exceeds the aggregate amount of the Net Proceeds Offer, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or multiples thereof shall be purchased) and that the Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law; (ii) the purchase price (including the amount of accrued interest) and the Net Proceeds Offer Payment Date (which shall be not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date and which shall be at least five Business Days after the Trustee receives notice thereof from the Company); (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Offer Payment Date; (v) that Holders electing to have a Note purchased pursuant to a Net Proceeds Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Net Proceeds Offer Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the second Business Day prior to the Net Proceeds Offer Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Note purchased; and (vii) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided, however, that each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof; On or before the Net Proceeds Offer Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Net Proceeds Offer which are to be purchased in accordance with item (b)(i) above, (ii) deposit with the Paying Agent in accordance 51 59 with Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted together with an Officer's Certificate stating the Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any. For purposes of this Section 4.15, the Trustee shall act as the Paying Agent. The Trustee shall promptly authenticate and mail to such Holders new Notes equal in principal amount to any unpurchased portion of the Notes surrendered. Upon the payment of the purchase price for the Notes accepted for purchase, the Trustee shall return the Notes purchased to the Company for cancellation. Any monies remaining after the purchase of Notes pursuant to a Net Proceeds Offer shall be returned within three Business Days by the Trustee to the Company except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. For purposes of this Section 4.15, the Trustee shall act as the Paying Agent. To the extent the amount of Notes tendered pursuant to any Net Proceeds Offer is less than the amount of Net Cash Proceeds subject to such Net Proceeds Offer, the Company may use any remaining portion of such Net Cash Proceeds not required to fund the repurchase of tendered Notes for general corporate purposes and such Net Proceeds Offer Amount shall be reset to zero. (d) The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the Section 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under Section 4.15 by virtue thereof. SECTION 4.16. Limitation on Preferred Stock of Subsidiaries. The Company will not permit any of its Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Subsidiary of the Company) to own any Preferred Stock of any Subsidiary of the Company. SECTION 4.17. Limitation on Liens. The Company will not, and will not cause or permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens of any kind against or upon any property or assets of the Company or any of its Subsidiaries whether owned on the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or assign or otherwise convey any right to receive income or profits therefrom unless (i) in the case of Liens securing Indebtedness 52 60 that is expressly subordinate or junior in right of payment to the Notes or any Guarantee, the Notes and such Guarantee, as the case may be, are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Notes and the Guarantees are equally and ratably secured, except for (A) Liens existing as of the Issue Date to the extent and in the manner such Liens are in effect on the Issue Date; (B) Liens securing Senior Indebtedness; (C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a Wholly Owned Subsidiary of the Company on assets of any Subsidiary of the Company; (E) Liens securing Refinancing Indebtedness which is incurred to Refinance any Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, however, that such Liens (1) are no less favorable to the Holders and are not more favorable to the lienholders with respect to such Liens than the Liens in respect of the Indebtedness being Refinanced and (2) do not extend to or cover any property or assets of the Company or any of its Subsidiaries not securing the Indebtedness so Refinanced (other than property or assets subject to Liens under clause (B) above); and (F) Permitted Liens. SECTION 4.18. Conduct of Business. The Company will not, and will not cause or permit any of its Subsidiaries to, engage in any businesses other than the businesses in which the Company is engaged on the Issue Date and any businesses reasonably related thereto (as determined in good faith by the Company's Board of Directors). SECTION 4.19. Additional Subsidiary Guarantees. If the Company or any of its Subsidiaries transfers or causes to be transferred, in one transaction or a series of related transactions, any property to any Subsidiary that is not a Subsidiary Guarantor, or if the Company or any of its Subsidiaries shall organize, acquire or otherwise invest in another Subsidiary, then such transferee or acquired or other Subsidiary shall (a) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes and this Indenture on the terms set forth in this Indenture and (b) deliver to the Trustee an opinion of counsel that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Subsidiary. After the execution and delivery of such supplemental indenture, such Subsidiary shall be a Subsidiary Guarantor for all purposes of this Indenture. SECTION 4.20. Prohibition on Incurrence of Senior Subordinated Debt. 53 61 The Company will not incur or suffer to exist Indebtedness that by its terms is senior in right of payment to the Notes and subordinate in right of payment to any other Indebtedness of the Company. No Subsidiary Guarantor shall incur or suffer to exist Indebtedness that by its terms is senior in right of payment to the Guarantees and subordinate in right of payment to any other Indebtedness of such Subsidiary Guarantor. SECTION 4.21. Payment of Additional Amounts. All payments by the Company in respect of the Notes or any Subsidiary Guarantor in respect of its Guarantee shall be made free and clear of and without withholding or deduction for or on account of any present or future taxes, duties, assessments or other governmental charges of whatever nature, including penalties, interest and any other liabilities related thereto ("Taxes"), imposed or levied by or on behalf of Canada or any relevant jurisdiction or any political subdivision or authority thereof or therein having power to tax. If the Company or any Subsidiary Guarantor is required to make any withholding or deduction for or on account of any Taxes from any payment made under or with respect to the Notes or the Guarantees, the Company or such Subsidiary Guarantor, as the case may be, will pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount the Holder would have received had such Taxes not been withheld or deducted; provided, that no Additional Amounts will be payable to a Holder (an "Excluded Holder") (i) with which the Company does not deal at arm's length (within the meaning of the Income Tax Act (Canada)) at the time of making such payment, (ii) which is subject to such Taxes by reason of its being connected with the jurisdiction imposing such tax or authority thereof otherwise than by the mere holding of the Notes or the receipt of payments thereunder, (iii) which presents any Note for payment of principal more than 60 days after the later of (x) the date on which payment first became due and (y) if the full amount payable has not been received by the Trustee on or prior to such due date, the date on which, the full amount payable having been so received, notice to that effect shall have been given to the Holders by the Trustee, except to the extent that the Holder would have been entitled to such Additional Amounts on presenting such Note for payment on the last day of the applicable 60-day period, (iv) which failed to duly and timely comply with a timely request of the Company to provide information, documents or other evidence concerning the Holder's nationality, residence, entitlement to treaty benefits, identity or connection with the jurisdiction imposing such tax, if and to the extent that due and timely compliance with such request would have reduced or eliminated any Taxes as to which Additional Amounts would have otherwise been payable to such Holder but for this clause (iv), (v) on account of any estate, inheritance, gift, sale, transfer, personal property or other similar Tax, (vi) which is a fiduciary, a partnership or not the beneficial owner of any payment on a Note, if and to the extent that any beneficiary or settlor of such fiduciary, any partner in such partnership or the beneficial owner of such payment (as the case may be) would not have been entitled to receive Additional Amounts with respect to such payment if such beneficiary, settlor, partner or beneficial owner had been the 54 62 Holder of such Note or (vii) any combination of the foregoing numbered clauses of this proviso. The Company and each Subsidiary Guarantor will also (i) make such withholding or deduction as required by applicable law and (ii) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. The Company or any Subsidiary Guarantor, as the case may be, will furnish to the Trustee, within 60 days after the date the payment of any Taxes is due pursuant to applicable law, copies of tax receipts evidencing that such payment has been made by the Company or such Subsidiary Guarantor, in such form as provided in the normal course by the taxing authority imposing such Taxes and as is reasonably available to the Company or such Subsidiary Guarantor. The Trustee shall make such evidence available to the Holders of Notes upon request. The Company and each Subsidiary Guarantor, jointly and severally, will indemnify and hold harmless each Holder of Notes that are outstanding on the date that withholding or deduction was required pursuant to applicable law (other than an Excluded Holder) and upon written notice reimburse each such Holder for the amount of (i) any taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Notes or the Guarantees, (ii) any liability (including penalties, interest and expenses) arising therefrom or with respect thereto and (iii) any taxes imposed with respect to any reimbursement under clause (i) or (ii) above. Whenever in this Indenture there is mentioned, in any context, (a) the payment of principal (and premium, if any), (b) purchase prices in connection with a repurchase of Notes, (c) interest or (d) any other amount payable on or with respect to any of the Notes, such mention shall be deemed to include mention of the payment of Additional Amounts provided for in this Section 4.21 to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. The foregoing obligations shall survive any termination of this Indenture or the defeasance of any obligations pursuant to this Indenture. The Company may redeem, at its option, all, but not less than all, the Notes at a redemption price equal to 100% of the principal amount so redeemed, plus accrued and unpaid interest, if any, thereon to the date of redemption if the Company (a) determines and certifies to the Trustee immediately prior to the giving of the notice of redemption that (i) it has or will become obligated to pay any Additional Amounts in respect of the Notes as a result of any change in or amendment to the laws (or any regulations or rulings promulgated thereunder) of Canada or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein affecting taxation, or any change in any official position regarding the application or interpretation of such laws, regulations or rulings (including a holding by a court of competent jurisdiction) which change, amendment, application or interpretation is announced or becomes effective on or after the Issue Date, (ii) such obligation cannot be avoided by the Company taking reasonable measures available to it, (iii) such obligation did not arise, directly or indirectly, from any transaction, action 55 63 or omission by the Company (whether or not such transaction, action or omission is otherwise permitted under the terms of this Indenture) and (b) provides the Trustee with a written legal opinion of independent legal counsel to the Company to the effect that the Company has become obligated to pay Additional Amounts as a result of a change, amendment, official application or interpretation described above and that the Company can not avoid payment of such Additional Amounts by taking reasonable measures available to it. Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. The Company will pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies that arise in any jurisdiction from the execution, delivery or registration of the Notes or the Guarantees or any other document or instrument referred to in this Indenture or the Notes. ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets. (a) The Company will not, in a single transaction or series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company's assets (determined on a consolidated basis for the Company and its Subsidiaries) unless: (i) either (1) the Company shall be the surviving or continuing corporation or (2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition the properties and assets of the Company and of the Company's Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia or the federal laws of Canada or any province thereof and (y) shall expressly assume as primary obligor, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and the performance of every covenant of the Notes, this Indenture and the Registration Rights Agreement on the part of the Company to be performed or observed, as the case may be; (ii) immediately after giving effect to such transaction and the assumption contemplated by clause (i) (2) (y) above (including giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction), the Company or such Surviving Entity, as the case may be, (1) shall have a Consolidated Net Worth equal to or 56 64 greater than the Consolidated Net Worth of the Company immediately prior to such transaction and (2) shall be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.12; (iii) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (i) (2) (y) above (including, without limitation, giving effect to any Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred and any Lien granted in connection with or in respect of the transaction), no Default or Event of Default shall have occurred or be continuing; and (iv) the Company or the Surviving Entity, as the case may be, shall have delivered to the Trustee an officer's certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. (b) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Subsidiaries of the Company the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. (c) Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose Guarantee is to be released in accordance with the terms of the Guarantee and this Indenture in connection with any transaction complying with the provisions of Section 4.15) will not, and the Company will not cause or permit any Subsidiary Guarantor to, consolidate with or merge with or into any Person other than the Company or another Subsidiary Guarantor that is a Wholly Owned Subsidiary unless: (a) the entity formed by or surviving any such consolidation or merger (if other than the Subsidiary Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any state thereof or the District of Columbia or the federal laws of Canada or any province thereof; (b) such entity assumes by execution of a supplemental indenture all of the obligations of the Subsidiary Guarantor under its Guarantee; (c) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (d) immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the Company could satisfy the provisions of clause (ii) of paragraph (a) of this Section 5.01. Any merger or consolidation of a Subsidiary Guarantor with and into the Company (with the Company being the surviving entity) or another Subsidiary Guarantor that is a Wholly Owned Subsidiary need only comply with clause (iv) of paragraph (a) of this Section 5.01. SECTION 5.02. Successor Corporation Substituted. Upon any consolidation, combination or merger or any transfer of all or substantially all of 57 65 the assets of the Company in accordance with Section 5.01, in which the Company is not the continuing corporation, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such successor had been named as the Company herein. ARTICLE SIX REMEDIES SECTION 6.01. Events of Default. An "Event of Default" means any of the following events: (i) the failure to pay interest (including any Additional Interest, if any) on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment is prohibited by Article Ten of this Indenture); (ii) the failure to pay the principal on any Notes when such principal becomes due and payable, at maturity, upon acceleration, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment is prohibited by Article Ten of this Indenture); (iii) a default in the observance or performance of any other covenant or agreement contained in this Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to Section 5.01, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); (iv) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, aggregates $10.0 million or more at any time; (v) one or more judgments in an aggregate amount in excess of $10.0 million shall have been rendered against the Company or any of its Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments 58 66 become final and non-appealable; (vi) the Company or any of its Significant Subsidiaries pursuant to or under or within the meaning of any Bankruptcy Law: (a) commences a voluntary case or proceeding; (b) consents to the entry of an order for relief against it in an involuntary case or proceeding; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property; (d) makes a general assignment for the benefit of its creditors; or (e) shall generally not pay its debts when such debts become due or shall admit in writing its inability to pay its debts generally; (vii) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against the Company or any Significant Subsidiary of the Company in an involuntary case or proceeding, (b) appoints a Custodian of the Company or any Significant Subsidiary of the Company for all or substantially all of its Properties, or (c) orders the liquidation of the Company or any Significant Subsidiary of the Company, and in each case the order or decree remains unstayed and in effect for 60 consecutive days; or (viii) any of the Guarantees cease to be in full force and effect or any of the Guarantees are declared to be null and void or invalid and unenforceable or any of the Subsidiary Guarantors denies or disaffirms its liability under its Guarantees (other than by reason of release of a Subsidiary Guarantor in accordance with the terms of this Indenture). SECTION 6.02. Acceleration. (a) Upon the happening of an Event of Default specified in Section 6.01 (other than an Event of Default specified in clause (vi) or (vii) of Section 6.01) the Trustee may, or the holders of at least 25% in principal amount of outstanding Notes may, declare the principal of and 59 67 accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the Credit Agreement, shall become due and payable upon the first to occur of an acceleration under the Credit Agreement, or five business days after receipt by the Company and the Representative under the Credit Agreement of such Acceleration Notice, unless all Events of Default specified in such Acceleration Notice (other than any Event of Default in respect of non-payment of principal) shall have been cured or waived. In the event of a declaration because an Event of Default set forth in Section 6.01(iv) has occurred and is continuing, such declaration of acceleration shall be automatically annulled if the missed payments in respect of such Indebtedness have been paid or if the holders of the Indebtedness that is subject to acceleration have rescinded their declaration of acceleration and the Trustee has received written notice of such Indebtedness having been repaid in full, in each case within 60 days thereof and if (i) the annulment of such acceleration would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default, except non-payment of principal or interest which have become due solely because of the acceleration, have been cured or waived and (iii) the Company has delivered an Officer's Certificate to the Trustee to the effect of clauses (i) and (ii) above. If an Event of Default of the type described in clause (vi) or (vii) of Section 6.01 occurs and is continuing, then all unpaid principal of, and premium, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. (b) At any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Company and the Trustee may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of such acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in clause (vi) or (vii) of Section 6.01, the Trustee shall have received an Officer's Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available 60 68 remedy by proceeding at law or in equity to collect the payment of the principal of, premium, if any, or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. All rights of action and claims under this Indenture or the Notes may be enforced by the Trustee even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. Prior to the declaration of acceleration of the Notes, the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may, on behalf of the Holders of all the Notes, waive any existing Default or Event of Default and its consequences under this Indenture, except a Default or Event of Default specified in Section 6.01(i) or (ii) or in respect of any provision hereof which cannot be modified or amended without the consent of the Holder so affected pursuant to Section 9.02. When a Default or Event of Default is so waived, it shall be deemed cured and shall cease to exist. This Section 6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. SECTION 6.05. Control by Majority. Subject to Section 2.09, the Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Article Six and under the TIA. The Holders of not less than a majority in aggregate principal amount of the outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided, however, that the Trustee may refuse to follow any direction (a) that conflicts with any rule of law or this Indenture, (b) that the Trustee determines may be unduly prejudicial to the rights of another Holder, or (c) that may expose the Trustee to personal liability for which reasonable indemnity provided to the Trustee against such liability shall be inadequate; provided, further, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction or this Indenture. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. SECTION 6.06. Limitation on Suits. 61 69 No Holder of any Notes shall have any right to institute any proceeding with respect to this Indenture or the Notes or any remedy hereunder, unless the Holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as Trustee under the Notes and this Indenture, the Trustee has failed to institute such proceeding within 25 days after receipt of such notice, request and offer of indemnity and the Trustee, within such 25-day period, has not received directions inconsistent with such written request by Holders of not less than a majority in aggregate principal amount of the outstanding Notes. The foregoing limitations shall not apply to a suit instituted by a Holder of a Note for the enforcement of the payment of the principal of, premium, if any, or interest on, such Note on or after the respective due dates expressed or provided for in such Note. A Holder may not use this Indenture to prejudice the rights of any other Holders or to obtain priority or preference over such other Holders. SECTION 6.07. Right of Holders To Receive Payment. Notwithstanding any other provision in this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, and interest on such Note, on or after the respective due dates expressed or provided for in such Note, or to bring suit for the enforcement of any such payment on or after the respective due dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in clause (i) or (ii) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company, or any other obligor on the Notes for the whole amount of the principal of, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate per annum provided for by the Notes and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents, 62 70 counsel, accountants and experts) and the Holders allowed in any judicial proceedings relative to the Company or Subsidiaries (or any other obligor upon the Notes), their creditors or their property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. The Company's payment obligations under this Section 6.09 shall be secured in accordance with the provisions of Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article Six it shall pay out such money in the following order: First: to the Trustee for amounts due under Section 7.07; Second: to Holders for interest accrued on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for interest; Third: to Holders for the principal amounts (including any premium) owing under the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for the principal (including any premium); and Fourth: the balance, if any, to the Company. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may in its discretion require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or 63 71 defenses made by the party litigant. This Section 6.11 does not apply to any suit by the Trustee, any suit by a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in aggregate principal amount of the outstanding Notes. SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture or any Note and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Company, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee may exercise such of the rights and powers vested in it by this Indenture and shall use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no duties, covenants or obligations of the Trustee shall be implied in this Indenture. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own 64 72 willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01 and Section 7.02. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. (g) The Trustee may refuse to perform any duty or exercise any right or power hereunder unless (i) it is provided adequate funds to enable it to do so and (ii) it receives indemnity reasonably satisfactory to it against any loss, liability, fee or expense. SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The Trustee may rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not and shall not be required to investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel of its selection and may require an Officer's Certificate or an Opinion of Counsel, or both, which shall conform to Sections 11.04 and 11.05. The Trustee shall not be liable for any action it takes or 65 73 omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney and to consult with the officers and representatives of the Company, including the Company's accountants and attorneys. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction. (g) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (h) Delivery of reports, information and documents to the Trustee under Section 4.08 is for informational purposes only and the Trustee's receipt of the foregoing shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of their covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any of their Subsidiaries, or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or 66 74 adequacy of this Indenture or the Notes, and it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or any document entered into or issued in connection with the issuance and sale of the Notes or any statement in the Notes other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Default. If a Default or an Event of Default occurs and is continuing and if it is known to a Trust Officer, the Trustee shall mail to each Holder notice of the uncured Default or Event of Default within 90 days after obtaining knowledge thereof. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Note, including an accelerated payment, a Default in payment on the Change of Control Payment Date pursuant to a Change of Control Offer or on the Net Proceeds Offer Payment Date pursuant to a Net Proceeds Offer and a Default in compliance with Article Five hereof, the Trustee may withhold the notice if and so long as its Board of Directors, the executive committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Holders. The foregoing sentence of this Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after May 15 of each year beginning with 1997, the Trustee shall, to the extent that any of the events described in TIA Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b), (c) and (d). A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the Commission and each stock exchange, if any, on which the Notes are listed. The Company shall promptly notify the Trustee if the Notes become listed on any stock exchange and the Trustee shall comply with TIA Section 313(d). SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time such compensation for its services as has been agreed to in writing signed by the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket disbursements, advances or expenses incurred or made by it in connection with the performance of its duties under this Indenture. Such expenses shall include the reasonable fees and expenses of 67 75 the Trustee's agents, counsel, accountants and experts. The Company shall indemnify each of the Trustee (or any predecessor Trustee) and its agents, employees, stockholders, Affiliates and directors and officers for, and hold them each harmless against, any and all loss, liability, damage, claim or expense (including reasonable fees and expenses of counsel), including taxes (other than taxes based on the income of the Trustee) incurred by any of them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the acceptance or administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity, provided, however, that failure to so notify the Company shall not release the Company of its obligations hereunder unless and to the extent such failure results in the forfeiture by the Company of substantial rights and defenses. At the Trustee's sole discretion, the Company shall defend the claim and the Trustee shall cooperate and may participate in the defense; provided, however, that any settlement of a claim shall be approved in writing by the Trustee, such approval not to be unreasonably withheld. Alternatively, the Trustee may at its option have separate counsel of its own choosing and the Company shall pay the reasonable fees and expenses of such counsel. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all assets or money held or collected by the Trustee, in its capacity as Trustee, except assets or money held in trust to pay principal of or premium, if any, or interest on particular Notes. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(vi) or (vii) occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law. The provisions of this Section 7.07 shall survive the termination of this Indenture or the resignation or removal of the Trustee. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company in writing at least 30 days in advance of such resignation; provided, however, that no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.08. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee and appoint a successor Trustee with the Company's consent, by so notifying the Company and the Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; 68 76 (2) the Trustee is adjudged bankrupt or insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail notice of such successor Trustee's appointment to each Holder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in aggregate principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding any resignation or replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided, however, that such corporation shall be otherwise qualified and eligible under this Article Seven. 69 77 SECTION 7.10. Eligibility; Disqualification. This Indenture shall always have a Trustee who satisfies the requirement of TIA Sections 310(a)(1), (2) and (5). The Trustee (or, in the case of a Trustee that is a corporation included in a bank holding company system, the related bank holding company) shall have a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition, and have a Corporate Trust Office in the City of New York. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA Section 310(a)(2). The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA Section 310 shall apply to the Company, as obligor of the Notes. SECTION 7.11. Preferential Collection of Claims Against the Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. The provisions of TIA Section 311 shall apply to the Company, as obligor of the Notes. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of Company's Obligations. This Indenture will be discharged and will cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in this Indenture) as to all outstanding Notes when (i) either (a) all Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with 70 78 irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under this Indenture by the Company; and (iii) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel stating that all conditions precedent under this Indenture relating to the satisfaction and discharge of this Indenture have been complied with. The Company may, at its option and at any time, elect to have its obligations and the corresponding obligations of the Subsidiary Guarantors discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, except for (i) the rights of Holders to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments, (iii) the rights, powers, trust, duties and immunities of the Trustee and the Company's obligations in connection therewith including, but not limited to, those contained in Section 7.07 and (iv) the Legal Defeasance provisions of this Section 8.01. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company and the Subsidiary Guarantors released with respect to covenants contained in Sections 4.10 through 4.20 and Article Five ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event of Covenant Defeasance, those events described under Section 6.01 (except those events described in Section 6.01(i),(ii),(vi) and (vii)) will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in United States dollars, non-callable U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable Redemption Date, as the case may be; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A)(w) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (x) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income 71 79 tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred and (B) an opinion of counsel in Canada reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for Canadian federal income tax purposes as a result of such Legal Defeasance and will be subject to Canadian federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred and (B) an opinion of counsel in Canada reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for Canadian federal income tax purposes as a result of such Covenant Defeasance and will be subject to Canadian federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default under Section 6.01(vi) or (vii) are concerned, at any time in the period ending on the 91st day after the date of deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes concurrently with such incurrence); (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an Officer's Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (vii) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with; (viii) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Indebtedness of the 72 80 Company other than the Notes and (B) after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (ix) certain other customary conditions precedent are satisfied. SECTION 8.02. Application of Trust Money. The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to Section 8.01, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of the principal of and interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree in writing with the Company. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.01 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of outstanding Notes. SECTION 8.03. Repayment to the Company. Subject to Section 8.01, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for one year; provided, however, that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person. SECTION 8.04. Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the 73 81 Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01 until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with Section 8.01; provided, however, that if the Company has made any payment of interest on or principal of any Notes because of the reinstatement of their obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. SECTION 8.05. Acknowledgment of Discharge by Trustee. After (i) the conditions of Section 8.01 have been satisfied, (ii) the Company has paid or caused to be paid all other sums payable hereunder by the Company and (iii) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent referred to in clause (i) above relating to the satisfaction and discharge of this Indenture have been complied with, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.01; provided the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officer's Certificates of the Company. ARTICLE NINE MODIFICATION OF THE INDENTURE SECTION 9.01. Without Consent of Holders. Notwithstanding Section 9.02, the Company, the Subsidiary Guarantors and the Trustee may amend, waive or supplement this Indenture without notice to or consent of any Holder: (a) to cure any ambiguity, defect or inconsistency; (b) to comply with Section 5.01 of this Indenture; (c) to provide for uncertificated Notes in addition to certificated Notes; (d) to comply with any requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; or (e) to make any change that would provide any additional benefit or rights to the Holders or that does not adversely affect the rights of any Holder in any material respect. Notwithstanding the foregoing, the Trustee and the Company may not make any change that adversely affects the rights of any Holder under this Indenture without the consent of such Holder. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an Opinion of Counsel; provided, however, that in delivering such Opinion of Counsel, such counsel may rely as to matters of fact, on a certificate or certificates of officers of the Company. SECTION 9.02. With Consent of Holders. 74 82 All other modifications, waivers and amendments of this Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes, except that, without the consent of each Holder of the Notes affected thereby, no amendment or waiver may: (i) reduce the amount of Notes whose Holders must consent to an amendment; (ii) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes; (iii) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (iv) make any Notes payable in money other than that stated in the Notes; (v) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default; (vi) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto; (vii) modify or change any provision of this Indenture affecting the subordination or ranking of the Notes or any Guarantee in a manner which adversely affects the Holders; (viii) modify or amend the obligation of the Company to pay Additional Amounts; or (ix) release any Subsidiary Guarantor from any of its obligations under its Guarantee or this Indenture other than in accordance with the terms of this Indenture. After an amendment, supplement or waiver under this Section 9.02 becomes effective (as provided in Section 9.04), the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Compliance with TIA. Every amendment, waiver or supplement of this Indenture or the Notes shall comply with the TIA as then in effect; provided, however, that this Section 9.03 shall not of itself require that this Indenture or the Trustee be qualified under the TIA or constitute any admission or acknowledgment by any party hereto that any such qualification is required prior to the time this Indenture and the Trustee are required by the TIA to be so qualified. SECTION 9.04. Revocation and Effect of Consents. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is 75 83 not made on any Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder's Note or portion of such Note by notice to the Trustee or the Company received before the date on which the Trustee receives an Officer's Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. An amendment, supplement or waiver becomes effective upon receipt by the Trustee of such Officer's Certificate and evidence of consent by the Holders of the requisite percentage in principal amount of outstanding Notes. The Company may, but shall not be obligated to, fix a Record Date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which Record Date shall be at least 30 days prior to the first solicitation of such consent. If a Record Date is fixed, then notwithstanding the second sentence of the immediately preceding paragraph, those Persons who were Holders at such Record Date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such Record Date. No such consent shall be valid or effective for more than 90 days after such Record Date unless consents from Holders of the requisite percentage in principal amount of outstanding Notes required hereunder for the effectiveness of such consents shall have also been given and not revoked within such 90 day period. SECTION 9.05. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of such Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determine, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. SECTION 9.06. Trustee To Sign Amendments, Etc. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided, however, that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. In executing such supplement or waiver the Trustee shall be entitled to receive indemnity reasonably satisfactory to it, and shall be fully protected in relying upon an Opinion of Counsel and an Officer's Certificate of the Company, stating that no event of default shall occur as a result of such amendment, supplement or waiver and that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture; provided the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officer's Certificates of the Company. Such Opinion of 76 84 Counsel shall not be an expense of the Trustee. SECTION 9.07. Trustee To Sign Consents. The Trustee shall at the request of the Company execute a consent or approval of any merger, consolidation or sale of assets pursuant to Article Five if and to the extent such consent or approval is required by applicable law; provided, however, that the Trustee may, but shall not be obligated to, execute any such consent or approval which affects the Trustee's own rights, duties or immunities under this Indenture. In executing such approval or consent the Trustee will receive indemnity reasonably satisfactory to it, and shall be fully protected in relying upon an Opinion of Counsel and an Officer's Certificate of the Company, stating that no event of default shall occur as a result of such consent or approval, that no Holder consent is required with respect to such merger, consolidation or sale of assets and that the execution of any consent or approval authorized pursuant to this Article Nine is authorized or permitted by this Indenture; provided, the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officer's Certificates of the Company. Such Opinion of Counsel shall not be an expense of the Trustee. ARTICLE TEN SUBORDINATION SECTION 10.01. Notes Subordinated to Senior Indebtedness. The Company covenants and agrees, and each Holder of the Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article Ten; and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that the payment of all Obligations on the Notes by the Company shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Indebtedness, including, without limitation, the Company's obligations under the Credit Agreement; that the subordination is for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness, and that each holder of Senior Indebtedness whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired Senior Indebtedness in reliance upon the covenants and provisions contained in this Indenture and the Notes. SECTION 10.02. Suspension of Payment When Senior Indebtedness is in Default. (a) No direct or indirect payment by or on behalf of the Company of principal of, 77 85 premium, if any, or interest on, the Notes whether pursuant to the terms of the Notes or upon acceleration or otherwise shall be made if, at the time of such payment, there exists a default in the payment of all or any portion of principal of, premium, if any, or interest on, any Designated Senior Indebtedness (and the Trustee has received written notice thereof), and such default shall not have been cured or waived or the benefits of this sentence waived by or on behalf of the holders of such Designated Senior Indebtedness. In addition, if any other event of default occurs and is continuing with respect to any Designated Senior Indebtedness, as such event of default is defined in the instrument creating or evidencing such Designated Senior Indebtedness, permitting the holders of such Designated Senior Indebtedness then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Senior Indebtedness gives notice of the event of default to the Trustee (a "Default Notice"), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Indebtedness terminating the Blockage Period (as defined below), during the 179 days after the delivery of such Default Notice (the "Blockage Period"), neither the Company nor any other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on the Notes or (y) acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 179 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Indebtedness shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Senior Indebtedness whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (b) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by Section 10.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amount of Senior Indebtedness held by such holders) or their respective Representatives upon written instruction of the Company or a court of competent jurisdiction. The Trustee shall be entitled to rely on written information regarding amounts then due and owing on the Senior Indebtedness, if any, received from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Indebtedness. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of 78 86 Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Indebtedness thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes. SECTION 10.03. Notes Subordinated to Prior Payment of All Indebtedness on Dissolution, Liquidation or Reorganization of Company. (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Indebtedness shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Indebtedness, before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture upon written notice of a court of competent jurisdiction if received by them, directly to the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Indebtedness. (b) To the extent any payment of Senior Indebtedness (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Indebtedness or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment has not occurred. 79 87 (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.03(c), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness (pro rata to such holders on the basis of the respective amount of Senior Indebtedness held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. (d) The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Indebtedness shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company's obligations hereunder in accordance with Article Five hereof. SECTION 10.04. Holders To Be Subrogated to Rights of Holders of Senior Indebtedness. Subject to the payment in full in cash or Cash Equivalents of all Senior Indebtedness, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Indebtedness by or on behalf of the Company or by or on behalf of the Holders by virtue of this Article Ten which otherwise would have been made to the Holders shall, as between the Company and the Holders of the Notes, be deemed to be a payment by the Company to or on account of the Senior Indebtedness, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of the Senior Indebtedness, on the other hand. SECTION 10.05. Obligations of the Company Unconditional. Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and interest 80 88 on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Ten of the holders of Senior Indebtedness in respect of cash, property or Notes of the Company received upon the exercise of any such remedy. Upon any payment or distribution of assets or securities of the Company referred to in this Article Ten, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any liquidation, dissolution, winding-up or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent or other Person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. Nothing in this Article Ten shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Indebtedness or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until a Trust Officer shall have received notice in writing from the Company, 81 89 or from a holder of Senior Indebtedness or a Representative therefor, together with proof satisfactory to the Trustee of such holding of Senior Indebtedness or of the authority of such Representative, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. SECTION 10.07. Application by Trustee of Assets Deposited with It. U.S. Legal Tender or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be for the sole benefit of the Holders of the Notes and, to the extent allocated for the payment of Notes, shall not be subject to the subordination provisions of this Article Ten. Otherwise, any deposit of assets or securities by or on behalf of the Company with the Trustee or any Paying Agent (whether or not in trust) for the payment of principal of or interest on any Notes shall be subject to the provisions of this Article Ten; provided, however, that if prior to the second Business Day preceding the date on which by the terms of this Indenture any such assets may become distributable for any purpose (including, without limitation, the payment of either principal of or interest on any Note) the Trustee or such Paying Agent shall not have received with respect to such assets the notice provided for in Section 10.06, then the Trustee or such Paying Agent shall have full power and authority to receive such assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary received by it on or after such date. The foregoing shall not apply to the Paying Agent if the Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing contained in this Section 10.07 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by this Article Ten. SECTION 10.08. No Waiver of Subordination Provisions. (a) No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act by any such holder, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 10.08, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do any one or more of the following: (1) change the manner, place, terms or time of payment of, or 82 90 renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (3) release any Person liable in any manner for the collection or payment of Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.09. Holders Authorize Trustee To Effectuate Subordination of Notes. Each Holder of the Notes by such Holder's acceptance thereof authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effect the subordination provisions contained in this Article Ten, and appoints the Trustee such Holder's attorney-in-fact for such purpose, including, in the event of any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company tending towards liquidation or reorganization of the business and assets of the Company, the immediate filing of a claim for the unpaid balance of such Holder's Notes in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then any of the holders of the Senior Indebtedness or their Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Indebtedness or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Indebtedness or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.10. Right of Trustee to Hold Senior Indebtedness. The Trustee and any agent of the Company or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Indebtedness which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Indebtedness and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. 83 91 Whenever a distribution is to be made or a notice given to holders or owners of Senior Indebtedness, the distribution may be made and the notice may be given to their Representative, if any. SECTION 10.11. This Article Ten Not To Prevent Events of Default. The failure to make a payment on account of principal of or interest on the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Six or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Ten of the holders, from time to time, of Senior Indebtedness. SECTION 10.12. No Fiduciary Duty of Trustee to Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness, and it undertakes to perform or observe such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be liable to any such holders (other than for its willful misconduct or gross negligence) if it shall pay over or deliver to the Holders of Notes or the Company or any other Person money or assets in compliance with the terms of this Indenture. Nothing in this Section 10.12 shall affect the obligation of any Person other than the Trustee to hold such payment for the benefit of, and to pay such payment over to, the holders of Senior Indebtedness or their Representative. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control; provided, however, that this Section 11.01 shall not of itself require that this Indenture or the Trustee be qualified under the TIA or constitute any admission or acknowledgment by any party hereto that any such qualification is required prior to the time this Indenture and the Trustee are 84 92 required by the TIA to be so qualified. SECTION 11.02. Notices. Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or overnight courier guaranteeing next-day delivery or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or any Subsidiary Guarantor: SPARKLING SPRING WATER GROUP LIMITED 19 Fielding Avenue Dartmouth, Nova Scotia, Canada B3B-1C9 Telecopier Number: (902) 468-2751 Attn: Stephen L. Larson if to the Trustee: BANKERS TRUST COMPANY Corporate Trust and Agency Services Four Albany Street New York, New York 10006 Telecopier Number: (212) 250-6961 Attention: Corporate Market Services Each of the Company and the Trustee by written notice to the other may designate additional or different addresses for notices to such Person. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if hand delivered; when receipt is acknowledged, if faxed; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Holder shall be mailed by first class mail, certified or registered return receipt requested, or by overnight courier guaranteeing next-day delivery to its address as it appears on the registration books of the Registrar. Any notice or communication shall be mailed to any Person as described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner 85 93 provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communications by Holders with Other Holders. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA Section 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officer's Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with (which counsel, as to factual matters, may rely on an Officer's Certificate). SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officer's Certificate required by Section 4.06, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is reasonably necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with. 86 94 SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. Legal Holidays. A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 11.08. Governing Law. THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture. SECTION 11.09. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. No Personal Liability. No director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, this Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. SECTION 11.11. Successors. 87 95 All agreements of the Company in this Indenture and the Notes shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Duplicate Originals. All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. SECTION 11.13. Severability. In case any one or more of the provisions in this Indenture or in the Notes shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. SECTION 11.14 Agent for Service; Submission to Jurisdiction; Waiver of Immunities. By the execution and delivery of this Indenture, each of the Company and the Subsidiary Guarantors (i) acknowledges that it has, by separate written instrument, designated and appointed CT Corporation System (the "Agent") (and any successor entity) as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Indenture or any Note or Guarantee that may be instituted in any federal or state court in the Borough of Manhattan, The City of New York, State of New York and acknowledges that the Agent has accepted such designation, (ii) submits to the jurisdiction of any such court in any such suit or proceeding and (iii) agrees that service of process upon the Agent and written notice of said service to the Company and the Subsidiary Guarantors in accordance with this Section 11.14 shall be deemed in every respect effective service of process upon the Company and the Subsidiary Guarantors in any such suit or proceeding. The Company and the Subsidiary Guarantors further agree to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of the Agent in full force and effect so long as any of the Notes shall be outstanding; provided, however, that the Company and the Subsidiary Guarantors may (and to the extent the Agent ceases to be able to be served on the basis contemplated herein, shall), by written notice to the Trustee and the holders of the Notes in accordance with this Section 11.14 designate such additional or alternative agent for service of process under this Section 11.14 that (i) maintains an office located in the Borough of Manhattan, The City of New York, State of New York and (ii) is a corporate service company which acts as agent for service of process for other persons in the ordinary course of its business. Such written notice shall identify the name of such agent for service of process and the address of 88 96 the office of such agent for service of process in the Borough of Manhattan, The City of New York, State of New York. To the extent that the Company or any Subsidiary Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of motion, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of its obligations under the above-referenced documents. ARTICLE TWELVE GUARANTEE OF NOTES SECTION 12.01. Unconditional Guarantee. Subject to the provisions of this Article Twelve, each Subsidiary Guarantor hereby, jointly and severally, unconditionally and irrevocably guarantees, on a senior subordinated basis (such guarantee to be referred to herein as a "Guarantee") to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company or any other Subsidiary Guarantor hereunder or thereunder, that: (a) the principal of, premium, if any, and interest on the Notes (and any Additional Interest payable thereon) shall be duly and punctually paid in full when due, whether at maturity, upon redemption at the option of Holders pursuant to the provisions of the Notes relating thereto, by acceleration or otherwise, and interest on the overdue principal and (to the extent permitted by law) interest, if any, on the Notes and all other obligations of the Company or the Subsidiary Guarantors to the Holders or the Trustee hereunder or thereunder (including amounts due the Trustee under Section 7.07) and all other obligations shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed, or failing performance of any other obligation of the Company to the Holders under this Indenture or under the Notes, for whatever reason, each Subsidiary Guarantor shall be obligated to pay, or to perform or cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Guarantee, and shall entitle the Holders of Notes to accelerate the obligations of the Subsidiary Guarantors hereunder in the same manner and to the same extent as the obligations of the Company. Each of the Subsidiary Guarantors hereby agrees that its obligations hereunder shall be 89 97 unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, any release of any other Subsidiary Guarantor, the recovery of any judgment against the Company, any action to enforce the same, whether or not a Guarantee is affixed to any particular Note, or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Subsidiary Guarantors hereby waives the benefit of diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and this Guarantee. This Guarantee is a guarantee of payment and not of collection. If any Holder or the Trustee is required by any court or otherwise to return to the Company or to any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Subsidiary Guarantor, any amount paid by the Company or such Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject to this Article Twelve, the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article Six hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Subsidiary Guarantors for the purpose of this Guarantee. No stockholder, officer, director, employee or incorporator, past, present or future, of any Subsidiary Guarantor, as such, shall have any personal liability under this Guarantee by reason of his, her or its status as such stockholder, officer, director, employee or incorporator. Each Subsidiary Guarantor that makes a payment or distribution under its Guarantee shall be entitled to a contribution from each other Subsidiary Guarantor in an amount pro rata, based on the net assets of each Subsidiary Guarantor, determined in accordance with GAAP. SECTION 12.02. Limitations on Guarantees. The obligations of each Subsidiary Guarantor under its Guarantee will be limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Guarantee or pursuant to its contribution obligations under this Indenture, will result in the obligations of such Subsidiary Guarantor under its Guarantee not constituting a 90 98 fraudulent conveyance or fraudulent transfer under any laws of the United States, any state of the United States, the District of Columbia, Canada or any province or territory of Canada. SECTION 12.03. Execution and Delivery of Guarantee. To further evidence the Guarantee set forth in Section 12.01, each Subsidiary Guarantor hereby agrees that a notation of such Guarantee, substantially in the form of Exhibit F hereto, shall be endorsed on each Note authenticated and delivered by the Trustee. Such Guarantee shall be executed on behalf of each Subsidiary Guarantor by either manual or facsimile signature of two Officers of each Subsidiary Guarantor, each of whom, in each case, shall have been duly authorized to so execute by all requisite corporate action. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note. Each of the Subsidiary Guarantors hereby agrees that its Guarantee set forth in Section 12.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. If an Officer of a Subsidiary Guarantor whose signature is on this Indenture or a Guarantee no longer holds that office at the time the Trustee authenticates the Note on which such Guarantee is endorsed or at any time thereafter, such Subsidiary Guarantor's Guarantee of such Note shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of any Guarantee set forth in this Indenture on behalf of each Subsidiary Guarantor. SECTION 12.04. Release of a Subsidiary Guarantor. (a) If no Default exists or would exist under this Indenture, upon the sale or disposition of all of the Capital Stock of a Subsidiary Guarantor by the Company or a Subsidiary of the Company in a transaction constituting an Asset Sale the Net Cash Proceeds of which are applied in accordance with Section 4.15, or upon the consolidation or merger of a Subsidiary Guarantor with or into any Person in compliance with Article Five (in each case, other than to the Company or an Affiliate of the Company), or if any Subsidiary Guarantor is dissolved or liquidated in accordance with this Indenture, such Subsidiary Guarantor and each Subsidiary of such Subsidiary Guarantor that is also a Subsidiary Guarantor shall be deemed released from all obligations under this Article Twelve without any further action required on the part of the Trustee or any Holder; provided, however, that each such Subsidiary Guarantor is sold or disposed of in accordance with this Indenture. Any Subsidiary Guarantor not so released or the entity surviving such Subsidiary Guarantor, as applicable, shall remain or be liable under its Guarantee as provided in this Article Twelve. 91 99 (b) The Trustee shall deliver an appropriate instrument evidencing the release of a Subsidiary Guarantor upon receipt of a request by the Company or such Subsidiary Guarantor accompanied by an Officer's Certificate and an Opinion of Counsel certifying as to the compliance with this Section 12.04, provided the legal counsel delivering such Opinion of Counsel may rely as to matters of fact on one or more Officer's Certificates. The Trustee shall execute any documents reasonably requested by the Company or a Subsidiary Guarantor in order to evidence the release of such Subsidiary Guarantor from its obligations under its Guarantee endorsed on the Notes and under this Article Twelve. Except as set forth in Articles Four and Five and this Section 12.04, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor or shall prevent any sale or conveyance of the property of a Subsidiary Guarantor as an entirety or substantially as an entirety to the Company or another Subsidiary Guarantor. SECTION 12.05. Waiver of Subrogation. Until this Indenture is discharged and all of the Notes are discharged and paid in full, each Subsidiary Guarantor hereby irrevocably waives and agrees not to exercise any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of the Company's obligations under the Notes or this Indenture and such Subsidiary Guarantor's obligations under this Guarantee and this Indenture, in any such instance including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of the Holders against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Subsidiary Guarantor in violation of the preceding sentence and any amounts owing to the Trustee or the Holders of Notes under the Notes, this Indenture, or any other document or instrument delivered under or in connection with such agreements or instruments, shall not have been paid in full, such amount shall have been deemed to have been paid to such Subsidiary Guarantor for the benefit of, and held in trust for the benefit of, the Trustee or the Holders and shall forthwith be paid to the Trustee for the benefit of itself or such Holders to be credited and applied to the obligations in favor of the Trustee or the Holders, as the case may be, whether matured or unmatured, in accordance with the terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 12.05 is knowingly made in contemplation of such benefits. 92 100 SECTION 12.06. No Set-Off. Each payment to be made by a Subsidiary Guarantor hereunder in respect of the Obligations shall be payable in the currency or currencies in which such Obligations are denominated, and shall be made without set-off, counterclaim, reduction or diminution of any kind or nature. SECTION 12.07. Obligations Absolute. The obligations of each Subsidiary Guarantor hereunder are and shall be absolute and unconditional and any monies or amounts expressed to be owing or payable by each Subsidiary Guarantor hereunder which may not be recoverable from such Subsidiary Guarantor on the basis of a Guarantee shall be recoverable from such Subsidiary Guarantor as a primary obligor and principal debtor in respect thereof. SECTION 12.08. Obligations Continuing. The obligations of each Subsidiary Guarantor hereunder shall be continuing and shall remain in full force and effect until all the obligations have been paid and satisfied in full. Each Subsidiary Guarantor agrees with the Trustee that it will from time to time deliver to the Trustee suitable acknowledgments of this continued liability hereunder and under any other instrument or instruments in such form as counsel to the Trustee may advise and as will prevent any action brought against it in respect of any default hereunder being barred by any statute of limitations now or hereafter in force and, in the event of the failure of a Subsidiary Guarantor so to do, it hereby irrevocably appoints the Trustee the attorney and agent of such Subsidiary Guarantor to make, execute and deliver such written acknowledgment or acknowledgments or other instruments as may from time to time become necessary or advisable, in the judgment of the Trustee on the advice of counsel, to fully maintain and keep in force the liability of such Subsidiary Guarantor hereunder. SECTION 12.09. Obligations Not Reduced. The obligations of each Subsidiary Guarantor hereunder shall not be satisfied, reduced or discharged solely by the payment of such principal, premium, if any, interest, fees and other monies or amounts as may at any time prior to discharge of this Indenture pursuant to Article 8 be or become owing or payable under or by virtue of or otherwise in connection with the Notes or this Indenture. SECTION 12.10. Obligations Reinstated. The obligations of each Subsidiary Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have 93 101 reduced the obligations of any Subsidiary Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Subsidiary Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Subsidiary Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Subsidiary Guarantor as provided herein. SECTION 12.11. Obligations Not Affected. The obligations of each Subsidiary Guarantor hereunder shall not be affected, impaired or diminished in any way by any act, omission, matter or thing whatsoever, occurring before, upon or after any demand for payment hereunder (and whether or not known or consented to by any Subsidiary Guarantor or any of the Holders) which, but for this provision, might constitute a whole or partial defense to a claim against any Subsidiary Guarantor hereunder or might operate to release or otherwise exonerate any Subsidiary Guarantor from any of its obligations hereunder or otherwise affect such obligations, whether occasioned by default of any of the Holders or otherwise, including, without limitation: (a) any limitation of status or power, disability, incapacity or other circumstance relating to the Company or any other person, including any insolvency, bankruptcy, liquidation, reorganization, readjustment, composition, dissolution, winding up or other proceeding involving or affecting the Company or any other person; (b) any irregularity, defect, unenforceability or invalidity in respect of any indebtedness or other obligation of the Company or any other person under this Indenture, the Notes or any other document or instrument; (c) any failure of the Company, whether or not without fault on its part, to perform or comply with any of the provisions of this Indenture or the Notes, or to give notice thereof to a Subsidiary Guarantor; (d) the taking or enforcing or exercising or the refusal or neglect to take or enforce or exercise any right or remedy from or against the Company or any other Person or their respective assets or the release or discharge of any such right or remedy; (e) the granting of time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (f) any change in the time, manner or place of payment of, or in any other term of, any of the Notes, or any other amendment, variation, supplement, replacement or waiver of, or 94 102 any consent to departure from, any of the Notes or this Indenture, including, without limitation, any increase or decrease in the principal amount of or premium, if any, or interest on any of the Notes; (g) any change in the ownership, control, name, objects, businesses, assets, capital structure or constitution of the Company or a Subsidiary Guarantor; (h) any merger or amalgamation of the Company or a Subsidiary Guarantor with any Person or Persons; (i) the occurrence of any change in the laws, rules, regulations or ordinances of any jurisdiction by any present or future action of any governmental authority or court amending, varying, reducing or otherwise affecting, or purporting to amend, vary, reduce or otherwise affect, any of the Obligations or the obligations of a Subsidiary Guarantor under its Guarantee; and (j) any other circumstance, including release of the Subsidiary Guarantor pursuant to Section 12.04 (other than by complete, irrevocable payment) that might otherwise constitute a legal or equitable discharge or defense of the Company under this Indenture or the Notes or of a Subsidiary Guarantor in respect of its Guarantee hereunder. SECTION 12.12. Waiver. Without in any way limiting the provisions of Section 12.01 hereof, each Subsidiary Guarantor hereby waives notice of acceptance hereof, notice of any liability of any Subsidiary Guarantor hereunder, notice or proof of reliance by the Holders upon the obligations of any Subsidiary Guarantor hereunder, and diligence, presentment, demand for payment on the Company, protest, notice of dishonor or non-payment of any of the Obligations, or other notice or formalities to the Company or any Subsidiary Guarantor of any kind whatsoever. SECTION 12.13. No Obligation To Take Action Against the Company. Neither the Trustee nor any other Person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the Obligations or against the Company or any other Person or any Property of the Company or any other Person before the Trustee is entitled to demand payment and performance by any or all Subsidiary Guarantors of their liabilities and obligations under their Guarantees or under this Indenture. SECTION 12.14. Dealing with the Company and Others. The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in 95 103 part the obligations and liabilities of any Subsidiary Guarantor hereunder and without the consent of or notice to any Subsidiary Guarantor, may (a) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other Person; (b) take or abstain from taking security or collateral from the Company or from perfecting security or collateral of the Company; (c) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Notes; (d) accept compromises or arrangements from the Company; (e) apply all monies at any time received from the Company or from any security upon such part of the Obligations as the Holders may see fit or change any such application in whole or in part from time to time as the Holders may see fit; and (f) otherwise deal with, or waive or modify their right to deal with, the Company and all other Persons and any security as the Holders or the Trustee may see fit. SECTION 12.15. Default and Enforcement. If any Subsidiary Guarantor fails to pay in accordance with Section 12.01 hereof, the Trustee may proceed in its name as trustee hereunder in the enforcement of the Guarantee of any such Subsidiary Guarantor and such Subsidiary Guarantor's obligations thereunder and hereunder by any remedy provided by law, whether by legal proceedings or otherwise, and to recover from such Subsidiary Guarantor the obligations. SECTION 12.16. Amendment, Etc. No amendment, modification or waiver of any provision of this Indenture relating to any Subsidiary Guarantor or consent to any departure by any Subsidiary Guarantor or any other Person from any such provision will in any event be effective unless it is signed by such Subsidiary Guarantor and the Trustee. SECTION 12.17. Acknowledgment. Each Subsidiary Guarantor hereby acknowledges communication of the terms of this Indenture and the Notes and consents to and approves of the same. 96 104 SECTION 12.18. Costs and Expenses. Each Subsidiary Guarantor shall pay on demand by the Trustee any and all costs, fees and expenses (including, without limitation, legal fees on a solicitor and client basis) incurred by the Trustee, its agents, advisors and counsel or any of the Holders in enforcing any of their rights under any Guarantee. SECTION 12.19. No Merger or Waiver; Cumulative Remedies. No Guarantee shall operate by way of merger of any of the obligations of a Subsidiary Guarantor under any other agreement, including, without limitation, this Indenture. No failure to exercise and no delay in exercising, on the part of the Trustee or the Holders, any right, remedy, power or privilege hereunder or under this Indenture or the Notes, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under this Indenture or the Notes preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges in the Guarantee and under this Indenture, the Notes and any other document or instrument between a Subsidiary Guarantor and/or the Company and the Trustee are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. SECTION 12.20. Survival of Obligations. Without prejudice to the survival of any of the other obligations of each Subsidiary Guarantor hereunder, the obligations of each Subsidiary Guarantor under Section 12.01 shall survive the payment in full of the Obligations and shall be enforceable against such Subsidiary Guarantor without regard to and without giving effect to any defense, right of offset or counterclaim available to or which may be asserted by the Company or any Subsidiary Guarantor. SECTION 12.21. Guarantee in Addition to Other Obligations. The obligations of each Subsidiary Guarantor under its Guarantee and this Indenture are in addition to and not in substitution for any other obligations to the Trustee or to any of the Holders in relation to this Indenture or the Notes and any guarantees or security at any time held by or for the benefit of any of them. SECTION 12.22. Severability. Any provision of this Article Twelve which is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction unless its removal would substantially defeat the basic intent, spirit and 97 105 purpose of this Indenture and this Article Twelve. SECTION 12.23. Successors and Assigns. Each Guarantee shall be binding upon and inure to the benefit of each Subsidiary Guarantor and the Trustee and the other Holders and their respective successors and permitted assigns, except that no Subsidiary Guarantor may assign any of its obligations hereunder or thereunder. ARTICLE THIRTEEN SUBORDINATION OF GUARANTEE SECTION 13.01. Obligations of Guarantors Subordinated to Guarantor Senior Indebtedness. Anything herein to the contrary notwithstanding, each of the Subsidiary Guarantors, for itself and its successors, and each Holder, by his or her acceptance of Guarantees, agrees that the payment of all Obligations owing to the Holders in respect of its Guarantee (collectively, as to any Subsidiary Guarantor, its "Guarantee Obligations") is subordinated, to the extent and in the manner provided in this Article Thirteen, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, of all Obligations on Guarantor Senior Indebtedness of such Subsidiary Guarantor, including without limitation, the Subsidiary Guarantors' obligations under the Credit Agreement. This Article Thirteen shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Indebtedness, and such provisions are made for the benefit of the holders of Guarantor Senior Indebtedness and such holders are made obligees hereunder and any one or more of them may enforce such provisions. SECTION 13.02. Suspension of Guarantee Obligations When Guarantor Senior Indebtedness is in Default. (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal or interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Designated Senior Indebtedness of a Subsidiary Guarantor or guaranteed by a Subsidiary Guarantor (which Designated Senior Indebtedness or guarantee, as the case may be, constitutes Guarantor Senior Indebtedness of such Subsidiary Guarantor), no payment of any kind or character shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Obligations on the Notes or to acquire any of the Notes for cash or property 98 106 or otherwise. In addition, if any other event of default occurs and is continuing with respect to any Guarantor Senior Indebtedness, as such event of default is defined in the instrument creating or evidencing such Guarantor Senior Indebtedness, permitting the holders of such Guarantor Senior Indebtedness then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Guarantor Senior Indebtedness gives a Default Notice, then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice from the Representative for the respective issue of Guarantor Senior Indebtedness terminating the Blockage Period, during the Blockage Period, neither the Company nor any other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on the Notes or (y) acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 179 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Guarantor Senior Indebtedness shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Guarantor Senior Indebtedness whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period, that in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (b) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by Section 13.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Indebtedness (pro rata to such holders on the basis of the respective amount of Guarantor Senior Indebtedness held by such holders) or their respective Representatives upon written request of the Company or a court of competent jurisdiction. The Trustee shall be entitled to rely on written information regarding amounts then due and owing on the Guarantor Senior Indebtedness, if any, received from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Guarantor Senior Indebtedness. Nothing contained in this Article Thirteen shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Guarantor Senior Indebtedness thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes. SECTION 13.03. Guarantee Obligations Subordinated to Prior 99 107 Payment of All Guarantor Senior Indebtedness on Dissolution, Liquidation or Reorganization of Such Subsidiary Guarantor. Upon any payment or distribution of assets of any Subsidiary Guarantor of any kind or character, whether in cash, property or securities to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Subsidiary Guarantor, whether voluntary or involuntary, or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to any Subsidiary Guarantor or its property, whether voluntary or involuntary, but excluding any liquidation or dissolution of a Subsidiary Guarantor into the Company or into another Subsidiary Guarantor: (a) the holders of all Guarantor Senior Indebtedness of such Subsidiary Guarantor shall first be entitled to receive payments in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, of all amounts payable under Guarantor Senior Indebtedness before the Holders will be entitled to receive any payment or distribution of any kind or character on account of the Guarantee of such Subsidiary Guarantor, and until all Obligations with respect to the Guarantor Senior Indebtedness are paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, any distribution to which the Holders would be entitled shall be made to the holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor; (b) any payment or distribution of assets of such Subsidiary Guarantor of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee on behalf of the Holders would be entitled except for the provisions of this Article Thirteen shall be paid by the liquidating trustee or agent or other Person making such a payment or distribution, directly to the holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor or their representatives, ratably according to the respective amounts of such Guarantor Senior Indebtedness remaining unpaid held or represented by each, until all such Guarantor Senior Indebtedness remaining unpaid shall have been paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, after giving effect to any concurrent payment or distribution to the holders of such Guarantor Senior Indebtedness; and (c) in the event that, notwithstanding the foregoing, any payment or distribution of assets of such Subsidiary Guarantor of any kind or character, whether such payment shall be in cash, property or securities, and such Subsidiary Guarantor shall have made payment to the Trustee or directly to the Holders or any Paying Agent in respect of payment of the Guarantees before all Guarantor Senior Indebtedness of such Subsidiary Guarantor is paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, such payment or distribution (subject to the provisions of Sections 13.06 and 13.07) shall be received, segregated from other funds, and held in trust by the 100 108 Trustee or such Holder or Paying Agent for the benefit of, and shall immediately be paid over by the Trustee (if the notice required by Section 13.06 has been received by the Trustee) or by the Holder to, the holders of such Guarantor Senior Indebtedness or their representatives, ratably according to the respective amounts of such Guarantor Senior Indebtedness held or represented by each, until all such Guarantor Senior Indebtedness remaining unpaid shall have been paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, after giving effect to any concurrent payment or distribution to the holders of Guarantor Senior Indebtedness. Each Subsidiary Guarantor shall give prompt notice to the Trustee prior to any dissolution, winding-up, total or partial liquidation or total or reorganization (including, without limitation, in bankruptcy, insolvency, or receivership proceedings or upon any assignment for the benefit of creditors or any other marshaling of such Subsidiary Guarantor's assets and liabilities). SECTION 13.04. Holders of Guarantee Obligations To Be Subrogated to Rights of Holders of Guarantor Senior Indebtedness. Subject to the payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Indebtedness, of all Guarantor Senior Indebtedness, the Holders of Guarantee Obligations of a Subsidiary Guarantor shall be subrogated to the rights of the holders of Guarantor Senior Indebtedness of such Subsidiary Guarantor to receive payments or distributions of assets of such Subsidiary Guarantor applicable to such Guarantor Senior Indebtedness until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full in cash or Cash Equivalents, and for the purpose of such subrogation no payments or distributions to the holders of such Guarantor Senior Indebtedness by or on behalf of such Subsidiary Guarantor, or by or on behalf of the Holders by virtue of this Article Thirteen, which otherwise would have been made to the Holders shall, as between such Subsidiary Guarantor and the Holders, be deemed to be payment by such Subsidiary Guarantor to or on account of such Guarantor Senior Indebtedness, it being understood that the provisions of this Article Thirteen are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of such Guarantor Senior Indebtedness, on the other hand. If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article Thirteen shall have been applied, pursuant to the provisions of this Article Thirteen, to the payment of all amounts payable under such Guarantor Senior Indebtedness, then the Holders shall be entitled to receive from the holders of such Guarantor Senior Indebtedness any such payments or distributions received by such holders of such Guarantor Senior Indebtedness in excess of the amount sufficient to pay all amounts payable under or in respect of such Guarantor Senior Indebtedness in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior 101 109 Indebtedness. Each Holder by purchasing or accepting a Note waives any and all notice of the creation, modification, renewal, extension or accrual of any Guarantor Senior Indebtedness of the Subsidiary Guarantors and notice of or proof of reliance by any holder or owner of Guarantor Senior Indebtedness of the Subsidiary Guarantors upon this Article Thirteen and the Guarantor Senior Indebtedness of the Subsidiary Guarantors shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Article Thirteen, and all dealings between the Subsidiary Guarantors and the holders and owners of the Guarantor Senior Indebtedness of the Subsidiary Guarantors shall be deemed to have been consummated in reliance upon this Article Thirteen. SECTION 13.05. Obligations of the Subsidiary Guarantors Unconditional. Nothing contained in this Article Thirteen or elsewhere in this Indenture or in the Guarantees is intended to or shall impair, as between the Subsidiary Guarantors and the Holders, the obligation of the Subsidiary Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Subsidiary Guarantors other than the holders of the Guarantor Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article Thirteen, of the holders of Guarantor Senior Indebtedness in respect of cash, property or securities of the Subsidiary Guarantors received upon the exercise of any such remedy. Upon any payment or distribution of assets of any Subsidiary Guarantor referred to in this Article Thirteen, the Trustee, subject to the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any liquidation, dissolution, winding-up or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidating trustee or agent or other Person making any payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Guarantor Senior Indebtedness and other Indebtedness of any Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Thirteen. Nothing in this Article Thirteen shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 7.07. The Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Guarantor Senior Indebtedness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Guarantor Senior Indebtedness or a trustee or representative on behalf of any such holder. In the event that the Trustee determines in good faith that any evidence is required with 102 110 respect to the right of any Person as a holder of Guarantor Senior Indebtedness to participate in any payment or distribution pursuant to this Article Thirteen, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Guarantor Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article Thirteen, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 13.06. Trustee Entitled To Assume Payments Not Prohibited in Absence of Notice. The Trustee shall not at any time be charged with knowledge of the existence of any facts that would prohibit the making of any payment to or by the Trustee unless and until the Trustee or any Paying Agent shall have received notice thereof from the Company or any Subsidiary Guarantor or from one or more holders of Guarantor Senior Indebtedness or from any Representative therefor and, prior to the receipt of any such notice, the Trustee, subject to the provisions of Sections 7.01 and 7.02, shall be entitled in all respects conclusively to assume that no such fact exists. SECTION 13.07. Application by Trustee of Assets Deposited with It. U.S. Legal Tender or U.S. Government Obligations deposited in trust with the Trustee pursuant to and in accordance with Sections 8.01 and 8.02 shall be for the sole benefit of Holders of the Notes and, to the extent allocated for the payment of Notes, shall not be subject to the subordination provisions of this Article Thirteen. Otherwise, any deposit of assets or securities by or on behalf of a Subsidiary Guarantor with the Trustee or any Paying Agent (whether or not in trust) for payment of the Guarantees shall be subject to the provisions of this Article Thirteen; provided, however, that if prior to the second Business Day preceding the date on which by the terms of this Indenture any such assets may become distributable for any purpose (including, without limitation, the payment of either principal of or interest on any Note) the Trustee or such Paying Agent shall not have received with respect to such assets the notice provided for in Section 13.06, then the Trustee or such Paying Agent shall have full power and authority to receive such assets and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary received by it on or after such date. The foregoing shall not apply to the Paying Agent if the Company or any Subsidiary or Affiliate of the Company is acting as Paying Agent. Nothing contained in this Section 13.07 shall limit the right of the holders of Guarantor Senior Indebtedness to recover payments as contemplated by this Article Thirteen. SECTION 13.08. No Waiver of Subordination Provisions. 103 111 (a) No right of any present or future holder of any Guarantor Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Subsidiary Guarantor or by any act or failure to act, by any such holder, or by any non-compliance by any Subsidiary Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. (b) Without limiting the generality of subsection (a) of this Section 13.08, the holders of Guarantor Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article Thirteen or the obligations hereunder of the Holders of the Notes to the holders of Guarantor Senior Indebtedness, do any one or more of the following: (1) change the manner, place, terms or time of payment of, or renew or alter, Guarantor Senior Indebtedness or any instrument evidencing the same or any agreement under which Guarantor Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Indebtedness; (3) release any Person liable in any manner for the collection or payment of Guarantor Senior Indebtedness; and (4) exercise or refrain from exercising any rights against the Subsidiary Guarantors and any other Person. SECTION 13.09. Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations. Each Holder of the Guarantee Obligations by its acceptance thereof authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effect the subordination provisions contained in this Article Thirteen, and appoints the Trustee its attorney-in-fact for such purpose, including, in the event of any liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of any Subsidiary Guarantor tending towards liquidation or reorganization of the business and assets of any Subsidiary Guarantor, the immediate filing of a claim for the unpaid balance under its or his Guarantee Obligations in the form required in said proceedings and cause said claim to be approved. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then any of the holders of the Guarantor Senior Indebtedness or their Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Guarantee Obligations. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Guarantor Senior Indebtedness or their Representative to authorize or consent to or accept or adopt on behalf of any holder of Guarantee Obligations any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder thereof, or to authorize the Trustee or the holders of Guarantor Senior Indebtedness or their Representative to vote in respect of the claim of any holder of Guarantee Obligations in any such proceeding. 104 112 SECTION 13.10. Right of Trustee to Hold Guarantor Senior Indebtedness. The Trustee shall be entitled to all of the rights set forth in this Article Thirteen in respect of any Guarantor Senior Indebtedness at any time held by it to the same extent as any other holder of Guarantor Senior Indebtedness, and nothing in this Indenture shall be construed to deprive the Trustee of any of its rights as such holder. SECTION 13.11. No Suspension of Remedies. The failure to make a payment in respect of the Guarantees by reason of any provision of this Article Thirteen shall not be construed as preventing the occurrence of a Default or an Event of Default under Section 6.01. Nothing contained in this Article Thirteen shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Article Six or to pursue any rights or remedies hereunder or under applicable law, subject to the rights, if any, under this Article Thirteen of the holders, from time to time, of Guarantor Senior Indebtedness. SECTION 13.12. No Fiduciary Duty of Trustee to Holders of Guarantor Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Indebtedness, and it undertakes to perform or observe such of its covenants and obligations as are specifically set forth in this Article Thirteen, and no implied covenants or obligations with respect to the Guarantor Senior Indebtedness shall be read into this Indenture against the Trustee. The Trustee shall not be liable to any such holders (other than for its willful misconduct or gross negligence) if it shall pay over or deliver to the holders of Guarantee Obligations or the Guarantors or any other Person, money or assets in compliance with the terms of this Indenture. Nothing in this Section 13.12 shall affect the obligation of any Person other than the Trustee to hold such payment for the benefit of, and to pay such payment over to, the holders of Guarantor Senior Indebtedness or their Representative. 105 113 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. SPARKLING SPRING WATER GROUP LIMITED By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Vice Chairman SPARKLING SPRING WATER LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Vice Chairman SPRING WATER, INC., as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WATER JUG ENTERPRISES LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 114 WITHEY'S WATER SOFTENING & PURIFICATION LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer AQUA CARE WATER SOFTENING & PURIFICATION LTD., as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer HIGH VALLEY WATER LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 3003969 NOVA SCOTIA LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer CANADIAN SPRINGS WATER COMPANY LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer SPARKLING SPRING WATER UK LIMITED, as a Subsidiary Guarantor 115 By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer AQUAPORTE (UK) LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer CRYSTAL SPRING ACQUISITION, INC., as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 116 MOUNTAIN FRESH ACQUISITION CORP., as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer MARLBOROUGH EMPLOYMENT LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WATER AT WORK LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer NATURAL WATER LIMITED, as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 117 CULLYSPRING WATER CO., INC. as a Subsidiary Guarantor By: /s/ Stephen L. Larson ---------------------------- Name: Stephen L. Larson Title: Chief Financial Officer BANKERS TRUST COMPANY as Trustee By: /s/ Jason Krasilovsky ----------------------------- Name: Jason Krasilovsky Title: Assistant Treasurer 118 EXHIBIT A FORM OF INITIAL NOTE [THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a) (1), (2), (3), OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS SECURITY AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF THIS SECURITY, RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.] A-A 119 A-B 120 [THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.] THIS SECURITY HAS NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. THIS SECURITY IS NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN CANADA OR TO ANY RESIDENT THEREOF IN VIOLATION OF THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA. A-C 121 CUSIP No.:______________ SPARKLING SPRING WATER GROUP LIMITED 11 1/2% SENIOR SUBORDINATED NOTE DUE 2007 No. _________ $__________ SPARKLING SPRING WATER GROUP LIMITED, a Nova Scotia, Canada corporation (the "Company," which term includes any successor entities), for value received promises to pay to _________ or registered assigns the principal sum of __________ Dollars on November 15, 2007. Interest Payment Dates: May 15 and November 15, commencing May 15, 1998. Record Dates: May 1 and November 1. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. SPARKLING SPRING WATER GROUP LIMITED By: ------------------------------------ Name:__________________________________ Title:_________________________________ By: ------------------------------------ Name:__________________________________ Title:_________________________________ Dated: __________, 1997 A-D 122 A-E 123 Certificate of Authentication This is one of the 11 1/2% Senior Subordinated Notes due 2007, referred to in the within-mentioned Indenture. BANKERS TRUST COMPANY, as Trustee By: Authorized Signatory Date of Authentication:__________, 1997 A-F 124 (REVERSE OF SECURITY) 11 1/2% Senior Subordinated Note due 2007 Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Indenture, dated as of November 19, 1997 (the "Indenture"), and as amended from time to time, by and among Sparkling Spring Water Group Limited, a Nova Scotia, Canada corporation (the "Company"), the Subsidiary Guarantors named therein and Bankers Trust Company, as trustee (the "Trustee"). 1. Interest. The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from November 19, 1997. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing May 15, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Registration Rights Agreement)) after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and premium, if any, and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Notes under the Indenture. This Note is one of a duly authorized issue of Notes of the Company designated as its 11 1/2% Senior Subordinated Notes due 2007 issued on the Issue Date (the "Initial Notes"), limited (except as otherwise provided in the Indenture) in aggregate principal amount to $100,000,000 which may be issued under the Indenture. The Notes include the Initial Notes, the Private Exchange Notes A-G 125 and the Unrestricted Notes, as defined below, issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes, the Private Exchange Notes and the Unrestricted Notes are treated as a single class of securities under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are general unsecured obligations of the Company. Payment on each Note is guaranteed on a senior subordinated basis by the Subsidiary Guarantors pursuant to Article 12 of the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms. 5. Redemption. (a) The Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, on and after November 15, 2002, upon not less than 30 nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on November 15 of the years set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption: Year Percentage ---- ---------- 2002.......................................... 105.570% 2003.......................................... 103.833% 2004.......................................... 101.917% 2005.......................................... 100.000% (b) Notwithstanding the foregoing, at any time, or from time to time, on or prior to November 15, 2000, the Company may, at its option, redeem up to $30.0 million aggregate principal amount of the Notes originally issued with the net cash proceeds of one or more Public Equity Offerings by the Company at a redemption price equal to 111.50% of the principal amount thereof, plus accrued interest to the date of redemption, provided that at least $70.0 million in aggregate principal amount of the Notes originally issued remains outstanding immediately following such redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 60 days after the consummation of any such Public Equity Offering. (c) In addition, as set forth in the Indenture, and subject to the conditions contained in the Indenture, the Notes are redeemable by the Company in the event of certain changes in or amendments to the laws (or regulations or rulings promulgated thereunder) of Canada or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein affecting taxation, or certain changes in any official position regarding the interpretation or application of such laws, regulations or rulings. A-H 126 6. Notice of Redemption. Notice of redemption will be mailed at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any. 7. Offers to Purchase. Section 4.14 of the Indenture provides that upon a Change of Control each Holder will have the right, subject to certain conditions set forth in the Indenture, to require the Company to purchase all or a portion of such Holder's Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. Section 4.15 of the Indenture provides that, after certain Asset Sales, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 8. Registration Rights. Pursuant to the Registration Rights Agreement among the Company, the Subsidiary Guarantors and the Initial Purchasers, the Company and the Subsidiary Guarantors will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for the Company's 11 1/2% Senior Subordinated Notes due 2007 (the "Unrestricted Notes"), which will be registered under the Securities Act, in like principal amount and having terms identical in all material respects as the Initial Notes. The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 9. Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, and (except Notes issued as payment of Interest) in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as required by law or as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption except for the unredeemed portion of any Note being redeemed in part. 10. Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it for all purposes. 11. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the A-I 127 Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but including, under certain circumstances, their obligation to pay the principal of and interest on the Notes but without affecting the rights of the Holders to receive such amounts from such deposits). 13. Amendment; Supplement; Waiver. Subject to certain exceptions set forth in the Indenture, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, and any past Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA or comply with Section 5.01 of the Indenture or make any other change that does not adversely affect the rights of any Holder of a Note in any material respect. 14. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain indebtedness, make certain Investments, create or incur liens, enter into transactions with Affiliates, create dividend or other payment restrictions affecting the Company's Subsidiaries, issue Preferred Stock of its Subsidiaries, and on the ability of the Company to merge or consolidate with any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's and its Subsidiaries' assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations. 15. Subordination. The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Indebtedness of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. A-J 128 16. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor, subject to certain exceptions, will be released from those obligations. 17. Defaults and Remedies. Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest when due, for any reason or a Default in compliance with Article Five of the Indenture) if it determines that withholding notice is in their interest. 18. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. No partner, director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 20. Guarantees. This Note will be entitled to the benefits of certain Guarantees made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Subsidiary Guarantors, the Trustee and the Holders. 21. Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. 22. Governing Law. This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to principles of conflict of laws. Each of the parties hereto and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note. 23. Abbreviations and Defined Terms. Customary abbreviations may be used in A-K 129 the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 24. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note. Requests may be made to: SPARKLING SPRING WATER GROUP LIMITED, 19 Fielding Avenue, Dartmouth, Nova Scotia, Canada B3B-1C9. A-L 130 [FORM OF ASSIGNMENT] I or we assign to PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER - -------------------------------------- - -------------------------------------------------------------------------------- (please print or type name and address) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints - -------------------------------------------------------------------------------- attorney to transfer the Note on the books of the Company with full power of substitution in the premises. Dated: -------------------- ------------------------------------ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever. Signature Guarantee: ---------------------------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-M 131 In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) ____________ the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: [Check One] (1) _____ to the Company or a subsidiary thereof; or (2) _____ pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (3) _____ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) _____ outside the United States to a "foreign purchaser" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (5) _____ pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended; or (6) _____ pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (7) _____ pursuant to another available exemption from the registration statement requirements of the Securities Act of 1933, as amended. and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate,): |_| The transferee is an Affiliate of the Company. A-N 132 A-O 133 Unless one of the items is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item (3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4), and other information as the Trustee or the Company have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing items are checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.17 of the Indenture shall have been satisfied. Dated:____________ Signed: ------------------------------------------ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: - ---------------------------------------------------- TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:______________ ---------------------------------------------- NOTICE: To be executed by an executive officer A-P 134 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, check the appropriate box: Section 4.14 [ ] Section 4.15 [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the amount: $____________ Date:__________________ Your Signature: - -------------------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------------------ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. A-Q 135 EXHIBIT B FORM OF EXCHANGE NOTE CUSIP No.: ______________ SPARKLING SPRING WATER GROUP LIMITED 11 1/2% SENIOR SUBORDINATED NOTE DUE 2007 No. _________ $__________ SPARKLING SPRING WATER GROUP LIMITED, a Nova Scotia, Canada corporation (the "Company," which term includes any successor entities), for value received promises to pay to _________ or registered assigns the principal sum of __________ Dollars on November 15, 2007. Interest Payment Dates: May 15 and November 15, commencing May 15, 1998. Record Dates: May 1 and November 1. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. SPARKLING SPRING WATER GROUP LIMITED By: --------------------------------- Name:_______________________________ Title:______________________________ By: --------------------------------- Name:_______________________________ Title:______________________________ B-A 136 Dated: _________, 1997 B-B 137 Certificate of Authentication This is one of the 11 1/2% Senior Subordinated Notes due 2007, referred to in the within-mentioned Indenture. BANKERS TRUST COMPANY, as Trustee By: Authorized Signatory Date of Authentication: _____, 1997 B-C 138 (REVERSE OF SECURITY) 11 1/2% Senior Subordinated Note due 2007 Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Indenture, dated as of November 19, 1997 (the "Indenture"), and as amended from time to time, by and among Sparkling Spring Water Group Limited, a Nova Scotia, Canada corporation (the "Company"), the Subsidiary Guarantors named therein and Bankers Trust Company, as trustee (the "Trustee"). 1. Interest. The Company promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from November 19, 1997. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing May 15, 1998. Interest will be computed on the basis of a 360-day year of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange (including pursuant to an Exchange Offer (as defined in the Registration Rights Agreement)) after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and premium, if any, and interest by check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, the Trustee will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Notes under the Indenture. This Note is one of a duly authorized issue of Notes of the Company designated as its 11 1/2% Senior Subordinated Notes due 2007 (the "Unrestricted Notes"), limited (except as otherwise provided in the Indenture) in aggregate principal amount to $100,000,000 which may be issued under the Indenture. The Notes include the 11 1/2% Senior Subordinated Notes Due 2007 issued on the Issue Date (the "Initial Notes"), the Private Exchange Notes and the Unrestricted Notes, issued in exchange for the Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes, B-D 139 the Private Exchange Notes and the Unrestricted Notes are treated as a single class of securities under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the TIA for a statement of such terms. The Notes are general unsecured obligations of the Company. Payment on each Note is guaranteed on a senior subordinated basis by the Subsidiary Guarantors pursuant to Article 12 of the Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time in accordance with its terms. 5. Redemption. (a) The Notes are redeemable, at the Company's option, in whole at any time or in part from time to time, on and after November 15, 2002, upon not less than 30 nor more than 60 days' notice, at the following Redemption Prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on November 15 of the years set forth below, plus, in each case, accrued and unpaid interest thereon, if any, to the date of redemption: Year Percentage ---- ---------- 2002............................................ 105.750% 2003............................................ 103.833% 2004............................................ 101.917% 2005............................................ 100.000% (b) Notwithstanding the foregoing, at any time, or from time to time, on or prior to November 15, 2000, the Company may, at its option, redeem up to $30.0 million aggregate principal amount of the Notes originally issued with the net cash proceeds of one or more Public Equity Offerings by the Company at a redemption price equal to 111.50% of the principal amount thereof, plus accrued interest to the date of redemption, provided that at least $70.0 million in aggregate principal amount of the Notes originally issued remains outstanding immediately following such redemption. In order to effect the foregoing redemption with the proceeds of any Public Equity Offering, the Company shall make such redemption not more than 60 days after the consummation of any such Public Equity Offering. (c) In addition, as set forth in the Indenture, and subject to the conditions contained in the Indenture, the Notes are redeemable by the Company in the event of certain changes in or amendments to the laws (or regulations or rulings promulgated thereunder) of Canada or any relevant jurisdiction or any political subdivision or taxing authority thereof or therein affecting taxation, or certain changes in any official position regarding the interpretation or application of such laws, regulations or rulings. 6. Notice of Redemption. Notice of redemption will be mailed at least 30 but not B-E 140 more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any. 7. Offers to Purchase. Section 4.14 of the Indenture provides that upon a Change of Control each Holder will have the right, subject to certain conditions set forth in the Indenture, to require the Company to purchase such Holder's Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of purchase. Section 4.15 of the Indenture provides that, after certain Asset Sales, and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 8. Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, and (except Notes issued as payment of Interest) in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as required by law or as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption except for the unredeemed portion of any Note being redeemed in part. 9. Persons Deemed Owners. The registered Holder of a Note shall be treated as the owner of it for all purposes. 10. Unclaimed Money. If money for the payment of principal or interest remains unclaimed for one year, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 11. Discharge Prior to Redemption or Maturity. If the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but including, under certain circumstances, their obligation to pay the principal of and interest on the Notes but without affecting the rights of the Holders to receive such amounts from such deposits). B-F 141 12. Amendment; Supplement; Waiver. Subject to certain exceptions set forth in the Indenture, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding, and any past Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of not less than a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, comply with any requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA or comply with Section 5.01 of the Indenture or make any other change that does not adversely affect the rights of any Holder of a Note in any material respect. 13. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain indebtedness, make certain Investments, create or incur liens, enter into transactions with Affiliates, create dividend or other payment restrictions affecting the Company's Subsidiaries, issue Preferred Stock of its Subsidiaries, and on the ability of the Company to merge or consolidate with any other Person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's and its Subsidiaries' assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. Pursuant to Section 4.06 of the Indenture, the Company must annually report to the Trustee on compliance with such limitations. 14. Subordination. The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Obligations on Senior Indebtedness of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes. 15. Successors. When a successor assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor, subject to certain exceptions, will be released from those obligations. 16. Defaults and Remedies. Except as set forth in the Indenture, if an Event of Default occurs and is continuing, the Trustee or the Holders of not less than 25% in principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in B-G 142 aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest when due, for any reason or a Default in compliance with Article Five of the Indenture) if it determines that withholding notice is in their interest. 17. Trustee Dealings with Company. The Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 18. No Recourse Against Others. No partner, director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture, the Guarantees or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 19. Guarantees. This Note will be entitled to the benefits of certain Guarantees, if any, made for the benefit of the Holders. Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Subsidiary Guarantors, the Trustee and the Holders. 20. Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. 21. Governing Law. This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, as applied to contracts made and performed within the State of New York, without regard to principles of conflict of laws. Each of the parties hereto and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Note. 22. Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. B-H 143 The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note. Requests may be made to: SPARKLING SPRING WATER GROUP LIMITED, 19 Fielding Avenue, Dartmouth, Nova Scotia, Canada B3B-1C9. B-I 144 [FORM OF ASSIGNMENT] I or we assign to PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER - -------------------------------------- - -------------------------------------------------------------------------------- (please print or type name and address) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints - -------------------------------------------------------------------------------- attorney to transfer the Note on the books of the Company with full power of substitution in the premises. Dated: ----------------- ------------------------------------ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever. Signature Guarantee: ---------------------------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-J 145 In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the Commission of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) __________ the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer: [Check One] (8) _____ to the Company or a subsidiary thereof; or (9) _____ pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended; or (10) _____ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (11) _____ outside the United States to a "foreign purchaser" in compliance with Rule 904 of Regulation S under the Securities Act of 1933, as amended; or (12) _____ pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933, as amended; or (13) _____ pursuant to an effective registration statement under the Securities Act of 1933, as amended; or (14) _____ pursuant to another available exemption from the registration statement requirements of the Securities Act of 1933, as amended. and unless the box below is checked, the undersigned confirms that such Note is not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act of 1933, as amended (an "Affiliate,): |_| The transferee is an Affiliate of the Company. B-K 146 Unless one of the items is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if item (3), (4), (5) or (7) is checked, the Company or the Trustee may require, prior to registering any such transfer of the Notes, in their sole discretion, such written legal opinions, certifications (including an investment letter in the case of box (3) or (4), and other information as the Trustee or the Company have reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended. If none of the foregoing items are checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.16 of the Indenture shall have been satisfied. Dated:____________ Signed: -------------------------------------------------- (Sign exactly as name appears on the other side of this Note) Signature Guarantee: - -------------------------------------------------------- TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:______________ ---------------------------------------------- NOTICE: To be executed by an executive officer B-L 147 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, check the appropriate box: Section 4.14 [ ] Section 4.15 [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the amount: $____________ Date:__________________ Your Signature: ----------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ------------------------------------------------------------ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Trustee, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. B-M 148 EXHIBIT C FORM OF LEGEND FOR GLOBAL NOTE Any Global Note authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Note) in substantially the following form: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT THEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PARTY, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE. C-A 149 EXHIBIT D Form of Certificate To Be Delivered in Connection with Transfers To Non-QIB Accredited Investors BT ALEX, BROWN INCORPORATED NATWEST CAPITAL MARKETS LIMITED Initial Purchasers in connection with the Offering memorandum Referred to below Ladies and Gentlemen: In connection with our proposed purchase of 11 1/2% Senior Subordinated Notes due 2007 (the "Notes") of Sparkling Spring Water Group Limited, a corporation incorporated under the laws of the province of Nova Scotia, Canada (the "Company"), we confirm that: 1. We have received a copy of the Offering Memorandum (the "Offering Memorandum"), dated November 14, 1997, relating to the Notes and such other information as we deem necessary in order to make our investment decision. We acknowledge that we have read and agreed to the matters stated in the section entitled "Transfer Restrictions" of such Offering Memorandum. 2. We understand that any subsequent transfer of Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (the "Indenture") (as described in the Offering Memorandum) and the undersigned agrees to be bound by such restrictions and conditions, and agrees not, to resell, pledge or otherwise transfer the Notes except in compliance with the Securities Act of 1933, as amended (the "Securities Act"), and all applicable state securities laws. 3. We understand that the offer and sale of the Notes have not been registered under the Securities Act or pursuant to any state securities laws, and that the Notes may not be offered or sold with the United States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes, we will do so only (i) to Sparkling Spring or any subsidiary thereof, (ii) inside the United States in accordance with Rule 144A promulgated under the Securities Act to a "qualified institutional buyer" (as defined in Rule 144A promulgated under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture) a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes (the form of which letter can be obtained from the Trustee), (iv) outside the United States in accordance with Rule 904 of Regulation S promulgated under the D-A 150 Securities Act to non-U.S. persons, (v) pursuant to the exemption from registration provided by Rule 144 promulgated under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchase any of the Notes from us a notice advising such purchaser that any resale of the Notes are restricted as stated herein. 4. We understand that, on any proposed resale of any Notes, we will be required to furnish to the Trustee and the Company such certification, written legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be, for an indefinite period of time. 6. We are acquiring the Notes purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. 7. We have no intention of transferring any Notes to a resident of Canada and (i) we acknowledge that transfer of Notes to residents of Canada may be restricted under certain circumstances and (ii) we agree to comply with any applicable Canadian provincial securities laws in respect of any transfer of Notes to a resident of Canada. You, the Company, the Trustee and their respective counsel are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereto to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ---------------------------------- Name: Title: D-B 151 EXHIBIT E Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S [ ], [ ] [ ] [ ] [ ] Re: Sparkling Spring Water Group Limited (the "Company") 11 1/2% Senior Subordinated Notes due 2007 (the "Notes") Ladies and Gentlemen: In connection with our proposed sale of [$ ] aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been prearranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the E-1 152 Notes. You, the Company, the Trustee and others are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ---------------------------- Authorized Signature E-2 153 EXHIBIT F FORM OF GUARANTY For value received, the undersigned hereby unconditionally guarantees, as principal obligor and not only as a surety, to the Holder of this Note the cash payments in United States dollars of principal of, premium, if any, and interest on this Note (and including Additional Interest payable thereon) in the amounts and at the times when due and interest on the overdue principal, premium, if any, and interest, if any, of this Note, if lawful, and the payment or performance of all other obligations of the Company under the Indenture or the Notes, to the Holder of this Note and the Trustee, all in accordance with and subject to the terms and limitations of this Note, Article Twelve of the Indenture and this Guaranty. This Guaranty will become effective in accordance with Article Twelve of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guaranty shall not be affected by the fact that it is not affixed to any particular Note. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture dated as of November 19, 1997, among SPARKLING SPRING WATER GROUP LIMITED, a Nova Scotia corporation, as issuer (the "Company"), each of the Subsidiary Guarantors named therein and Bankers Trust Company, as trustee (the "Trustee"), as amended or supplemented (the "Indenture"). The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Guaranty and the Indenture are expressly set forth in Article Twelve of the Indenture and reference is hereby made to the Indenture for the precise terms of the Guaranty and all of the other provisions of the Indenture to which this Guaranty relates. THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. The undersigned Subsidiary Guarantor hereby agrees to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Guaranty. [The obligations of the undersigned to the Holders of Notes and to the Trustee pursuant to this Guaranty and the Indenture do not extend to any obligations which would be prohibited under [English/Scots] law.] This Guaranty is subject to release upon the terms set forth in the Indenture. F-1 154 IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its Guaranty to be duly executed. Date:________________________________ [NAME OF SUBSIDIARY GUARANTOR], as a Subsidiary Guarantor By: ------------------------------ Name: Title: By: ------------------------------ Name: Title: F-2 155 F-3 EX-5.1 37 OPINION OF ROBINSON AND COLE LLP 1 EXHIBIT 5.1 [ROBINSON & COLE LLP LETTERHEAD] December ___, 1997 Spring Water, Inc. Crystal Spring Acquisition, Inc. Mountain Fresh Acquisition Corp. Cullyspring Water Co., Inc. Sparkling Spring Water Group Limited Sparkling Spring Water Limited Water Jug Enterprises Limited Withey's Water Softening & Purification Ltd. Aqua Care Water Softening & Purification Inc. High Valley Water Limited 3003969 Nova Scotia Limited Canadian Springs Water Company Limited Sparkling Spring Water (UK) Limited Aquaporte (UK) Limited Marlborough Employment Limited Water at Work Limited Natural Water Limited One Landmark Square Stamford, Connecticut 06901 Ladies and Gentlemen: We refer to the offer of Sparkling Spring Water Group Limited (the "Issuer") and Spring Water, Inc., Crystal Spring Acquisition, Inc., Mountain Fresh Acquisition Corp., Cullyspring Water Co., Inc., Sparkling Spring Water Limited, Water Jug Enterprises Limited, Withey's Water Softening & Purification, Ltd., Aqua Care Water Softening & Purification Inc., High Valley Water Limited, 3003969 Nova Scotia Limited, Canadian Springs Water Company Limited, Sparkling Spring Water (UK) Limited, Aquaporte (UK) Limited, Marlborough Employment Limited, Water at Work Limited and Natural Water Limited (the "Guarantors") to exchange $1,000, aggregate principal amount of 11-1/2% Senior Subordinated Notes due 2007 of the Issuer (the "Exchange Notes") (together with the related guarantees of the Guarantors), for each $1,000 aggregate principal of the outstanding unregistered 11-1/2% Senior Subordinated Notes due 2007 of the Issuer (together with the related guarantees of the Guarantors), which Exchange Notes (and the related guarantees of the Guarantors) are the subject of the Registration Statement on Form F-4, to which this opinion is an Exhibit, filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act") (the "Registration Statement"). In connection herewith, we have examined the Registration Statement, the Indenture, dated as of November 19, 1997 among the Issuer, the Guarantors and Bankers Trust Company as trustee the ("Indenture"), and the Exchange Notes (and the related guarantees of the Guarantors included therewith) (the Indenture, the Exchange Notes and the related guarantees of the Exchange Notes of the Guarantors are collectively referred to herein as the "Documents"), together with such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. On the basis of the foregoing examination, we advise you that, upon the (i) Registration Statement becoming effective under the Act, and (ii) qualification of the Indenture under the Trust Indenture Act of 1939, as amended, in our opinion the guarantee of the Exchange Notes by each Guarantor will have been duly authorized and will constitute a valid and binding obligation of such Guarantor, subject to applicable bankruptcy, insolvency, reorganization and similar laws affecting creditors' rights generally and general principles of equity (regardless of whether such principles are considered in a proceeding in equity or at action at law). 2 The foregoing opinion is limited to the laws of the State of New York and the General Corporation Law of the State of Delaware. The foregoing opinions are subject to the qualification that the enforceability of certain rights, remedies and waivers provided in the Documents may be unavailable or limited by certain laws and judicial decisions. In respect of such qualification, however, we are of the opinion that such laws and judicial decisions do not, subject to the other exceptions and limitations contained in this letter, make the remedies generally afforded by the Documents inadequate to permit enforcement of the indebtedness arising thereunder. We note that the provisions of any Document that permit any person thereunder to take action or make determinations, or to benefit from indemnities and similar undertakings of the Issuer or any Guarantor, may be subject to a requirement that such action be taken or such determinations be made, and that any action or inaction by such person which may give rise to a request for payment under such an undertaking be taken or not taken, on a reasonable basis and in good faith. We consent to the filing of this opinion with the Commission as an Exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included therein. Our opinion is rendered solely for your information in connection with the foregoing, and may not be relied upon by any other person or for any other purpose without our prior written consent. In giving this opinion, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission. Very truly yours, ROBINSON & COLE LLP By: /s/ Richard A. Krantz ------------------------------- Richard A. Krantz EX-5.2 38 OPINION OF LANE POWERS LUBERSKY LLP 1 EXHIBIT 5.2 [LANE POWELL SPEARS LUBERSKY LLP LETTERHEAD] December ___, 1997 Cullyspring Water Co., Inc. One Landmark Square Stamford, Connecticut 06901 Ladies and Gentlemen: We refer to the offer of Sparkling Spring Water Group Limited (the "Issuer") and Cullyspring Water Co., Inc. (the "Guarantor") to exchange $1,000, aggregate principal amount of 11-1/2% Senior Subordinated Notes due 2007 of the Issuer (the "Exchange Notes") (together with the related guarantee of the Guarantor), for each $1,000 aggregate principal of the outstanding unregistered 11-1/2% Senior Subordinated Notes due 2007 of the Issuer (together with the related guarantee of the Guarantor), which Exchange Notes (and the related guarantee of the Guarantor) are the subject of the Registration Statement on Form F-4, to which this opinion is an Exhibit, filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act") (the "Registration Statement"). In connection herewith, we have examined the Indenture, dated as of November 19, 1997 among the Issuer, the Guarantor and Bankers Trust Company as trustee the ("Indenture"), and the Exchange Notes (and the related guarantee of the Guarantor included therewith) (the Indenture, the Exchange Notes and the related guarantee of the Exchange Notes of the Guarantor are collectively referred to herein as the "Documents"), together with such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. We have not participated in the preparation of the Registration Statement, and express no opinion as to the quality of the disclosures contained therein, or to the compliance by the Issuer and the Guarantor with any federal or state securities laws. On the basis of the foregoing examination, we advise you that, upon the (i) Registration Statement becoming effective under the Act, and (ii) qualification of the Indenture under the Trust Indenture Act of 1939, as amended, in our opinion the guarantee of the Exchange Notes by the Guarantor will have been duly authorized by the Guarantor. 2 The foregoing opinion is limited to the laws of the State of Washington. We consent to the filing of this opinion with the Commission as an Exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included therein. Our opinion is rendered solely for your information in connection with the foregoing, and may not be relied upon by any other person or for any other purpose without our prior written consent. In giving this opinion, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission. Very truly yours, /s/ LANE POWELL SPEARS LUBERSKY LLP EX-5.3 39 OPINION OF STEWART MCKELVEY STIRLING SCALES 1 EXHIBIT 5.3 [STEWART McKELVEY STIRLING SCALES LETTERHEAD] December ___, 1997 Sparkling Spring Water Group Limited Sparkling Spring Water Limited Water Jug Enterprises Limited Withey's Water Softening & Purification Ltd. Aqua Care Water Softening & Purification Inc. High Valley Water Limited 3003969 Nova Scotia Limited Canadian Springs Water Company Limited One Landmark Square Stamford, Connecticut 06901 Ladies and Gentlemen: We refer to the offer of Sparkling Spring Water Group Limited (the "Issuer") and Sparkling Spring Water Limited, Water Jug Enterprises Limited, Withey's Water Softening & Purification Ltd., Aqua Care Water Softening & Purification Inc., High Valley Water Limited, 3003969 Nova Scotia Limited and Canadian Springs Water Company Limited (the "Guarantors") to exchange $1,000, aggregate principal amount of 11 1/2% Senior Subordinated Notes due 2007 of the Issuer (the "Exchange Notes") (together with the related guarantees of the Guarantors), for each $1,000 aggregate principal of the outstanding unregistered 11 1/2% Senior Subordinated Notes due 2007 of the Issuer (together with the related guarantees of the Guarantors), which Exchange Notes (and the related guarantees of the Guarantors) are the subject of the Registration Statement on Form F-4, to which this opinion is an Exhibit, filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act") (the "Registration Statement"). In connection herewith, we have examined the Registration Statement, the Indenture, dated as of November 19, 1997 among the Issuer, the Guarantors and Bankers Trust Company as trustee the ("Indenture"), and the Exchange Notes (and the related guarantees of the Guarantors included therewith) (the Indenture, the Exchange Notes and the related guarantees of the Exchange Notes of the Guarantors are collectively referred to herein as the "Documents"), together with such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. 2 On the basis of the foregoing examination, we advise you that, upon the (i) Registration Statement becoming effective under the Act, and (ii) qualification of the Indenture under the Trust Indenture Act of 1939, as amended, in our opinion: (1) Each of the Issuer and the Guarantors is duly organized, validly existing and in good standing of the province of Nova Scotia and has all requisite corporate power and authority to own, lease and operate its properties and conduct its businesses described in the Registration Statement; (2) The Issuer has all requisite corporate power and authority to execute, deliver and perform its obligations under the Exchange Notes and the Exchange Notes have been duly and validly authorized, executed and delivered by the Issuer; (3) Each of the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Exchange Notes and the Exchange Notes have been duly and validly authorized, executed and delivered by each of the Guarantors. The foregoing opinion is limited to the laws of the Province of Nova Scotia and the federal laws of Canada applicable in the Province of Nova Scotia. The foregoing opinions are subject to the qualification that the enforceability of the Exchange Notes is governed by New York law and we offer no opinion in this regard. We consent to the filing of this opinion with the Commission as an Exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus included therein. Our opinion is rendered solely for your information in connection with the foregoing, and may not be relied upon by any other person or for any other purpose without our prior written consent. In giving this opinion, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act or the Rules and Regulations of the Commission. Very truly yours, By: /s/ STEWART McKELVEY STIRLING SCALES EX-5.4 40 OPINION OF NORTON ROSE 1 Exhibit 5.4 [Letterhead of Norton Rose] December 1997 Sparkling Spring Water UK Limited and Aquaporte (UK) Limited One Landmark Square Stamford Connecticut 06901 USA Dear Sirs, Sparkling Spring Water UK Limited and Aquaporte (UK) Limited ("English Guarantors") 1. We have been asked to provide an opinion on behalf of the English Guarantors in connection with the execution of guarantees given by the English Guarantors contained in an indenture dated 19 November 1997 (the "Indenture") between Sparkling Spring Water Group Limited (the "Parent"), Spring Water Incorporated, the English Guarantors and the other Guarantors named therein and the Trustee named therein relating to Parent's US $100,000,000 11.5% Senior Subordinated Notes due 2007 (the "Notes"). 2. We understand that the Notes are to be exchanged for 11.5% Senior Subordinated Notes due 2007 of the Parent (the "Exchange Notes") (together with the related guarantees of the English Guarantors as contained in the Indenture) such Exchange Notes being the subject of the Registration Statement on Form F-4 to which this opinion is an Exhibit, filed with the Securities and Exchange Commission under the United States Securities Act of 1933. 3. Our opinion relates solely to English law as applied by the English courts at the date of this opinion. We express no opinion as to the effect or enforceability of the Indenture, which is expressed to be governed by New York law. We do not assume any obligation to advise you (or any person authorized to rely upon this opinion) of any subsequent change in English law which might affect the contents of this opinion. 4. For the purposes of giving this opinion: 2 (a) we have examined and relied upon the following documents: (i) faxed executed copy of the Indenture (including the form of Note, Exchange Note and Guarantee); (ii) microfiches dated 10th November 1997 of the public files of the English Guarantors at the Companies Registration Office in England and Wales; (iii) certificates of good standing dated 10th November 1997 provided by the Registrar of Companies in England and Wales in respect of the English Guarantors; (iv) executed Board resolutions passed by each of the English Guarantors in connection with the entry into (inter alia) of the Indenture; (v) faxed signed copy of a Directors certificate dated ______________confirming (inter alia) the authenticity of the Board resolutions in respect of the English Guarantors; and (b) we have assumed: (i) the truth and accuracy of all representations and statements as to factual matters contained in the Indenture referred to in paragraph 4(a)(i) above; (ii) that the Indenture constitutes valid and legally binding obligations of the English Guarantors under the laws of the State of New York (by which it is expressed to be governed); (iii) the completeness and accuracy in all respects of the public files relating to the English Guarantors referred to in paragraph 4(a)(ii) above; (iv) the genuineness of all signatures on all documents, the completeness and authenticity of all documents submitted to us as original and the conformity to the original of all copies submitted to us; and (c) We express no view and have made no independent investigation of whether the Indenture is for the commercial benefit of the English Guarantors or any of them. Nor have we reviewed the terms of the Indenture. 3 5. On the basis of the foregoing, and subject to our further comments below, we are of the opinion that: (a) each of the English Guarantors has the corporate power under its Memorandum and Articles of Association to execute, deliver and perform its obligations under the Indenture; (b) the execution and delivery of and the performance of each of the English Guarantor's obligations under the Indenture have been duly authorized by all necessary corporate action on the part of the English Guarantors. 6. This opinion is addressed to you personally and it may not be relied upon by anyone else without our prior written consent. This opinion may not be filed with any governmental agency or authority other than the Securities and Exchange Commission or quoted in any public document other than as an exhibit to the Registration Statement in Form F-4 filed with the Securities and Exchange Commission under the United States Securities Act of 1933 (as amended) without, in any such case, our prior written consent or except as required by applicable law. We consent to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. 7. This opinion is strictly limited to the matters stated herein and is not to be read as extending by implication to any other matter in connection wit the Indenture. Appropriate legal advice should be taken at the time of enforcement of the Indenture. 8. This opinion is given on condition that it is governed by and shall be construed in accordance with English Law and on condition that any action arising out of it is subject to the exclusive jurisdiction of the court of competent jurisdiction in England. Yours faithfully, /s/ Norton Rose EX-5.5 41 OPINION OF DUNDAS AND WILSON 1 Exhibit 5.5 [Letterhead of Dundas & Wilson] Malborough Employment Limited Water at Work Limited Natural Water Limited (the "Scottish Guarantors") December 1997 Our Ref. SJP Your Ref. Dear Sirs, Marlborough Employment Limited, Water at Work Limited and Natural Water Limited 1. We have been asked to provide an opinion on behalf of the Scottish Guarantors in connection with the execution of guarantees given by the Scottish Guarantors contained in an indenture dated 19 November 1997 (the "Indenture") between Sparkling Spring Water Group Limited (the "Parent"), Spring Water Incorporated, the Scottish Guarantors and the other Guarantors named therein and the Trustee named therein relating to Parent's US $100,000,000 11.5% Senior Subordinated Notes due 2007 (the "Notes"). 2. We understand that the Notes are to be exchanged for 11.5% Senior Subordinated Notes due 2007 of the Parent (the "Exchange Notes") (together with the related guarantees of the Scottish Guarantors as contained in the Indenture) such Exchange Notes being the subject of the Registration Statement on Form F-4 to which this opinion is an Exhibit, filed with the Securities and Exchange Commission under the United States Securities Act of 1933. 3. Our opinion relates solely to Scots law as applied by the Scottish courts at the date of this opinion. We express no opinion as to the effect or enforceability of the Indenture, which is expressed to be governed by New York law. We do not assume any obligation to advise you (or any person authorized to rely upon this opinion) of any subsequent change in Scots law which might affect the contents of this opinion. 4. For the purposes of giving this opinion: 2 (a) we have examined and relied upon the following documents: (i) faxed executed copy of the Indenture (including the form of Note, Exchange Note and Guarantee); (ii) microfiches dated 13th November 1997 of the public files of the Scottish Guarantors at the Companies Registration Office in Scotland; (iii) certificates of good standing dated 10th November 1997 provided by the Registrar of Companies in Scotland and Wales in respect of the Scottish Guarantors; (iv) executed Board resolutions passed by each of the Scottish Guarantors in connection with the entry into of the Indenture; and (v) faxed signed copy of a Directors certificate dated ______________ confirming; (inter alia) the authenticity of the Board resolutions in respect of the Scottish Guarantors; and (b) we have assumed: (i) the truth and accuracy of all representations and statements as to factual matters contained in the Indenture referred to in paragraph 4(a)(i) above; (ii) that the Indenture constitutes valid and legally binding obligations of the Scottish Guarantors under the laws of the State of New York (by which it is expressed to be governed); (iii) the completeness and accuracy in all respects of the public files relating to the Scottish Guarantors referred to in paragraph 4(a)(ii) above; (iv) the genuineness of all signatures on all documents, the completeness and authenticity of all documents submitted to us as original and the conformity to the original of all copies submitted to us; (c) We express no view and have made no independent investigation of whether the Indenture is for the commercial benefit of the Scottish Guarantors or any of them nor have we reviewed the terms of the Indenture. 3 5. On the basis of the foregoing, and subject to our further comments below, we are of the opinion that: (a) each of the Scottish Guarantors has the corporate power under its Memorandum and Articles of Association to execute, deliver and perform its obligations under the Indenture; (b) the execution and delivery of and the performance of each of the Scottish Guarantor's obligations under the Indenture have been duly authorized by all necessary corporate action on the part of the Scottish Guarantors. 6. This opinion is addressed to you personally and it may not be relied upon by anyone else without our prior written consent. This opinion may not be filed with any governmental agency or authority other than the Securities and Exchange Commission or quoted in any public document other than as an exhibit to the Registration Statement in Form F-4 filed with the Securities and Exchange Commission under the United States Securities Act of 1933 (as amended) without, in any such case, our prior written consent or except as required by applicable law. We consent to the use of our name under the caption "Legal Matters" in the Prospectus included in the Registration Statement. 7. This opinion is strictly limited to the matters stated herein and is not to be read as extending by implication to any other matter in connection wit the Indenture. Appropriate legal advice should be taken at the time of enforcement of the Indenture. 8. This opinion is given on condition that it is governed by and shall be construed in accordance with Scots Law and on condition that any action arising out of it is subject to the exclusive jurisdiction of the court of competent jurisdiction in Scotland. Yours faithfully, /s/ Dundas & Wilson EX-10.1 42 PURCHASE AGREEMENT 1 Exhibit 10.1 SPARKLING SPRING WATER GROUP LIMITED $100,000,000 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 PURCHASE AGREEMENT November 14, 1997 BT Alex. Brown Incorporated NatWest Capital Markets Limited c/o BT Alex. Brown Incorporated One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Ladies and Gentlemen: Sparkling Spring Water Group Limited, a corporation organized under the laws of the Province of Nova Scotia, Canada (the "Issuer" or the "Company"), and each of the Guarantors (as defined) hereby confirm their agreement with you (the "Initial Purchasers"), as set forth below. 1. The Securities. Subject to the terms and conditions herein contained, the Issuer proposes to issue and sell to the Initial Purchasers $100,000,000 aggregate principal amount of the Issuer's 11 1/2% Senior Subordinated Notes due 2007 (the "Notes"). The Notes will be guaranteed (collectively, the "Guarantees") on a senior subordinated basis by each of the Issuer's subsidiaries listed on the signature pages hereof (collectively, and together with any subsidiary that in the future executes a supplemental indenture pursuant to which such subsidiary agrees to guarantee the Notes, the "Guarantors"). The Notes and the Guarantees are collectively referred to herein as the "Securities." The Securities are to be issued under an indenture (the "Indenture") dated the Closing Date (as defined below) by and among the Issuer, the Guarantors and Bankers Trust Company, as trustee (the "Trustee"). The Securities will be offered and sold to you without being registered under the Securities Act of 1933, as amended (the "Act"), in reliance on exemptions therefrom and pursuant to exemptions from the prospectus and registration requirements of the Securities Act (Nova Scotia). In connection with the sale of the Securities, the Issuer has prepared a preliminary offering memorandum dated October 30, 1997 (the "Preliminary Memorandum") and a final offering memorandum dated November 14, 1997 (the "Final 2 Memorandum," the Preliminary Memorandum and the Final Memorandum each herein being referred to as a "Memorandum") setting forth or including a description of the terms of the Securities, the terms of the offering of the Securities, a description of the Issuer and the Guarantors and any material developments relating to the Issuer and the Guarantors occurring after the date of the most recent historical financial statements included therein. The Issuer understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth in the Final Memorandum and Section 8 hereof as soon as the Initial Purchasers deem advisable after this Purchase Agreement (this "Agreement") has been executed and delivered, to certain persons in the United States whom the Initial Purchasers reasonably believe to be qualified institutional buyers ("Qualified Institutional Buyers" or "QIBs") as defined in Rule 144A under the Act, as such rule may be amended from time to time ("Rule 144A"), in transactions under Rule 144A, to a limited number of other institutional "accredited investors" ("Accredited Investors") as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D under the Act ("Regulation D") in private sales exempt from registration under the Act, and outside the United States to certain persons in reliance on Regulation S under the Act ("Regulation S"). The Initial Purchasers and their direct and indirect transferees of the Securities will be entitled to the benefits of the Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the "Registration Rights Agreement"), pursuant to which the Issuer and the Guarantors have agreed, among other things, to file a registration statement (the "Registration Statement") with the Securities and Exchange Commission (the "Commission") registering the Exchange Notes (as defined in the Registration Rights Agreement) under the Act. This Agreement, the Notes, the Exchange Notes, the Private Exchange Notes (as defined in the Registration Rights Agreement), the Guarantees, the Indenture and the Registration Rights Agreement are hereinafter referred to collectively as the "Operative Documents." 2. Representations and Warranties of the Issuer and the Guarantors. The Issuer and each of the Guarantors, jointly and severally, represents and warrants to and agrees with each of the Initial Purchasers that: (a) Neither the Preliminary Memorandum as of the date thereof nor the Final Memorandum nor any amendment or supplement thereto as of the date thereof and at all times subsequent thereto up to the Closing Date (as defined in Section 3 below) contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact necessary to make the statements 2 3 therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 2(a) do not apply to statements or omissions made in reliance upon and in conformity with information relating to any of the Initial Purchasers furnished to the Issuer in writing by the Initial Purchasers expressly for use in the Preliminary Memorandum, the Final Memorandum or any amendment or supplement thereto. The Preliminary Memorandum, the Final Memorandum and each amendment or supplement thereto complies or will comply in all material respects with the Act. (b) As of the Closing Date, the Issuer will have the authorized, issued and outstanding capitalization set forth in the Final Memorandum; all of the outstanding shares of capital stock of the Issuer and each of the Guarantors have been, and as of the Closing Date will be, duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; except as set forth in the Final Memorandum, all of the outstanding shares of capital stock of the Guarantors will be owned, directly or indirectly, by the Issuer, free and clear of all liens, encumbrances, equities and claims or restrictions on transferability (other than those imposed by the Act and the securities or "Blue Sky" laws of certain jurisdictions) or voting; except as set forth in the Final Memorandum, there are no (i) options, warrants or other rights to purchase, (ii) agreements or other obligations to issue or (iii) other rights to convert any obligation into, or exchange any securities for, shares of capital stock of or ownership interests in the Issuer or any of the Guarantors outstanding. Except for the Issuer's direct and indirect interests in the Guarantors, the Issuer does not own, directly or indirectly, any shares of capital stock or any other equity or long-term debt securities or have any equity interest in any firm, partnership, joint venture or other entity other than as described in the Final Memorandum. (c) Each of the Issuer and the Guarantors is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate or other power and authority to own its properties and conduct its business as now conducted and as described in the Final Memorandum; each of the Issuer and the Guarantors is duly qualified to do business as a foreign or extra-provincial corporation and is in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the general affairs, management, business, 3 4 condition (financial or otherwise), prospects or results of operations of the Issuer and each of its subsidiaries (each, a "Subsidiary" and collectively, the "Subsidiaries"), taken as a whole (any such event, a "Material Adverse Effect"). (d) Each of the Issuer and the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Operative Documents to which it is a party and to consummate the transactions contemplated hereby and thereby, including, without limitation, the power and authority to issue, sell and deliver the Securities as contemplated by this Agreement. The Notes, when issued, will be in the form contemplated by the Indenture. The Notes, the Exchange Notes and the Private Exchange Notes have each been duly and validly authorized by the Issuer and, when executed by the Issuer and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Notes, when delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Issuer (assuming the due authorization, execution and delivery of the Indenture by the Trustee and the due authorization and delivery of the Notes by the Trustee in accordance with the Indenture), entitled to the benefits of the Indenture, and enforceable against the Issuer in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (e) The Guarantees have been duly and validly authorized by each Guarantor, and when executed and delivered by such Guarantors, will constitute the valid and legally binding obligations of such Guarantors, entitled to the benefits of the Indenture, enforceable against each of them in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (f) Each of the Issuer and the Guarantors has all 4 5 requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture. The Indenture meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly authorized by each of the Issuer and the Guarantors and, when executed and delivered in accordance with its terms (assuming the due authorization, execution and delivery by the Trustee), will have been duly executed and delivered and will constitute a valid and legally binding agreement of each of the Issuer and the Guarantors, enforceable against each of them in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (g) Each of the Issuer and the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement. The Registration Rights Agreement has been duly and validly authorized by each of the Issuer and the Guarantors and, when executed and delivered by each of the Issuer and the Guarantors (assuming due authorization, execution and delivery by the Initial Purchasers), will have been duly executed and delivered and will constitute a valid and legally binding agreement of each of the Issuer and the Guarantors, enforceable against each of them in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (B) any rights to indemnity or contribution thereunder may be limited by U.S. or Canadian federal, state or provincial securities laws. (h) Each of the Issuer and the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. This Agreement and the consummation by the Issuer and the Guarantors of the transactions contemplated hereby have been duly and validly authorized by each of the Issuer and the Guarantors. This Agreement has been duly executed and 5 6 delivered by each of the Issuer and the Guarantors and constitutes a valid and legally binding agreement of each of the Issuer and the Guarantors, enforceable against each of them in accordance with its terms, except that enforcement may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (i) No consent, waiver, approval, authorization or order of, or filing, registration, qualification, license or permit of or with, any court or governmental agency or body, or third party is required for the performance of this Agreement or any other Operative Document by the Issuer and the Guarantors or the consummation by them of the other transactions contemplated hereby or thereby, except such (i) as have been obtained or made, (ii) as may be required under state securities or "Blue Sky" laws in connection with the purchase and resale of the Securities by the Initial Purchasers, and (iii) as may be required in connection with the registration of the Securities, Exchange Notes and Private Exchange Notes, as the case may be, pursuant to the Registration Rights Agreement and the qualification of the Indenture under the TIA and (iv) the failure of which to obtain could not have, individually or in the aggregate, a Material Adverse Effect. Neither the Issuer nor any of the Guarantors is (i) in violation of its constating documents, certificate of incorporation or bylaws (or similar organization documents), (ii) in breach or violation of any statute, judgment, decree, order, rule or regulation applicable to any of them or any of their respective properties or assets, or (iii) in breach of or in default under (nor has any event occurred which, with notice or passage of time or both, would constitute a default under) or in violation of any of the terms or provisions of any indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate, contract or other agreement or instrument to which any of them is a party or to which their respective properties or assets are subject (collectively, "Contracts"), except in the case of clauses (ii) and (iii) above for any such breaches, defaults, violations or events which would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Issuer nor any Guarantor has received any notice or claim of any default or event, condition or omission which with notice or lapse of time or both would result in a default under any of their respective Contracts, including those referred to in the Final Memorandum, or any 6 7 Operative Document to which it is a party or has knowledge of any breach of any of such Contracts by the other party or parties thereto, except such defaults or breaches which would not, individually or in the aggregate, have a Material Adverse Effect. (j) The execution, delivery and performance by the Issuer and the Guarantors of each of the Operative Documents (to the extent a party thereto) and the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Securities to the Initial Purchasers), and the fulfillment of the terms hereof and thereof, will not conflict with or constitute or result in a breach of or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of or cause an acceleration of any obligation under, or result in the imposition or creation of (or the obligation to create or impose) a lien on any property or assets of the Issuer or any Guarantor with respect to (i) the terms or provisions of any Contract; (ii) the constating documents, certificate of incorporation or bylaws (or similar organizational documents) of the Issuer or any of the Guarantors; or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or regulation of any court or governmental agency or body applicable to the Issuer, the Guarantors or any of their respective properties or assets. (k) Each of the Operative Documents conforms in all material respects to the description thereof in the Final Memorandum. (l) The consolidated financial statements of the Issuer and the related notes thereto included in the Final Memorandum present fairly the consolidated financial position, results of operations and cash flows of the Issuer at the dates and for the periods to which they relate and have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein, and comply in all material respects with the applicable accounting requirements of the Act and the rules and regulations thereunder. The financial statements of Canadian Springs Water Company Ltd. ("CS"), Cullyspring Water Co., Inc. ("Cullyspring"), D&D and Company, Inc. ("D&D") and Marlborough Employment Limited and Subsidiaries ("Marlborough"), including, in each case, the related notes thereto, included in the Final Memorandum (i) presently fairly the financial position, results of operations and 7 8 cash flows of CS, Cullyspring, D&D and Marlborough, respectively, at the dates and for the periods to which they relate, (ii)(except Marlborough) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein, and (iii) comply in all material respects with the applicable requirements of the Act and the rules and regulations thereunder. The Final Memorandum contains all financial statements and other financial information required under the Act, including, without limitation, under Rules 3-01, 3-05, 3-10 and 11-02 of Regulation S-X. The summary and selected financial and statistical data included in the Final Memorandum present fairly the information shown therein and have been prepared and compiled on a basis consistent with the audited financial statements included therein, except as otherwise stated therein, and comply in all material respects with the applicable accounting requirements of the Act and the rules and regulations thereunder. Each of Ernst & Young and Kidsons Impey is an independent public accounting firm as required by the Act and the rules and regulations thereunder. (m) (i) The pro forma financial statements (including the notes thereto) and the other pro forma financial information included in the Final Memorandum (A) comply as to form in all material respects with the applicable requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (B) have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements and (C) have been properly computed on the bases described therein, and (ii) the assumptions used in the preparation of the pro forma financial statements and other pro forma financial information included in the Final Memorandum are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (n) There is not pending or, to the best knowledge of the Issuer and each of the Guarantors, threatened any action, suit, proceeding, inquiry or investigation to which the Issuer or any of the Guarantors is a party, or to which any of their respective properties or assets are subject, before or brought by any court, arbitrator or governmental agency or body, which, if determined adversely to the Issuer or any such Guarantor, would, individually or in the aggregate, have a Material Adverse Effect, or which seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Securities to be sold hereunder or the anticipated application of the proceeds therefrom or the consummation of the other transactions 8 9 contemplated by the Operative Documents. (o) Each of the Issuer and the Guarantors owns or possesses adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now or proposed to be operated by it as described in the Final Memorandum, and neither the Issuer nor any of the Guarantors has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, would, individually or in the aggregate, have a Material Adverse Effect. (p) Each of the Issuer and the Guarantors possesses all licenses, permits, certificates, consents, orders, approvals, exemptions and other authorizations from, and has made all declarations and filings with, all federal, provincial, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals presently required or necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as set forth in the Final Memorandum ("Permits"), except where the failure to obtain such Permits would not, individually or in the aggregate, have a Material Adverse Effect; each of the Issuer and the Guarantors has fulfilled and performed all of its material obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or which could result in any other material impairment of the rights of the holder of any such Permit, except where such revocation, termination or impairment would not, individually or in the aggregate, have a Material Adverse Effect; and neither the Issuer nor any Guarantor has received any notice of any proceeding relating to revocation or modification of any such Permit, except where such revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect. (q) Since the respective dates as of which information is given in the Final Memorandum, except as described therein, there has been no material adverse change or any fact or event known to the Issuer or any of the Guarantors which could reasonably be expected to result in a material adverse change, in the general affairs, management, business, condition (financial or otherwise), prospects or results of operations of the Issuer and the Subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, or any loss of, or 9 10 damage to, properties (whether or not insured) which could reasonably be expected to affect materially and adversely the general affairs, management, business, condition (financial or otherwise), prospects or results of operations of the Issuer and the Subsidiaries taken as a whole. Since the date of the latest balance sheet of the Issuer presented in the Final Memorandum, except as expressly disclosed in the Final Memorandum, neither the Issuer nor any of the Guarantors has (i) incurred or undertaken any liabilities or obligations, direct or contingent, that are material to the Issuer and the Subsidiaries taken as a whole other than in the ordinary course of business consistent with past practice, (ii) entered into any transaction or contract not in the ordinary course of business and consistent with past practice, (iii) declared or paid any dividend or made any distribution on any shares of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of its capital stock or (iv) effected any change in the capital stock or long-term indebtedness of the Issuer or any of the Guarantors. (r) Each of the Issuer and the Guarantors has filed all necessary federal, provincial, state and foreign income, franchise and other tax returns, except where the failure to so file such returns would not, individually or in the aggregate, have a Material Adverse Effect, and has paid all taxes shown as due thereon; and other than tax deficiencies which the Issuer or any of the Guarantors is contesting in good faith and for which the Issuer or such Guarantor has provided adequate reserves in accordance with United States generally accepted accounting principles, there is no tax deficiency that has been asserted against the Issuer or any Guarantor that would, individually or in the aggregate, have a Material Adverse Effect. (s) The statistical and market-related data included in the Final Memorandum are based on or derived from sources which the Issuer believes to be reliable and accurate. (t) Neither the Issuer nor any of the Guarantors nor any agent acting on their behalf has taken or will take any action that might cause this Agreement or the sale of the Securities to violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date. (u) Each of the Issuer and the Guarantors has good title to all personal property described in the Final Memorandum as being owned by it, good and marketable title to all real property described in the Final Memorandum as 10 11 being owned by it and good and valid title to a leasehold estate in the real and personal property described in the Final Memorandum as being leased by it, in each case, free and clear of all liens, charges, encumbrances or restrictions except as described in the Final Memorandum or to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions would not, individually or in the aggregate, have a Material Adverse Effect. All leases, contracts and agreements to which the Issuer or any Guarantor is a party or by which the Issuer or such Guarantor is bound are valid and enforceable against the Issuer or such Guarantor (as the case may be), to the knowledge of the Issuer are valid and enforceable against the other party or parties thereto and are in full force and effect with only such exceptions as would not, individually or in the aggregate, have a Material Adverse Effect. (v) There are no legal or governmental proceedings involving or affecting the Issuer, any of the Guarantors or any of their respective properties or assets which would be required to be described in a prospectus contained in a registration statement on Form S-1 pursuant to the Act that are not described in the Final Memorandum, nor are there any material contracts or other documents which would be required to be described in a prospectus contained in a registration statement on Form S-1 pursuant to the Act that are not described in the Final Memorandum. (w) Except as described in the Final Memorandum or as would not, individually or in the aggregate, have a Material Adverse Effect, (A) each of the Issuer and the Guarantors is in compliance with and not subject to liability under applicable Environmental Laws, (B) each of the Issuer and the Guarantors has made all filings and provided all notices required under applicable Environmental Laws and possesses and is in compliance with all Permits required under applicable Environmental Laws, and each such filing, notice and Permit is in full force and effect, (C) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter or request for information pending or, to the knowledge of the Issuer or any of the Guarantors, threatened against the Issuer or any Guarantor under any Environmental Law, (D) no lien, charge, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by the Issuer or any Guarantor, (E) neither the Issuer nor any Guarantor has received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or any comparable state or 11 12 foreign law and (F) no property or facility of the Issuer or any Guarantor is (i) listed or proposed for listing on the National Priorities List under CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority. For purposes of this Agreement, "Environmental Laws" means the common law and all applicable federal, provincial, state, local and foreign laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of Hazardous Materials into the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of Hazardous Materials, and (iii) underground and aboveground storage tanks, and related piping, and emissions, discharges, releases or threatened releases therefrom. For purposes of this Agreement, "Hazardous Materials" means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which is defined, classified or regulated as "hazardous" or "toxic" pursuant to Environmental Laws and includes, without limitation, asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof). (x) There is no strike, labor dispute, slowdown or work stoppage with the employees of the Issuer or the Guarantors which is pending or, to the knowledge of the Issuer or any of the Guarantors, threatened. (y) Each of the Issuer and the Guarantors carries insurance in such amounts and covering such risks as is adequate for the conduct its business and the value of its properties. (z) Neither the Issuer nor any Guarantor has any liability for any prohibited transaction within the meaning of Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or funding deficiency within the meaning of Section 302 of ERISA or any complete or partial withdrawal liability under Title IV of ERISA with respect to any pension, profit sharing or other plan which is subject to ERISA to which the Issuer or any Guarantor 12 13 makes or ever has made a contribution and in which any employee of the Issuer or any Guarantor is or has ever been a participant. With respect to such plans, each of the Issuer and the Guarantors is in compliance in all material respects with all applicable provisions of ERISA. (aa) Each of the Issuer and the Guarantors (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (bb) None of the Issuer or any Guarantor is or will be an "investment company" or "promoter" or "principal underwriter" for an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. (cc) No holder of securities of the Issuer or any Guarantor (other than the Registrable Notes (as defined in the Registration Rights Agreement)) will be entitled to have such securities registered under the registration statements required to be filed by the Issuer pursuant to the Registration Rights Agreement. (dd) Immediately after the consummation of the transactions contemplated by this Agreement, the fair value and present fair saleable value of the assets of each of the Issuer and the Guarantors will exceed the sum of its stated liabilities and identified contingent liabilities (after giving effect, in the case of each of the Guarantors, to the limitations contained in each Guarantee); neither the Issuer nor any of the Guarantors is, or will be after giving effect to the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) otherwise insolvent. (ee) Neither the Issuer nor any of the Guarantors nor any of their respective Affiliates (as defined in Rule 501(b) of Regulation D) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of any "security" (as 13 14 defined in the Act) which is or could be integrated with the sale of the Securities in a manner that would require the registration under the Act of the Securities,(ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offering of the Securities or in any manner involving a public offering within the meaning of Section 4(2) of the Act or (iii) sold pursuant to a transaction or series of transactions involving a purchase and sale or a repurchase and resale of Securities in the course of or incidental to a "distribution" (as defined in the Securities Act (Nova Scotia)). (ff) Assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof, it is not necessary in connection with the offer, sale and delivery of the Securities to the Initial Purchasers in the manner contemplated by this Agreement to register any of the Securities under the Act or to qualify the Indenture under the TIA. (gg) No securities of the Issuer are of the same class (within the meaning of Rule 144A under the Act) as the Securities and listed on a national securities exchange registered under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. (hh) Neither the Issuer nor any Guarantor has taken, nor will take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Securities. (ii) Neither the Issuer nor any Guarantor, nor any of their respective Affiliates (as defined in Rule 501(b) of Regulation D) or any person acting on any of their behalf (other than the Initial Purchasers as to which the Issuer and the Guarantors make no representation) has engaged in any directed selling efforts (as that term is defined in Regulation S) with respect to the Securities; the Issuer and its Affiliates and any person acting on any of their behalf (other than the Initial Purchasers as to which the Issuer and the Guarantors make no representation) have complied with the offering restrictions requirement of Regulation S. (jj) Neither the Issuer nor any Guarantor or any of their respective affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes 1985, as amended, and all regulations promulgated thereunder. 14 15 3. Purchase, Sale and Delivery of the Securities. On the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Issuer and the Guarantors agree to issue and sell to the Initial Purchasers, and each of the Initial Purchasers agrees, acting severally and not jointly, to purchase the Notes (including the related Guarantees), at 97.225% of their principal amount, in the respective principal amounts set forth opposite their names on Schedule I hereto. One or more certificates in definitive form for the Securities that the Initial Purchasers have agreed to purchase hereunder, and in such denomination or denominations and registered in such name or names as the Initial Purchasers request upon notice to the Issuer at least 36 hours prior to the Closing Date, shall be delivered by or on behalf of the Issuer to the Initial Purchasers, against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer of immediately available funds payable to such account or accounts as the Issuer shall specify prior to the Closing Date, or by such means as the parties hereto shall agree prior to the Closing Date. Such delivery of and payment for the Securities shall be made at the offices of Winston & Strawn, 200 Park Avenue, New York, New York, at 10:00 A.M., New York time, on November 19, 1997, or at such other place, time or date as the Initial Purchasers and the Issuer may agree upon, such time and date of delivery against payment being herein referred to as the "Closing Date." The Issuer will make such certificate or certificates for the Securities available for checking and packaging by the Initial Purchasers at the offices of BT Alex. Brown Incorporated in New York, New York or such other place as BT Alex. Brown Incorporated may designate, at least 24 hours prior to the Closing Date. The Issuer agrees to pay any transfer taxes payable in connection with the initial delivery to the Initial Purchasers of the Securities. 4. Offering by the Initial Purchasers. The Initial Purchasers, directly or through affiliates, propose to make an offering of the Securities at the price and upon the terms set forth in the Final Memorandum as soon as practicable after this Agreement is entered into and as in the sole judgment of the Initial Purchasers is advisable. 5. Covenants of the Issuer and the Guarantors. The Issuer and each of the Guarantors covenant and agree with each of the Initial Purchasers that: (a) The Issuer will not amend or supplement the Final Memorandum or any amendment or supplement thereto of which the Initial Purchasers and counsel to the Initial Purchasers shall not previously have been advised and furnished a copy for a reasonable period of time prior to the proposed 15 16 amendment or supplement and as to which the Initial Purchasers shall not have given their consent, which consent shall not be unreasonably withheld. The Issuer will promptly, upon the reasonable request of the Initial Purchasers or counsel for the Initial Purchasers, make any amendments or supplements to the Preliminary Memorandum or the Final Memorandum that may be necessary or advisable in connection with the resale of the Securities by the Initial Purchasers. (b) The Issuer and the Guarantors will cooperate with the Initial Purchasers in arranging for the qualification of the Securities for offering and sale under the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchasers may designate and will continue such qualification in effect for as long as may be necessary to complete the resale of the Securities by the Initial Purchasers; provided, however, that in connection therewith, the Issuer and the Guarantors shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject the Issuer or any Guarantor to any tax in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (c) If, at any time prior to the completion of the distribution by the Initial Purchasers of the Notes or the Private Exchange Notes, any event occurs or information becomes known as a result of which the Final Memorandum as then amended or supplemented would include an untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Final Memorandum in order to comply with applicable law, the Issuer will promptly notify the Initial Purchasers thereof and will prepare, at the Issuer's expense, an amendment or supplement to the Final Memorandum that corrects such statement or omission or effects such compliance. (d) The Issuer will, without charge, provide to the Initial Purchasers and to counsel for the Initial Purchasers as many copies of the Preliminary Memorandum and the Final Memorandum or any amendment or supplement thereto as the Initial Purchasers may reasonably request. (e) The Issuer will apply the net proceeds from the sale of the Securities substantially as set forth under "Use of Proceeds" in the Final Memorandum. (f) For so long as any Securities remain outstanding, 16 17 the Issuer will furnish to the Initial Purchasers copies of all reports and other communications (financial or otherwise) furnished by the Issuer to the Trustee or the holders of the Securities and, as soon as available, copies of any reports or financial statements furnished to or filed by the Issuer with the Commission or any national securities exchange on which any class of securities of the Issuer may be listed. (g) Prior to the Closing Date, the Issuer will furnish to the Initial Purchasers, as soon as they have been prepared by or are available to the Issuer, a copy of any unaudited interim consolidated financial statements of the Issuer for any period subsequent to the period covered by its most recent financial statements appearing in the Final Memorandum. (h) None of the Issuer, the Guarantors or any of their respective Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) that could be integrated with the sale of the Securities in a manner that would require the registration under the Act of the Securities. (i) None of the Issuer or any Guarantor will engage in any form of general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offering of the Securities or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (j) For so long as any of the Securities remain outstanding, the Issuer will make available at its expense, upon request, to any holder of such Securities and any prospective purchasers thereof the information specified in Rule 144A(d)(4) under the Act, unless the Issuer is then subject to Section 13 or 15(d) of the Exchange Act and is in compliance therewith. (k) Each of the Issuer and the Guarantors will use its best efforts to (i) permit the Securities to be designated PORTAL securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. (the "NASD") relating to trading in the Private Offerings, Resales and Trading through Automated Linkages market (the "PORTAL Market") and (ii) permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (l) In connection with any Securities offered and sold in an offshore transaction (as defined in Regulation S), the Issuer will not register any transfer of such Securities not 17 18 made in accordance with the provisions of Regulation S and, except in accordance with the provisions of Regulation S, if applicable, the Issuer and the Guarantors will not issue any such Securities in the form of definitive securities. 6. Expenses. The Issuer agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof, including all costs and expenses incident to: (i) the printing, word processing or other production of documents with respect to such transactions, including any costs of printing the Preliminary Memorandum and the Final Memorandum and any amendments or supplements thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Issuer, (iv) the preparation (including printing), issuance and delivery to the Initial Purchasers of any certificates evidencing the Securities, (v) the qualification of the Securities under state securities and "Blue Sky" laws, including filing fees and reasonable fees and disbursements of counsel for the Initial Purchasers relating thereto, and other filing or similar fees payable to government agencies in connection with the issuance and sale of the Notes, (vi) expenses incurred in connection with any meetings with prospective investors in the Securities, (vii) the fees and expenses of the Trustee, including fees and expenses of its counsel, and (viii) all expenses and listing fees incurred in connection with the application for quotation of the Securities on the PORTAL Market and (ix) any fees charged by investment rating agencies for the rating of the Securities. If the issuance and sale of the Securities provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 7 hereof is not satisfied, because this Agreement is terminated pursuant to Section 11 hereof or because of any failure, refusal or inability on the part of the Issuer or any Guarantor to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder (other than solely by reason of a default by the Initial Purchasers of their obligations hereunder after all conditions hereunder have been satisfied in accordance herewith), the Issuer will promptly reimburse the Initial Purchasers upon demand for all out-of-pocket expenses (including fees, disbursements and charges of Winston & Strawn and Stikeman, Elliott, counsel for the Initial Purchasers) that shall have been incurred by the Initial Purchasers in connection with the proposed purchase and sale of the Securities. 7. Conditions of the Initial Purchasers' Obligations. The obligation of the Initial Purchasers to purchase and pay for the Securities shall, in their sole discretion, be subject to the 18 19 satisfaction or waiver of the following conditions on or prior to the Closing Date: (a) On the Closing Date, the Initial Purchasers shall have received the opinion, dated as of the Closing Date and addressed to the Initial Purchasers, of Robinson & Cole LLP, United States counsel for the Issuer and the Guarantors, in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers, substantially to the following effect (with customary qualifications and assumptions satisfactory to the Initial Purchasers and counsel to the Initial Purchasers): (i) Each of the Issuer and the Guarantors is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Final Memorandum. (ii) Based solely on a review of the stock ledger and the records of proceedings of the Board of Directors and shareholders of the Issuer, the Issuer has the authorized capitalization as set forth in the Final Memorandum; all of the outstanding shares of capital stock of the Issuer and each of the Guarantors have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; all of the outstanding shares of capital stock of each of the Guarantors are owned of record, directly or indirectly, by the Issuer, and, to the knowledge of such counsel, are free and clear of all liens, encumbrances, equities and claims or restrictions on transferability (other than those imposed by the Act and the securities or "Blue Sky" laws of certain jurisdictions) or voting. (iii) To the knowledge of such counsel, except as set forth in the Final Memorandum, (A) no options, warrants or other rights to purchase from the Issuer or any Guarantor shares of capital stock or ownership interests in the Issuer or any Guarantor are outstanding, (B) no agreements or other obligations of the Issuer or any Guarantor to issue, or other rights to cause the Issuer or any Guarantor to convert any obligation into, or exchange any securities for, shares of capital stock or ownership interests in the Issuer or any Guarantor are outstanding and, (C) no holder of securities of the Issuer or any Guarantor (other than the Registrable Notes) is entitled to have such securities registered under a registration statement filed by the Issuer and the Guarantors pursuant to the 19 20 Registration Rights Agreement. (iv) The Issuer has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture; each of the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture and such Guarantor's Guarantee; the Indenture is in sufficient form for qualification under the TIA; the Indenture has been duly and validly authorized, executed and delivered by each of the Issuer and the Guarantors, and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes the valid and legally binding agreement of each of the Issuer and the Guarantors, enforceable against each of them in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (v) The Notes are in the form contemplated by the Indenture. The Notes have each been duly and validly authorized, executed and delivered by the Issuer and, when paid for by the Initial Purchasers in accordance with the terms of this Agreement (assuming the due authorization, execution and delivery of the Indenture by the Trustee and due authentication and delivery of the Notes by the Trustee in accordance with the Indenture), will constitute the valid and legally binding obligations of the Issuer, entitled to the benefits of the Indenture, and enforceable against the Issuer in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (vi) The Guarantees are in the form contemplated by the Indenture. The Guarantees have been duly and validly authorized, executed and delivered by each Guarantor and (assuming the due authorization, execution and delivery of the Indenture by the Trustee 20 21 and due authentication and delivery of the Notes by the Trustee in accordance with the Indenture) constitute the valid and legally binding obligations of each Guarantor, entitled to the benefits of the Indenture, enforceable against each of them in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (vii) The Exchange Notes and the Private Exchange Notes and the Guarantees to be endorsed on them have been duly and validly authorized by the Issuer and each of the Guarantors, as the case may be, and when the Exchange Notes and the Private Exchange Notes have been duly executed and delivered by the Issuer and the Guarantees to be endorsed on them have been duly executed and delivered by the Guarantors, each in accordance with the terms of the Registration Rights Agreement and the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee and due authentication and delivery of the Exchange Notes and the Private Exchange Notes by the Trustee in accordance with the Indenture), will constitute the valid and legally binding obligations of the Issuer and the Guarantors, respectively, entitled to the benefits of the Indenture, and enforceable against the Issuer and the Guarantors, respectively, in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (viii) Each of the Issuer and the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement; the Registration Rights Agreement has been duly and validly authorized, executed and delivered by the Issuer and the Guarantors, and (assuming due authorization, execution and delivery thereof by the Initial Purchasers) constitutes the valid and legally binding agreement of 21 22 the Issuer and the Guarantors, enforceable against each of them in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law) and (B) any rights to indemnity or contribution thereunder may be limited by U.S. or Canadian federal, state or provincial securities laws. (ix) Each of the Issuer and the Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby; this Agreement and the consummation by the Issuer and the Guarantors of the transactions contemplated hereby have been duly and validly authorized by the Issuer and the Guarantors, respectively. This Agreement has been duly executed and delivered by each of the Issuer and the Guarantors and constitutes a valid and legally binding agreement of each of the Issuer and the Guarantors, enforceable against each of them in accordance with its terms, except that enforcement may be subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought (regardless of whether such enforcement is considered in a proceeding in equity or at law). (x) The statements made in the Final Memorandum under the captions "Description of the Notes" and "Exchange Offer; Registration Rights," insofar as they purport to constitute summaries of certain terms of documents referred to therein, constitute accurate summaries of the terms of such documents in all material respects. (xi) The statements made in the Final Memorandum under the caption "Certain Income Tax Considerations," to the extent that they constitute summaries of matters of United States law or regulation or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects. 22 23 (xii) Each of the Operative Documents conforms in all material respects to the descriptions thereof contained in the Final Memorandum. (xiii) To the knowledge of such counsel, no legal or governmental proceedings are pending or threatened to which the Issuer or any of the Guarantors is a party, or to which any of their respective properties or assets are subject, which would be required under the Act to be described in a registration statement on Form S-1 or in a prospectus contained therein and are not described in the Final Memorandum, or which seek to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Securities to be sold hereunder or the consummation of the other transactions contemplated by the Operative Documents. (xiv) To the knowledge of such counsel, neither the Issuer nor any of the Guarantors is in violation of its certificate of incorporation or bylaws (or similar organizational documents). (xv) The execution, delivery and performance by the Issuer and each of the Guarantors of the Operative Documents (to the extent a party thereto), the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Securities to the Initial Purchasers) and the fulfillment of the terms hereof and thereof will not conflict with or constitute or result in a breach or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of or cause an acceleration of any obligation under, or result in the imposition or creation of (or the obligation to create or impose) a lien on any property or assets of the Issuer or any Guarantor with respect to (i) any of the terms or provisions of any Contract identified to such counsel as material to the Issuer and the Subsidiaries taken as a whole,(ii) the certificate of incorporation or bylaws (or similar organizational documents) of the Issuer or any Guarantor, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof) any statute, rule or regulation or, to such counsel's knowledge, any judgment, decree or order, applicable to the Issuer or any of the Guarantors or any of their respective properties or assets. 23 24 (xvi) To the knowledge of such counsel, each of the Issuer and the Guarantors has obtained all Permits necessary to conduct the businesses now or proposed to be conducted by it as described in the Final Memorandum, the lack of which would, individually or in the aggregate, have a Material Adverse Effect; each of the Issuer and the Guarantors has fulfilled and performed all of its obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Issuer or any such Guarantor as holder of any such Permit, except for any such revocation or termination which would not have a Material Adverse Effect. (xvii) No consent, approval, authorization or order of any governmental authority is required for the issuance and sale by the Issuer and the Guarantors of the Securities to the Initial Purchasers or the other transactions contemplated in this Agreement, except (i) as may be required in connection with the registration of the Securities and the Exchange Notes and Private Exchange Notes and the Guarantees to be endorsed on them, pursuant to the Registration Rights Agreement and the qualification of the Indenture under the TIA, or (ii) such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits (y) as have been obtained and made or (z) as may be required under state securities or "Blue Sky" laws, as to which such counsel need express no opinion. (xviii) None of the Issuer or the Guarantors is, and immediately after the sale of the Securities to be sold hereunder and the application of the proceeds from such sale (as described in the Final Memorandum under the caption "Use of Proceeds") will be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (xix) No registration under the Act of the Securities is required in connection with the sale of the Securities to the Initial Purchasers as contemplated by this Agreement and the Final Memorandum or in connection with the initial resale of the Securities by the Initial Purchasers in accordance with Section 8 of this Agreement, and prior to the commencement of the Exchange Offer (as defined in the Registration Rights Agreement) or the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Indenture is not 24 25 required to be qualified under the TIA, in each case assuming (i) that the purchasers who buy such Securities in the initial resale thereof are QIBs or Accredited Investors or purchase such Securities in compliance with Regulation S under the Act, (ii) the accuracy of the Initial Purchasers' representations in Section 8 and those of the Issuer contained in this Agreement regarding the absence of a general solicitation in connection with the sale of such Securities to the Initial Purchasers and the initial resale thereof, (iii) the due performance by the Initial Purchasers of the agreements set forth in Section 8 hereof and the offering and transfer procedures set forth in the Final Memorandum, and (iv) the accuracy of the representations made by each Accredited Investor who purchases Securities in the initial resale as set forth in the Final Memorandum. (xx) Neither the execution, delivery or performance by the Issuer and the Guarantors of this Agreement nor the issuance or sale of the Securities under the circumstances contemplated by this Agreement nor the use of proceeds in the manner contemplated by the Final Memorandum under the caption "Use of Proceeds" will violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. (xxi) Neither the Issuer or any Guarantor nor any holder of the Notes, the Exchange Notes or the Private Exchange Notes will incur or be subject to any tax liability imposed by any governmental authority as a result of the transactions contemplated by the Reorganization (as defined in the Final Memorandum). At the time the foregoing opinion is delivered, such counsel shall additionally state that it has participated in conferences with officers and other representatives of the Issuer and the Guarantors, representatives of the independent public accountants for the Issuer and the Guarantors, representatives of Canadian counsel for the Issuer and the Guarantors and representatives of the Initial Purchasers and counsel for the Initial Purchasers, at which conferences the contents of the Final Memorandum and related matters were discussed, and, although it has not independently verified and is not passing upon and assumes no responsibility for the accuracy, completeness or fairness of the statements contained in the Final Memorandum (except to the extent specified in subsections 7(a)(ii), 7(a)(x), 7(a)(xi) and 7(a)(xii)), no facts have come to its attention which lead it to believe that the Final Memorandum, on the date thereof or at the Closing Date, contained an untrue statement of a material fact or omitted to state a material 25 26 fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and related notes thereto and the other financial and accounting data included in the Final Memorandum). The opinion of such counsel described in this Section shall be rendered to the Initial Purchasers at the request of the Issuer and the Guarantors and shall so state therein. References to the Final Memorandum in this subsection (a) shall include any amendment or supplement thereto prepared in accordance with the provisions of this Agreement at the Closing Date. In rendering such opinion, such counsel may state that they express no opinion as to the laws of any jurisdiction other than the federal laws of the United States and the laws of the States of New York and Delaware. Such counsel may also state that with respect to opinions as to the laws of jurisdictions other than Delaware and New York, such counsel has relied on the opinion of local counsel of the Issuer and the Guarantors who are reasonably satisfactory to counsel for the Initial Purchasers; provided, however, that Robinson & Cole LLP shall state that it believes that it, the Initial Purchasers and counsel for the Initial Purchasers are justified in relying on such opinion. Such counsel may also state that, insofar as such opinion involves factual matters, such counsel have relied, to the extent they deem proper, upon certificates of officers of the Issuer and certificates of public officials; provided that such certificates have been provided to the Initial Purchasers. (b) On the Closing Date, the Initial Purchasers shall have received the opinion, dated as of the Closing Date and addressed to the Initial Purchasers, of Stewart McKelvey Stirling Scales, Canadian counsel for the Issuer and each Guarantor organized under the federal laws of Canada or a province thereof (each a "Canadian Guarantor" and collectively, the "Canadian Guarantors"), in form and substance satisfactory to the Initial Purchasers and counsel for the Initial Purchasers substantially to the following effect (with customary qualifications and assumptions satisfactory to the Initial Purchasers and counsel to the Initial Purchasers): (i) Each of the Issuer and the Canadian Guarantors is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate power and 26 27 authority to own, lease and operate its properties and to conduct its business as described in the Final Memorandum. Each of the Issuer and the Canadian Guarantors is duly qualified to do business as a foreign or extra-provincial corporation and is in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. (ii) The Issuer has the authorized capitalization as set forth in the Final Memorandum; all of the outstanding shares of capital stock of the Issuer and each of the Canadian Guarantors have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; all of the outstanding shares of capital stock of each of the Canadian Guarantors are owned, directly or indirectly, by the Issuer, free and clear of all liens, encumbrances, equities and claims or restrictions on transferability (other than those imposed by the Securities Act (Nova Scotia) and the securities or "Blue Sky" laws of certain jurisdictions) or voting. (iii) To the knowledge of such counsel, except as set forth in the Final Memorandum, (A) no options, warrants or other rights to purchase from the Issuer or any Canadian Guarantor shares of capital stock or ownership interests in the Issuer or any Canadian Guarantor are outstanding, (B) no agreements or other obligations of the Issuer or any Canadian Guarantor to issue, or other rights to cause the Issuer or any Canadian Guarantor to convert, any obligation into, or exchange any securities for, shares of capital stock or ownership interests in the Issuer or any Canadian Guarantor are outstanding and, (C) no holder of securities of the Issuer or any Canadian Guarantor (other than the Registrable Notes) is entitled to have such securities registered under a registration statement filed by the Issuer and the Guarantors pursuant to the Registration Rights Agreement. (iv) The Issuer has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture; each of the Canadian Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture and the Guarantees to be entered into by such Canadian Guarantors (the "Canadian Guarantees"); the Indenture has been duly and 27 28 validly authorized, executed and delivered by each of the Issuer and the Canadian Guarantors. The appointment of the Trustee, at its principal office in the City of New York, as registrar, paying agent and transfer agent for the Notes and as trustee for the holders of the Notes has been duly authorized by the Issuer. (v) The Notes have each been duly and validly authorized, executed and delivered by the Issuer. The issuance of the Notes is not subject to pre-emptive or other similar rights arising by operation of law or under the constating documents of the Issuer. (vi) The Canadian Guarantees have been duly and validly authorized, executed and delivered by the Canadian Guarantors. (vii) The Exchange Notes and the Private Exchange Notes and the Canadian Guarantees to be endorsed on them have been duly and validly authorized by the Issuer and the Canadian Guarantors. The form of definitive certificate representing the Notes, the Exchange Notes and the Private Exchange Notes has been duly approved and adopted by the Issuer, and there are no provisions of the Companies Act (Nova Scotia) applicable thereto. (viii) Each of the Issuer and the Canadian Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement; the Registration Rights Agreement has been duly and validly authorized, executed and delivered by the Issuer and the Canadian Guarantors. (ix) Each of the Issuer and the Canadian Guarantors has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby; this Agreement and the consummation by the Issuer and the Canadian Guarantors of the transactions contemplated hereby have been duly and validly authorized by the Issuer and the Canadian Guarantors. This Agreement has been duly executed and delivered by the each of the Issuer and the Canadian Guarantors. (x) To the knowledge of such counsel, neither the Issuer nor any of the Canadian Guarantors is in violation of its memorandum or articles of association (or similar organizational documents). 28 29 (xi) The execution, delivery and performance by the Issuer and each of the Canadian Guarantors of the Operative Documents (to the extent a party thereto), the consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Securities to the Initial Purchasers) and the fulfillment of the terms hereof and thereof will not conflict with or constitute or result in a breach or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of or cause an acceleration of any obligation under, or result in the imposition or creation of (or the obligation to create or impose) a lien on any property or assets of the Issuer or any Canadian Guarantor with respect to (i) any of the terms or provisions of any Contract identified to such counsel as material to the Issuer and the Subsidiaries taken as a whole,(ii) the memorandum or articles of association or similar organizational documents of the Issuer or any Canadian Guarantor, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or regulation applicable to the Issuer or any Canadian Guarantor or any of their respective properties or assets. (xii) To the knowledge of such counsel, each of the Issuer and the Canadian Guarantors has obtained all Permits necessary to conduct the businesses now or proposed to be conducted by it as described in the Final Memorandum, the lack of which would, individually or in the aggregate, have a Material Adverse Effect; each of the Issuer and the Canadian Guarantors has fulfilled and performed all of its obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Issuer or any such Canadian Guarantor as holder of any such Permit, except for any such revocation or termination which would not have a Material Adverse Effect. (xiii) No legal or governmental proceedings are pending or, to the knowledge of such counsel, threatened to which the Issuer or any of the Guarantors is a party, or to which any of their respective properties or assets are subject which seek to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the 29 30 Securities to be sold hereunder or the consummation of the other transactions contemplated by the Operative Documents. (xiv) No consent, approval, authorization or order of any governmental authority in the Province of Nova Scotia is required for the issuance and sale by the Issuer of the Notes to the Initial Purchasers or the other transactions contemplated in this Agreement, subject to the filing in Nova Scotia within 10 days from the date of issuance and sale of the Notes of a copy of the Final Memorandum and a report on Form 20, duly executed, together with the payment of appropriate fees. (xv) The statements made in the Final Memorandum under the caption "Certain Income Tax Considerations," to the extent that they constitute summaries of matters of Canadian law or regulations or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects. (xvi) A court of competent jurisdiction in the Province of Nova Scotia, Canada (a "Canadian Court") would uphold the choice of law of the State of New York ("New York law") as the proper law governing the Operative Documents, provided that such choice of law is bona fide (in the sense that it was not made with a view to avoiding the consequences of the laws of any other jurisdiction, and provided further that such choice of law is not contrary to public policy, as that term is applied by a Canadian Court ("Public Policy"), and such choice of law is legal under the laws of the State of New York. To our knowledge, no Public Policy would be offended by recognition of the choice of New York law and the choice is bona fide. (xvii) The laws of the Province of Nova Scotia, Canada permit an action to be brought in a court of competent jurisdiction on any final and conclusive judgment in personam for a sum certain in money of a New York Court (as defined below) which is not impeachable as void or voidable under the internal laws of New York, without reexamination or relitigation of the matters adjudicated upon if: (A) the court rendering such judgment had jurisdiction, in accordance with Canadian conflict of law rules, over the judgment debtor (and submission by the Issuer and each of the Canadian Guarantors to the jurisdiction of such court of 30 31 the State of New York pursuant to the Operative Documents will suffice for this purpose) and if the New York Court was not a seriously inconvenient forum for the trial of the action; (B) the judgment does not conflict with another final and conclusive judgment in or relating to the same cause of action in a different jurisdiction; (C) the procedural rules for commencement and maintenance of the enforcement proceedings in the New York Court have been observed; (D) there is a real and substantial connection between the subject matter of the action upon which the judgment is based and the State of New York; (E) in the case of a judgment obtained by default there has been no manifest error in the granting of such judgment; (F) the judgment has neither been satisfied nor is it for any other reason not a subsisting judgment; (G) the proceedings in the New York Court were not contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court; (H) the judgment debtors were duly served with the process of the court proceedings to enable them to defend the action; (I) such judgment was not obtained by fraud or in a manner contrary to natural justice and the enforcement thereof would not be contrary to Public Policy, as such term is understood under the laws of the Province of Nova Scotia and the federal laws of Canada applicable therein; (J) the enforcement of such judgment would not constitute, directly or indirectly, the enforcement of a foreign revenue, expropriation, confiscatory, penal, criminal or public law; (K) no new admissible evidence relevant to the action is discovered prior to the rendering of judgment by the Canadian Court; and 31 32 (L) there has been compliance with the Limitation of Actions Act (Nova Scotia) which has the effect that the action to enforce such judgment must be commenced within 6 years after the date of such judgment. (xviii) In the event that any of the Operative Documents are sought to be enforced in any action or proceeding in the Province of Nova Scotia, Canada, the courts of the Province of Nova Scotia, Canada would recognize the choice of laws made in the Operative Documents and would apply the laws of the State of New York in any such action or proceeding, upon appropriate evidence as to such laws being adduced, provided that none of the provisions of the Operative Documents, as the case may be, or of the laws of the State of New York, are contrary to Public Policy, and a Canadian Court will not apply those laws of New York which it characterizes as being of a revenue, expropriatory, confiscatory, penal, criminal or public law nature, and in matters of procedure or administration, the laws of the Province of Nova Scotia, Canada will be applied. There are no reasons under the laws of the Province of Nova Scotia, Canada or the federal laws of Canada applicable therein and no reasons, to such counsel's knowledge with respect to the application of New York law by a Canadian Court, for avoiding enforcement of the Operative Documents (except as to the indemnity and contribution provisions of the Operative Documents, about which such counsel need not comment) based on Public Policy. (xix) In an action on a final and conclusive judgment in personam of any federal or state court sitting in the Borough of Manhattan in The City of New York (a "New York Court") that is not impeachable as void or voidable under New York law, a Canadian Court would recognize service of process on a duly appointed agent of the Issuer or any of the Canadian Guarantors such as CT Corporation System as service of process on the Issuer or any of the Canadian Guarantors in the United States of America under the Operative Documents and the provisions of the Operative Documents whereby the Issuer and each of the Canadian Guarantors submit to the non-exclusive jurisdiction of a New York Court would be recognized by a Canadian Court as conferring jurisdiction on the New York Court. The opinion of such counsel described in this Section shall be rendered to the Initial Purchasers at the request of the Issuer and the Canadian Guarantors and shall so state 32 33 therein. References to the Final Memorandum in this subsection (b) shall include any amendment or supplement thereto prepared in accordance with the provisions of this Agreement at the Closing Date. In rendering such opinion, such counsel may state that they express no opinion as to the laws of any jurisdiction other than the federal laws of Canada and the laws of the Province of Nova Scotia, Canada and the laws of Canada applicable therein. If applicable, such counsel may also state that with respect to opinions as to the laws of jurisdictions other than the federal laws of Canada and the laws of the Province of Nova Scotia, Canada and the laws of Canada applicable therein, such counsel has relied on the opinion of other counsel of the Issuer and the Canadian Guarantors who are reasonably satisfactory to counsel for the Initial Purchasers; provided, however, that Stewart McKelvey Stirling Scales shall state that it believes that it, the Initial Purchasers, and counsel for the Initial Purchasers are justified in relying on such opinion. Such counsel may also state that, insofar as such opinion involves factual matters, such counsel have relied, to the extent they deem proper, upon certificates of officers of the Issuer and the Canadian Guarantors and certificates of public officials; provided that such certificates have been provided to the Initial Purchasers. (c) The Initial Purchasers shall have received opinions, dated the Closing Date, of Winston & Strawn and Stikeman, Elliott, counsel for the Initial Purchasers, with respect to certain legal matters relating to this Agreement, and such other related matters as the Initial Purchasers may reasonably require. In rendering such opinions, Winston & Strawn and Stikeman, Elliott shall have received and may rely upon such certificates and other documents and information as they may reasonably request to pass upon such matters. (d) On the date of the Final Memorandum prior to the execution of this Agreement and also on the Closing Date, the Initial Purchasers shall have received from Ernst & Young, independent public accountants for the Issuer, and Kidsons Impey, chartered accountants for Marlborough, comfort letters, dated the date hereof and the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers and counsel for the Initial Purchasers. (e) The representations and warranties of the Issuer and the Guarantors contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date; each of the Issuer and the Guarantors shall have performed in all material respects all covenants and agreements and satisfied all conditions on its part to be performed or satisfied 33 34 hereunder at or prior to the Closing Date; and, except as set forth in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), subsequent to the date of the most recent financial statements in such Final Memorandum, there shall have been no events or developments (including, without limitation, any loss or interference with respect to the business, operations or properties of the Issuer or any of the Guarantors) that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect. (f) The issuance and sale of the Securities pursuant to this Agreement shall not be enjoined (temporarily or permanently) and no restraining order or other injunctive order shall have been issued or any action, suit or proceeding shall have been commenced with respect to this Agreement or any other Operative Document before any court or governmental authority. (g) The Initial Purchasers shall have received certificates, dated the Closing Date, signed on behalf of each of the Issuer and the Guarantors by its Chief Financial Officer and its President or any Vice President to the effect that: (i) The representations and warranties of the Issuer and the Guarantors in this Agreement are true and correct in all material respects as if made on and as of the Closing Date, and each of the Issuer and the Guarantors has performed in all material respects all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; (ii) At the Closing Date, since the date hereof and since the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), no events or developments have occurred, no information has become known nor does any condition exist that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect; and (iii) The sale of the Securities hereunder has not been enjoined (temporarily or permanently) and no restraining order or other injunctive order has been issued and no action, suit or proceeding has been commenced with respect to this Agreement or any other Operative Document before any court or governmental authority. 34 35 (h) On the Closing Date, the Initial Purchasers shall have received the Registration Rights Agreement executed by the Issuer and the Guarantors and such agreement shall be in full force and effect at all times from and after the Closing Date. (i) The Indenture shall have been duly executed and delivered by the Issuer, the Guarantors and the Trustee, the Notes and the Guarantees shall have been duly executed by the Issuer and the Guarantors, respectively, and the Notes shall have been duly authenticated by the Trustee. (j) On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such further documents, certificates and schedules or instruments relating to the business, corporate, legal and financial affairs of the Issuer as they shall have reasonably requested from the Issuer and the Guarantors. All such documents, opinions, certificates and schedules or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory to the Initial Purchasers and counsel for the Initial Purchasers. The Issuer shall furnish to the Initial Purchasers such conformed copies of such documents, opinions, certificates and schedules or instruments in such quantities as the Initial Purchasers shall reasonably request. 8. Offering of Securities; Restrictions on Transfer. Each of the Initial Purchasers represents and warrants (as to itself only) that it is a QIB. Each of the Initial Purchasers agrees with the Issuer (as to itself only) that (i) it has not and will not solicit offers for, or offer or sell, the Securities by any form of general solicitation or general advertising (as those terms are used in Regulation D) or in any manner involving a public offering within the meaning of Section 4(2) of the Act; and (ii) it has and will solicit offers for the Securities only from, and will offer the Securities only to (A) in the case of offers inside the United States, (x) persons whom the Initial Purchasers reasonably believe to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to the Initial Purchasers that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A or (y) a limited number of other institutional investors reasonably believed by the Initial Purchasers to be Accredited Investors that, prior to their purchase of the Securities, deliver to the Initial Purchasers a letter containing the representations and agreements set forth in Annex A to the Final Memorandum and (B) in the case of offers 35 36 outside the United States, to persons other than U.S. persons ("foreign purchasers," which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)) to whom it reasonably believes offers and sales of Securities may be made in reliance on Regulation S; provided, however, that in the case of this clause (B), in purchasing such Securities such persons are deemed to have represented and agreed as provided under the caption "Transfer Restrictions" contained in the Final Memorandum. 9. Indemnification and Contribution. (a) The Issuer and the Guarantors agree, jointly and severally, to indemnify and hold harmless the Initial Purchasers and the affiliates, directors, officers, agents, representatives and employees of the Initial Purchasers, and each other person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities, joint or several, to which any Initial Purchaser or any such affiliate, director, officer, agent, representative, employee or controlling person may become subject under the Act, the Exchange Act, the securities laws of Canada or any other jurisdiction or otherwise, insofar as any such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in (A) any Memorandum or any amendment or supplement thereto or (B) any application or other document, or any amendment or supplement thereto, executed by the Issuer or any Guarantor or based upon information furnished by or on behalf of the Issuer or any Guarantor filed in any jurisdiction in order to qualify the Securities under the securities or "Blue Sky" laws thereof or filed with any securities association or securities exchange (each, an "Application"); or (ii) the omission or alleged omission to state, in any Memorandum or any amendment or supplement thereto, or in any Application, a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and will reimburse, as incurred, the Initial Purchasers and each such affiliate, director, officer, agent, representative and employee and each such controlling person for any legal or other expenses reasonably incurred by the Initial Purchasers, such affiliate, director, officer, agent, representative or employee or such controlling person 36 37 in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, that the Issuer and the Guarantors will not be liable (i) in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Memorandum or any amendment or supplement thereto, or in any Application, in reliance upon and in conformity with the written information described in the first sentence of Section 12 hereof furnished to the Issuer by the Initial Purchasers specifically for use therein or (ii) with respect to the Preliminary Memorandum, to the extent that any such loss, claim, damage or liability arises solely from the fact that the Initial Purchasers sold Securities to a person to whom there was not sent or given a copy of the Final Memorandum (as amended or supplemented) at or prior to the written confirmation of such sale if the Issuer shall have previously furnished copies thereof to the Initial Purchasers in accordance with Section 5(d) hereof and the Final Memorandum (as amended or supplemented) would have corrected any such untrue statement or omission. This indemnity agreement will be in addition to any liability that the Issuer and the Guarantors may otherwise have to the indemnified parties. The Issuer and the Guarantors shall not be liable under this subsection (a) for any settlement of any claim or action effected without its consent, which consent shall not be unreasonably withheld or delayed. The Initial Purchasers shall not, without the prior written consent of the Issuer and the Guarantors, effect any settlement or compromise of any pending or threatened proceeding in respect of which the Issuer and the Guarantors are or could have been a party, or indemnity could have been sought hereunder by the Issuer and the Guarantors, unless such settlement (A) includes an unconditional written release of the Issuer and the Guarantors, in form and substance reasonably satisfactory to the Issuer and the Guarantors, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of the Issuer and the Guarantors. (b) The Initial Purchasers agree, severally and not jointly, to indemnify and hold harmless the Issuer and the Guarantors, their respective affiliates, directors, officers, agents, representatives and employees and each other person, if any, who controls the Issuer or any Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, 37 38 damages or liabilities to which the Issuer or any Guarantor or any such affiliate, director, officer, agent, representative, employee or controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Memorandum or any amendments or supplement thereto, or in any Application or (ii) the omission or the alleged omission to state therein a material fact required to be stated in any Memorandum or any amendment or supplement thereto, or in any Application, or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser described in the first sentence of Section 12 hereof furnished to the Issuer by such Initial Purchaser specifically for use therein; and, subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses reasonably incurred by the Issuer or any Guarantor or any such affiliate, director, officer, agent, representative, employee or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability that the Initial Purchasers may otherwise have to the indemnified parties. The Initial Purchasers shall not be liable under this Section 9 for any settlement of any claim or action effected without their consent, which consent shall not be unreasonably withheld or delayed. The Issuer and the Guarantors shall not, without the prior written consent of the Initial Purchasers, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Initial Purchaser is or could have been a party, or indemnity could have been sought hereunder by any Initial Purchaser, unless such settlement (A) includes an unconditional written release of the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Initial Purchaser. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action for which such indemnified party is entitled to 38 39 indemnification under this Section 9, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (i) will not relieve it from any liability under subsection (a) or (b) above unless and to the extent such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in subsections (a) and (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction 39 40 arising out of the same general allegations or circumstances, designated by BT Alex. Brown Incorporated in the case subsection (a) of this Section 9 or the Issuer in the case of subsection (b) of this Section 9, representing the indemnified parties under such subsection (a) or subsection (b), as the case may be, who are parties to such action or actions) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld), unless such indemnified party waived in writing its rights under this Section 9, in which case the indemnified party may effect such a settlement without such consent. (d) In circumstances in which the indemnity agreement provided for in the preceding subsections of this Section 9 is unavailable to, or insufficient to hold harmless, an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Securities or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative benefits received by the Issuer and the Guarantors on the one hand and any Initial Purchaser on the other shall be deemed to be in the same proportion as the total proceeds from the issuance and sale of the Notes under this Agreement (before deducting expenses) received by the Issuer bear to the total discounts and commissions received by such Initial Purchaser. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer and the Guarantors on the one hand, or such Initial Purchaser on the 40 41 other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances. The Issuer, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this subsection (d). Notwithstanding any other provision of this subsection (d), no Initial Purchaser shall be obligated to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this subsection (d), each affiliate, director, officer, agent, representative and employee of an Initial Purchaser and each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each affiliate, director, officer, agent, representative and employee of the Issuer and the Guarantors and each person, if any, who controls the Issuer or any Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Issuer and the Guarantors. 10. Survival Clause. The respective representations, warranties, agreements, covenants, indemnities and other statements of the Issuer, the Guarantors, their respective officers and directors and the Initial Purchasers set forth in this Agreement or made by or on behalf of them pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Issuer, the Guarantors, any of their respective officers or directors, the Initial Purchasers or any controlling person referred to in Section 9 hereof and (ii) delivery of and payment for the Securities. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 9, 15, 17 and 18 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 11. Termination. (a) This Agreement may be terminated 41 42 in the sole discretion of the Initial Purchasers by notice to the Issuer given prior to the Closing Date in the event that the Issuer or any of the Guarantors shall have failed, refused or been unable to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior to the date of such termination or, if at or prior to the Closing Date: (i) either (x) the Issuer or any of the Guarantors shall have sustained any loss or interference with respect to its businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any strike, labor dispute, slow down or work stoppage or any legal or governmental proceeding, which loss or interference, in the sole judgment of the Initial Purchasers, has had or could be reasonably likely to have a Material Adverse Effect, or (y) there shall have been, in the sole judgment of the Initial Purchasers, any event or development that, individually or in the aggregate, has or could be reasonably likely to have a Material Adverse Effect (including without limitation a change in control of the Issuer), except in each case as described in the Final Memorandum (exclusive of any amendment or supplement thereto); (ii) trading in securities generally on the New York Stock Exchange, the American Stock Exchange, the NASDAQ National Market or the Toronto Stock Exchange shall have been suspended or maximum or minimum prices shall have been established on any such exchange or market; (iii) a banking moratorium shall have been declared by New York, United States or Canadian authorities; (iv) there shall have been (A) an outbreak or escalation of hostilities between the United States or Canada and any foreign power, or (B) an outbreak or escalation of any other insurrection or armed conflict involving the United States or Canada or any other national or international calamity or emergency or (C) any material change in the financial markets of the United States or Canada that, in the case of clauses (A), (B) or (C) above and in the sole judgment of the Initial Purchasers, makes it impracticable or inadvisable to proceed with the offering or the delivery of the Securities as contemplated by the Final Memorandum; or (v) any securities of the Issuer shall have been 42 43 downgraded or placed on any "watch list" for possible downgrading by any nationally recognized statistical rating organization. (b) Termination of this Agreement pursuant to this Section 11 shall be without liability of any party to any other party except as provided in Section 10 hereof. 12. Information Supplied by the Initial Purchasers. The statements set forth in the last paragraph of the cover page and the third, fifth, seventh and ninth paragraphs of the section entitled "Private Placement" constitute the only information furnished by the Initial Purchasers to the Issuer for the purposes of Sections 2(a) and 9 hereof. In addition, NatWest Capital Markets Limited has provided the information set forth in the eighth paragraph of the section entitled "Private Placement." 13. Notices. All communications hereunder shall be in writing and, if sent to the Initial Purchasers, shall be mailed or delivered or telecopied and confirmed in writing to BT Alex. Brown Incorporated, One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: Corporate Finance Department, and if sent to the Issuer or the Guarantors, shall be mailed, delivered or telecopied and confirmed in writing to the Issuer at: 19 Fielding Avenue, Dartmouth, Nova Scotia, Canada B3B-1C9, Attention: Stewart Allen, with copies to CF Capital Corporation, One Landmark Square, 11th Floor, Stamford, Connecticut 06901, Attention: Stephen L. Larson and Robinson & Cole, Financial Center - 5th Floor, 695 E. Main Street, Stamford, Connecticut 10305, Attention: Richard A. Krantz. 14. Successors. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Issuer, the Guarantors and their respective successors, assigns and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the Initial Purchasers, the Issuer, the Guarantors and their respective successors, assigns and legal representatives and for the benefit of no other person except that (i) the indemnities of the Issuer and the Guarantors contained in Section 9 of this Agreement shall also be for the benefit of the affiliates, directors, officers, agents, representatives and 43 44 employees of the Initial Purchasers and any person or persons who control any of the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained in Section 9 of this Agreement shall also be for the benefit of the affiliates, directors, officers, agents, representatives and employees of the Issuer and the Guarantors and any person or persons who control the Issuer or any Guarantor within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of any of the Securities from the Initial Purchasers will be deemed a successor because of such purchase. 15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW. 16. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 17. Agent for Service; Submission to Jurisdiction; Waiver of Immunities. By the execution and delivery of this Agreement, each of the Issuer and the Guarantors (i) acknowledges that it has, by separate written instrument, designated and appointed CT Corporation System (the "Agent") (and any successor entity) as its authorized agent upon which process may be served in any suit or proceeding arising out of or relating to this Agreement that may be instituted in any federal or state court in the Borough of Manhattan, The City of New York, State of New York or brought under federal or state securities laws, and acknowledges that the Agent has accepted such designation, (ii) submits to the jurisdiction of any such court in any such suit or proceeding and (iii) agrees that service of process upon the Agent and written notice of said service to the Issuer and the Guarantors in accordance with this Section 17 shall be deemed in every respect effective service of process upon the Issuer and the Guarantors in any suit or proceeding. The Issuer and the Guarantors further agree to take any and all action, including the execution and filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment of the Agent in full force and effect so long as any of the Securities, the Exchange Notes or the Private Exchange Notes shall be outstanding; provided, however, that the Issuer and the Guarantors may (and, to the extent the Agent ceases to be able to be served on the basis contemplated herein, shall), by written notice to the holders of the Securities, the Exchange Notes and the Private Exchange Notes, as applicable, designate such additional or alternative agent for service of process under this Section 17 that (i) maintains an office located in the Borough of Manhattan, The City of New York, State of New York and (ii) is a corporate service company which acts as agent for service of process for other persons in the ordinary course of its business. Such written notice shall identify the name of such agent for service of process and the address of the office of such agent for service of process in the Borough of Manhattan, The City of New York, State of New York. 44 45 To the extent that the Issuer or any Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, it hereby irrevocably waives such immunity in respect of its obligations under the above-referenced documents. 18. Judgment Currency. The Issuer and the Guarantors agree, jointly and severally, to indemnify the Initial Purchasers against any loss incurred as a result of any judgment or order being given or made for any amount due under this Agreement and such judgment or order being expressed and paid in a currency (the "Judgment Currency") other than United States dollars and as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which any such person on the date of payment of such judgment or order is able to purchase United States dollars with the amount of the Judgment Currency actually received by such person. The foregoing indemnity shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States dollars. 45 46 If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Issuer, the Guarantors and the Initial Purchasers. Very truly yours, THE COMPANY: SPARKLING SPRING WATER GROUP LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Vice Chairman THE GUARANTORS: SPARKLING SPRING WATER LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Vice Chairman SPRING WATER, INC. By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WATER JUG ENTERPRISES LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WITHEY'S WATER SOFTENING & PURIFICATION LTD. By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 47 AQUA CARE WATER SOFTENING & PURIFICATION LTD. By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer HIGH VALLEY WATER LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 3003969 NOVA SCOTIA LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer CANADIAN SPRINGS WATER COMPANY LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer SPARKLING SPRING WATER (UK) LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer AQUAPORTE (UK) LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 48 CRYSTAL SPRING ACQUISITION, INC. By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer MOUNTAIN FRESH ACQUISITION CORP. By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer MARLBOROUGH EMPLOYMENT LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WATER AT WORK LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer NATURAL WATER LIMITED By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer CULLYSPRING WATER CO., INC. By: /s/ Stephen L. Larson ------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 49 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. BT ALEX. BROWN INCORPORATED By: /s/ David Hadley Name: David Hadley Title: Managing Director NATWEST CAPITAL MARKETS LIMITED By: /s/ N.S. Coulbeck Name: N.S. Coulbeck Title: Director 50 EXHIBIT A [Form of Registration Rights Agreement] 51 SCHEDULE I Principal Amount of Initial Purchaser Notes to be Purchased ----------------- --------------------- BT Alex. Brown Incorporated $80,000,000 NatWest Capital Markets Limited $20,000,000 ------------ Total $100,000,000 EX-10.2 43 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 10.2 - -------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT Dated as of November 19, 1997 Among SPARKLING SPRING WATER GROUP LIMITED and THE GUARANTORS NAMED HEREIN as Issuers and BT ALEX. BROWN INCORPORATED and NATWEST CAPITAL MARKETS LIMITED as Initial Purchasers 11 1/2% Senior Subordinated Notes due 2007 - -------------------------------------------------------------------------------- 2 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is dated as of November 19, 1997, among SPARKLING SPRING WATER GROUP LIMITED, a corporation organized under the laws of the Province of Nova Scotia, Canada (the "Company"), as issuer, the Guarantors named on the signature pages hereto (the "Guarantors," and together with the Company, the "Issuers") and BT ALEX. BROWN INCORPORATED and NATWEST CAPITAL MARKETS LIMITED, as initial purchasers (the "Initial Purchasers"). This Agreement is entered into in connection with the Purchase Agreement, dated as of November 14, 1997, among the Issuers and the Initial Purchasers (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of $100,000,000 aggregate principal amount of the Company's 11 1/2% Senior Subordinated Notes due 2007 (the "Notes"), guaranteed by the Guarantors (the "Guarantees" and, together with the Notes, the "Securities"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and any subsequent holder or holders of the Notes. The execution and delivery of this Agreement is a condition to the Initial Purchasers' obligation to purchase the Securities under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions: As used in this Agreement, the following terms shall have the following meanings: Additional Interest: See Section 4 hereof. Advice: See the last paragraph of Section 5 hereof. Agreement: See the introductory paragraphs hereto. Applicable Period: See Section 2 hereof. Company: See the introductory paragraphs hereto. Effectiveness Date: The 150th day after the Issue Date; provided, however, that with respect to any Shelf Registration, the Effectiveness Date shall be the 75th day after the Filing Date with respect thereto. Effectiveness Period: See Section 3 hereof. 3 Event Date: See Section 4 hereof. Exchange Act: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. Exchange Notes: See Section 2 hereof. Exchange Offer: See Section 2 hereof. Exchange Offer Registration Statement: See Section 2 hereof. Filing Date: (A) In the case of an Exchange Offer Registration Statement, the 45th day after the Issue Date; or (B) in the case of a Shelf Registration (which may be applicable notwithstanding the consummation of the Exchange Offer), the 30th day after a Shelf Notice is required to be delivered pursuant to this Agreement. Guarantees: See the introductory paragraphs hereto. Guarantors: See the introductory paragraphs hereto. Holder: Any holder of a Registrable Note or Registrable Notes. Indemnified Person: See Section 7(c) hereof. Indemnifying Person: See Section 7(c) hereof. Indenture: The Indenture, dated as of November 19, 1997, by and among the Issuers and Bankers Trust Company, as Trustee, pursuant to which the Notes and the Guarantees are being issued, as the same may be amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: See the introductory paragraphs hereto. Initial Shelf Registration: See Section 3(a) hereof. Inspectors: See Section 5(n) hereof. Issue Date: November 19, 1997, the date of original issuance of the Notes. Issuers: See the introductory paragraphs hereto. NASD: See Section 5(s) hereof. 2 4 Notes: See the introductory paragraphs hereto. Offering Memorandum: The final offering memorandum of the Company dated November 14, 1997, in respect of the offering of the Notes. Participant: See Section 7(a) hereof. Participating Broker-Dealer: See Section 2 hereof. Person: An individual, trustee, corporation, partnership, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. Private Exchange: See Section 2 hereof. Private Exchange Notes: See Section 2 hereof. Prospectus: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the introductory paragraphs hereof. Records: See Section 5(n) hereof. Registrable Notes: Each Note upon its original issuance and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering such Note, Exchange Note or Private Exchange Note has been declared effective by the SEC and such Note, Exchange Note or such Private Exchange Note, as the case may be, has been disposed of in accordance with such effective 3 5 Registration Statement, (ii) such Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or Exchange Notes that may be resold without restriction under state and federal securities laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange Note, as the case may be, may be resold without restriction pursuant to Rule 144 under the Securities Act. Registration Statement: Any registration statement of the Company and/or the Guarantors that covers any of the Notes, the Exchange Notes or the Private Exchange Notes (and the related Guarantees) filed with the SEC under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of the issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. Securities: See the introductory paragraphs hereto. Securities Act: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. Shelf Notice: See Section 2 hereof. Shelf Registration: See Section 3(b) hereof. Subsequent Shelf Registration: See Section 3(b) hereof. 4 6 TIA: The Trust Indenture Act of 1939, as amended. Trustee: The trustee under the Indenture and the trustee (if any) under any indenture governing the Exchange Notes and Private Exchange Notes. Underwritten registration or underwritten offering: A registration in which securities of one or more of the Issuers are sold to an underwriter for reoffering to the public. 2. Exchange Offer. (a) The Issuers shall file with the SEC, no later than the Filing Date, a Registration Statement (the "Exchange Offer Registration Statement") on an appropriate registration form with respect to a registered offer (the "Exchange Offer") to exchange any and all of the Registrable Notes for a like aggregate principal amount of notes of the Company, guaranteed by the Guarantors, that are identical in all material respects to the Notes, except that the Exchange Notes shall contain no restrictive legend thereon (the "Exchange Notes"), and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with the TIA) and which, in either case, has been qualified under the TIA. The Exchange Offer shall comply with all applicable tender offer rules and regulations under the Exchange Act and other applicable law. The Issuers shall use their best efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 business days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 45th day following the date on which the Exchange Offer Registration Statement is declared effective by the SEC. If, after the Exchange Offer Registration Statement is initially declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, the Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder that participates in the Exchange Offer will be required, as a condition to its participation in the Exchange Offer, to represent to the Company in writing (which may be contained in the applicable letter of transmittal) that any Exchange Notes to be received by it will be acquired in the 5 7 ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, and that such Holder is not an affiliate of the Company within the meaning of the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the provisions of this Agreement shall continue to apply, mutatis mutandis, solely with respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and Exchange Notes held by Participating Broker-Dealers (as defined), and the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes and the Guarantees shall be included in the Exchange Offer Registration Statement. (b) The Issuers shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies represent the prevailing views of the staff of the SEC. Such "Plan of Distribution" section shall also expressly permit, to the extent permitted by applicable policies and regulations of the SEC, the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including, to the extent permitted by applicable policies and regulations of the SEC, all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes in compliance with the Securities Act. The Issuers shall use their best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein in order to permit such Prospectus to be lawfully delivered by all Persons subject to the prospectus delivery requirements of the Securities Act for 6 8 such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes covered thereby; provided, however, that such period shall not exceed 180 days after such Exchange Offer Registration Statement is declared effective (or such longer period if extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period"). If, prior to consummation of the Exchange Offer, any Holder holds any Notes acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Exchange Offer, the Company upon the request of any such Holder shall simultaneously with the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to any such Holder, in exchange (the "Private Exchange") for such Notes held by any such Holder, a like principal amount of notes (the "Private Exchange Notes") of the Company, guaranteed by the Guarantors, that are identical in all material respects to the Exchange Notes except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall be issued pursuant to the same indenture as the Exchange Notes and bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes will accrue (A) from the later of (i) the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor, or (ii) if the Note is surrendered for exchange on a date in a period which includes the record date for an interest payment date to occur on or after the date of such exchange and as to which interest will be paid, the date of such interest payment date or (B) if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Issuers shall: (1) mail, or cause to be mailed, to each Holder of record entitled to participate in the Exchange Offer a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) use their best efforts to keep the Exchange Offer open for not less than 20 business days after the date that notice of the Exchange Offer is mailed to Holders (or longer if required by applicable law); (3) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; 7 9 (4) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (5) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer and the Private Exchange, if any, the Issuers shall: (1) accept for exchange all Registrable Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange, if any; (2) deliver to the Trustee for cancellation all Registrable Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than that (i) the Exchange Offer or Private Exchange, as the case may be, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) no action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or the Private Exchange, and no material adverse development shall have occurred in any existing action or proceeding with respect to the Issuers and (iii) all governmental approvals shall have been obtained, which approvals the Issuers deem necessary for the consummation of the Exchange Offer or Private Exchange. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the TIA or is exempt from such qualification and shall provide that the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. 8 10 (c) If, (i) because of any change in law or in currently prevailing interpretations of the staff of the SEC, the Issuers are not permitted to effect the Exchange Offer, (ii) the Exchange Offer is not consummated within 195 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests in writing to the Company within 45 days after the consummation of the Exchange Offer, or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of any of the Issuers within the meaning of the Securities Act), then in the case of each of clauses (i) to and including (iv) of this sentence, the Company shall immediately deliver to the Holders and the Trustee written notice thereof (the "Shelf Notice") and shall file a Shelf Registration pursuant to Section 3 hereof. 3. Shelf Registration. If at any time a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) Shelf Registration. The Issuers shall file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf Registration"). The Issuers shall use their best efforts to file with the SEC the Initial Shelf Registration on or before the applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers shall not permit any securities other than the Registrable Notes to be included in the Initial Shelf Registration or any Subsequent Shelf Registration (as defined below). The Issuers shall use their best efforts to cause the Initial Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Initial Shelf Registration continuously effective under the Securities Act until the date which is two years from the Issue Date, subject to extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"), or such shorter period ending when (i) all Registrable Notes covered by the Initial Shelf Registration have been sold in the manner set forth and as contemplated in the Initial Shelf Registration or (ii) a 9 11 Subsequent Shelf Registration covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration has been declared effective under the Securities Act; provided, however, that the Effectiveness Period in respect of the Initial Shelf Registration shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the Securities Act and as otherwise provided herein. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration or any Subsequent Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Issuers shall use their best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof, and in any event shall within 30 days of such cessation of effectiveness amend the Initial Shelf Registration in a manner to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement pursuant to Rule 415 covering all of the Registrable Notes covered by and not sold under the Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed, the Issuers shall use their best efforts to cause the Subsequent Shelf Registration to be declared effective under the Securities Act as soon as practicable after such filing and to keep such subsequent Shelf Registration continuously effective for a period equal to the number of days in the Effectiveness Period less the aggregate number of days during which the Initial Shelf Registration or any Subsequent Shelf Registration was previously continuously effective. As used herein the term "Shelf Registration" means the Initial Shelf Registration and any Subsequent Shelf Registration. (c) Supplements and Amendments. The Issuers shall promptly supplement and amend any Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. 4. Additional Interest. (a) The Issuers and the Initial Purchasers agree that the Holders will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages 10 12 with precision. Accordingly, the Company agrees to pay, as liquidated damages, additional interest on the Notes ("Additional Interest") under the circumstances and to the extent set forth below (each of which shall be given independent effect): (i) if the Exchange Offer Registration Statement or any Shelf Registration is not filed with the SEC on or prior to the Filing Date applicable thereto, then, commencing on the day after any such Filing Date, Additional Interest shall accrue on the principal amount of the Notes at a rate of 0.50% per annum for the first 90 days immediately following each such Filing Date, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (ii) if (A) the Exchange Offer Registration Statement is not declared effective by the SEC on or prior to the relevant Effectiveness Date or (B) notwithstanding that the Issuers have consummated or will consummate the Exchange Offer, the Issuers are required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after either such Effectiveness Dates, Additional Interest shall accrue on the principal amount of the Notes at a rate of 0.50% per annum for the first 90 days immediately following the day after either such Effectiveness Date, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Issuers have not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 45th day after the date on which the Exchange Offer Registration Statement relating thereto was declared effective or (B) if applicable, a Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue on the principal amount of the Notes at a rate of 0.50% per annum for the first 90 days commencing on the (x) 46th day after such effective date, in the case of (A) above, or (y) the day such Shelf Registration ceases to be effective in the case of (B) above, and such Additional Interest rate shall increase by an additional 0.50% per annum at the beginning of each subsequent 90-day period; provided, however, that the Additional Interest rate on the Notes 11 13 as a result of the provisions of clauses (i), (ii) and (iii) above may not exceed at any one time in the aggregate 2.0% per annum; provided, further, however, that (1) upon the filing of the applicable Exchange Offer Registration Statement or the applicable Shelf Registration as required hereunder (in the case of clause (i) above of this Section 4(a)), (2) upon the effectiveness of the Exchange Offer Registration Statement or the applicable Shelf Registration Statement as required hereunder (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of the applicable Exchange Notes for all Notes tendered (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the applicable Shelf Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)), Additional Interest on the Notes in respect of which such events relate as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of Section 4(a) will be payable in cash semiannually on each May 15 and November 15 (to the holders of record on the May 1 and November 1 immediately preceding such dates), commencing with the first such date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the Registrable Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. Registration Procedures. In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder each of the Issuers shall: (a) Prepare and file with the SEC prior to the applicable Filing Date, a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, and use its best efforts to cause each such Registration Statement to become 12 14 effective and remain effective as provided herein; provided, however, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall furnish to and afford the Holders of the Registrable Notes included in such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five days prior to such filing, or such later date as is reasonable under the circumstances). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto if the Holders of a majority in aggregate principal amount of the Registrable Notes included in such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object on a timely basis. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to each of them with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus. The Issuers shall be deemed not to have used their best efforts to keep a Registration Statement effective during the Effectiveness Period or the Applicable Period, as the case may be, relating thereto if any Issuer voluntarily takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or expressly permitted by this Agreement. 13 15 (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period relating thereto from whom the Company has received written notice that it will be a Participating Broker-Dealer in the Exchange Offer, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within one day), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(m) hereof cease to be true and correct in all material respects, (iv) of the receipt by any Issuer of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact 14 16 required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the Issuers' determination that a post-effective amendment to a Registration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use its best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (if any), the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering or any Participating Broker-Dealer, (i) as promptly as practicable incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, any Participating Broker-Dealer or counsel for any of them reasonably request to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after any Issuer has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to their respective counsel and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by 15 17 reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Issuers hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to register or qualify, and to cooperate with the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; provided, however, that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h), keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the 16 18 Registrable Notes covered by the applicable Registration Statement; provided, however, that no Issuer shall be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may request. (j) Use its best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be reasonably necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Notes, except as may be required solely as a consequence of the nature of such selling Holder's business, in which case the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 17 19 Notwithstanding the foregoing, the Issuers shall not be required to amend or supplement a Registration Statement, any related Prospectus or any document incorporated therein by reference, in the event that, and for a period not to exceed an aggregate of 60 days in any calendar year if, (i) an event occurs and is continuing as a result of which the Shelf Registration would, in the Company's good faith judgment, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (ii) (a) the Company determines in its good faith judgment that the disclosure of such event at such time would have a material adverse effect on the business, operations or prospects of the Company or (b) the disclosure otherwise relates to a pending material business transaction that has not yet been publicly disclosed. (l) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes. (m) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to expedite or facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Issuers and their respective subsidiaries (including any acquired business, properties or entity, if applicable) and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) obtain the written opinions of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Notes and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent public accountants of the Issuers (and, if necessary, any other 18 20 independent public accountants of any subsidiary of any of the Issuers or of any business acquired by any of the Issuers for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Notes and such other matters as reasonably requested by the managing underwriter or underwriters as permitted by the Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable to the sellers and underwriters, if any, than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to such Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in the Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Company and subsidiaries of the Company (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and any of its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement and Prospectus. Each Inspector shall agree in writing that it will keep the Records confidential and that it will not disclose any of the Records that the Company determines, in good faith, to be confidential and notifies the Inspectors in writing are confidential unless (i) the disclosure of such Records is necessary to avoid or correct a material misstatement or material omission in such Registration Statement or Prospectus, (ii) the 19 21 release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, or (iii) the information in such Records has been made generally available to the public; provided, however, that prior notice shall be provided as soon as practicable to the Company of the potential disclosure of any information by such Inspector pursuant to clauses (i) or (ii) of this sentence to permit the Company to obtain a protective order (or waive the provisions of this paragraph (n)) and that such Inspector shall take such actions as are reasonably necessary to protect the confidentiality of such information (if practicable) to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of the Holder or any Inspector. (o) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (p) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders with regard to any applicable Registration Statement, a consolidated earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 60 days after the end of any fiscal quarter (or 120 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (q) Upon consummation of the Exchange Offer or a Private Exchange, obtain an opinion of counsel to the Company, in a form customary for underwritten transactions, addressed to the Trustee for the benefit of all Holders of Registrable Notes participating in the Exchange Offer or the Private Exchange, as 20 22 the case may be, that the Exchange Notes or Private Exchange Notes, as the case may be, the related Guarantees and the related indenture constitute legal, valid and binding obligations of the Issuers, enforceable against them in accordance with their respective terms, subject to customary exceptions and qualifications. (r) If the Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being canceled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied (s) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (t) Use its best efforts to take all other steps reasonably necessary to effect the registration of the Exchange Notes and/or Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Notes as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes of any seller so long as such seller fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such seller not materially misleading. If any such Registration Statement refers to any Holder by name or otherwise as the holder of any securities of the Company, then such Holder shall have the right to require (i) the insertion therein of language, in form and substance reasonably satisfactory to such Holder, to the effect that the holding by such Holder of such securities is not to be construed as a recommendation by such Holder of the investment quality of the 21 23 securities covered thereby and that such holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (ii) in the event that such reference to such Holder by name or otherwise is not required by the Securities Act or any similar federal statute then in force, the deletion of the reference to such Holder in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event that the Company shall give any such notice, the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. 6. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers (other than any underwriting discounts or commissions) shall be borne by the Company whether or not the Exchange Offer Registration Statement or any Shelf Registration is filed or becomes effective or the Exchange Offer is consummated, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) reasonable fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such 22 24 jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or in respect of Registrable Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and reasonable fees and disbursements of one special counsel for all of the sellers of Registrable Notes (exclusive of any counsel retained pursuant to Section 7 hereof), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(m)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) Securities Act liability insurance, if the Company desires such insurance, (vii) fees and expenses of all other Persons retained by the Issuers, (viii) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (ix) the expense of any annual audit, (x) any fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, and the obtaining of a rating of the securities, in each case, if applicable, and (xi) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, indentures and any other documents necessary in order to comply with this Agreement. 7. Indemnification. (a) Each of the Issuers, jointly and severally, agrees to indemnify and hold harmless each Holder of Registrable Notes and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the affiliates, officers, directors, representatives, employees and agents of each such Person, and each Person, if any, who controls any such Person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from and against any and all losses, claims, damages, judgments, liabilities and expenses (including, without limitation, the reasonable legal fees and other expenses actually incurred in 23 25 connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) or Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Company in writing by such Participant expressly for use therein and with respect to any preliminary prospectus, to the extent that any such loss, claim, damage or liability arises solely from the fact that any Participant sold Notes to a person to whom there was not sent or given a copy of the Prospectus (as amended or supplemented) at or prior to the written confirmation of such sale if the Company shall have previously furnished copies thereof to the Participant in accordance herewith and the Prospectus (as amended or supplemented) would have corrected any such untrue statement or omission. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Issuers and their respective affiliates, officers, directors, representatives, employees and agents and each Person who controls each Issuer within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent (but on a several, and not joint, basis) as the foregoing indemnity from the Issuers to each Participant, but only with reference to information relating to such Participant furnished to the Company in writing by such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly notify the Persons against whom such indemnity may be sought (the "Indemnifying Persons") in writing, and the Indemnifying Persons, upon request of the Indemnified Person, shall retain counsel 24 26 reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Persons may reasonably designate in such proceeding and shall pay the fees and expenses actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify any Indemnifying Person (i) will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the Indemnifying Person of substantial rights and defenses and (ii) will not, in any event, relieve the Indemnifying Person from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraphs (a) and (b) above. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Persons shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both any Indemnifying Person and the Indemnified Person or any affiliate thereof and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Persons shall not, in connection with such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and shall be reasonably acceptable to the Company, and any such separate firm for the Issuers, their affiliates, officers, directors, representatives, employees and agents and such control Persons of the Issuers shall be designated in writing by the Company and shall be reasonably acceptable to the Holders. The Indemnifying Persons shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed), but if settled with such consent or if there be a final non-appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, each of the Indemnifying Persons agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or 25 27 judgment. No Indemnifying Person shall, without the prior written consent of the Indemnified Persons (which consent shall not be unreasonably withheld or delayed), effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, or indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of such Indemnified Person. (d) If the indemnification provided for in paragraphs (a) and (b) of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the original offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable 26 28 considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages, judgments, liabilities and expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 7 shall be paid by the Indemnifying Person to the Indemnified Person as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 7 and the representations and warranties of the Issuers set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Holder or any person who controls a Holder, the Issuer, its directors, officers, employees or agents or any person controlling an Issuer, and (ii) any termination of this Agreement. (g) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rules 144 and 144A. Each of the Issuers covenants and agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time such Issuer is not required to file such reports, such Issuer will, upon the request of any Holder or beneficial owner of Registrable Notes, make available such information as is necessary to permit sales pursuant to Rule 144A under the 27 29 Securities Act. Each of the Issuers further covenants and agrees, for so long as any Registrable Notes remain outstanding, that it will take such further action as any Holder of Registrable Notes may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Notes without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. 9. Underwritten Registrations. If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and shall be reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) No Inconsistent Agreements. The Issuers have not, as of the date hereof, and the Issuers shall not, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuers' other issued and outstanding securities under any such agreements. The Issuers will not enter into any agreement with respect to any of their securities which will grant to any Person piggy-back registration rights with respect to any Registration Statement. (b) Adjustments Affecting Registrable Notes. The Issuers shall not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include 28 30 such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of (I) the Company and (II)(A) the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes and (B) in circumstances that would adversely affect the Participating Broker-Dealers, the Participating Broker-Dealers holding not less than a majority in aggregate principal amount of the Exchange Notes held by all Participating Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not be amended, modified or supplemented without the prior written consent of each Holder and each Participating Broker-Dealer (including any person who was a Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as the case may be, disposed of pursuant to any Registration Statement) affected by any such amendment, modification or supplement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold pursuant to such Registration Statement. (d) Notices. All notices and other communications (including, without limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: (i) if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture. (ii) if to the Issuers, at the address as follows: c/o Sparkling Spring Water Group Limited 19 Fielding Avenue Dartmouth, Nova Scotia Canada B3B-1C9 Attention: Stewart Allen 29 31 All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto, the Holders and the Participating Broker-Dealers. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 30 32 (j) Securities Held by the Company or Its Affiliates. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third-Party Beneficiaries. Holders of Registrable Notes and Participating Broker-Dealers are intended third-party beneficiaries of this Agreement, and this Agreement may be enforced by such Persons. (l) Judgment Currency. The Issuers, jointly and severally, agree to indemnify the Initial Purchasers and each Holder against any loss incurred as a result of any judgment or order being given or made for any amount due under this Agreement and such judgment or order being expressed and paid in a currency (the "Judgment Currency") other than United States dollars and as a result of any variation as between (i) the rate of exchange at which the United States dollar amount is converted into the Judgment Currency for the purpose of such judgment or order and (ii) the spot rate of exchange in The City of New York at which any such person on the date of payment of such judgment or order is able to purchase United States dollars with the amount of the Judgment Currency actually received by such person. The foregoing indemnity shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term "spot rate of exchange" shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, United States dollars. (m) Entire Agreement. This Agreement, together with the Purchase Agreement and the Indenture, is intended by the parties as a final and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein and any and all prior oral or written agreements, representations, or warranties, contracts, understandings, correspondence, conversations and memoranda between the Holders on the one hand and the Issuers on the other, or between or among any agents, representatives, parents, subsidiaries, affiliates, predecessors in interest or successors in interest with respect to the subject matter hereof and thereof are merged herein and replaced hereby. 31 33 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. THE COMPANY: SPARKLING SPRING WATER GROUP LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Vice Chairman THE GUARANTORS: SPARKLING SPRING WATER LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Vice Chairman SPRING WATER, INC. By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WATER JUG ENTERPRISES LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WITHEY'S WATER SOFTENING & PURIFICATION LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 34 AQUA CARE WATER SOFTENING & PURIFICATION LTD. By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer HIGH VALLEY WATER LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 3003969 NOVA SCOTIA LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer CANADIAN SPRINGS WATER COMPANY LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer SPARKLING SPRING WATER (UK) LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer AQUAPORTE (UK) LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 35 CRYSTAL SPRING ACQUISITION, INC. By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer MOUNTAIN FRESH ACQUISITION CORP. By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer MARLBOROUGH EMPLOYMENT LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer WATER AT WORK LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer NATURAL WATER LIMITED By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer CULLYSPRING WATER CO., INC. By: /s/ Stephen L. Larson ---------------------------------------------- Name: Stephen L. Larson Title: Chief Financial Officer 36 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. BT ALEX. BROWN INCORPORATED By: /s/ David Hadley Name: David Hadley Title: Managing Director NATWEST CAPITAL MARKETS LIMITED By: /s/ N.S. Coulbeck Name: N.S. Coulbeck Title: Director EX-10.3 44 EMPLOYMENT AGREEMENT 1 Exhibit 10.3 MEMORANDUM To: Stewart E. Allen From: G. John Krediet Date: October 2, 1997 Re: Compensation The purpose of this memo is to document your compensation starting January '98 through the year 2000. Your base pay will be C$300,000 per annum adjusted for inflation in January '99 and 2000. Your annual bonus will be calculated as follows: {3x(current year OCF - preceding year OCF) - Cap. EX.}x1.6%=Bonus This is a continuation of the same formula that we used in preceding years. For calculation purposes transactions closing prior to May 1 of any year will be included in that year's bonus calculation, while transactions closing after that date will be included in the following year bonus calculation. The Company will also pay you C$40,000 in January '98 to compensate you for your loss on your house in Nova Scotia. Your housing allowance currently in effect will terminate on December 31st of this year. A major change in our business may result in us having to adjust this package. Stew I am very pleased that we were able to put a long term compensation plan together since I have always enjoyed working with you and now we will have the opportunity to go forward into the new millennium. EX-10.4 45 SHAREHOLDER AGREEMENT 1 Exhibit 10.4 SHAREHOLDER AGREEMENT THIS AGREEMENT effective as of the 22nd day of October, 1997, AMONG: SPARKLING SPRING WATER GROUP LIMITED, a corporation incorporated under the laws of the Province of Nova Scotia ("Holdco") OF THE FIRST PART; SPARKLING SPRING WATER LIMITED, a corporation continued under the laws of the Province of Nova Scotia (the "CORPORATION") OF THE SECOND PART; - and - CLAIRVEST GROUP INC., a corporation incorporated under the laws of the Province of Ontario ("CLAIRVEST") OF THE THIRD PART; - and - GASPAR LIMITED, a corporation incorporated under the laws of Barbados ("GASPAR") OF THE FOURTH PART; - and - C. SEAN DAY, of Stamford, Connecticut, United States of America ("DAY") OF THE FIFTH PART; 2 - and - STEPHEN L. LARSON, of Darien, Connecticut, United States of America ("LARSON") OF THE SIXTH PART; - and - KEVIN NEWMAN, of Darien, Connecticut, United States of America ("NEWMAN") OF THE SEVENTH PART; - and - MARK STITZER, of Greenwich, Connecticut, United States of America ("MARK") OF THE EIGHTH PART; - and - LUCY STITZER, of Greenwich, Connecticut, United States of America ("LUCY") OF THE NINTH PART; - and - STEWART ALLEN, of Burnaby, British Columbia ("ALLEN") OF THE TENTH PART; THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto hereby covenant and agree as follows: RECITALS 3 3 This Agreement recites the following circumstances: 1. Holdco was incorporated on October 22, 1997 under the Companies Act (Nova Scotia) and is the registered and beneficial owner of all outstanding shares in the capital stock of the Corporation. 2. The Corporation was continued on the 22nd day of February, 1994 under the Companies Act (Nova Scotia). 3. The authorized capital of Holdco consists of: 3.1 One Million (1,000,000) Class A Common Shares with a par value of Cdn. $0.0001 per share, 136,879 of which have been issued and are outstanding as fully paid and non-assessable Class A Common Shares; 3.2 One Million (1,000,000) Class B Common Shares with a par value of Cdn. $6.7790 per share, 118,209 of which have been issued and are outstanding as fully paid and non-assessable Class B Common Shares; 3.3 One Million (1,000,000) Class C Common Shares with a par value of Cdn.$13.4699 per share, 423,190 of which have been issued and are outstanding as fully paid and non-assessable Class C Common Shares; 3.4 Ten Million (10,000,000) Class D Common Shares with no par value none of which have been issued and are outstanding as fully paid and non-assessable Class D Common Shares; 3.5 Ten Million (10,000,000) Class E non-voting Common Shares with no par value none of which have been issued and are outstanding as fully paid and non-assessable Class E Common Shares; 3.6 One Million (1,000,000) Class F Common Shares with a par value of Cdn.$0.9401 per share, 705,050 of which have been issued and are outstanding as fully paid and non-assessable Class F Common Shares; 3.7 Ten Million (10,000,000) Special Preferred Shares with a par value of Cdn. $1.00, issuable in series, none of which have been issued and are outstanding as fully paid and non-assessable Special Preferred Shares; 4 4 3.8 Ten Million (10,000,000) Special Preferred Shares with no par value which may be issued from time to time in one or more series, each series having the designation, rights, privileges, restrictions and conditions determined by the Board. 4. The authorized capital of the Corporation consists of ten million (10,000,000) Common Shares without nominal or par value, ten million (10,000,000) Class B Non-Voting Common Shares with no par value of which one million, seven hundred and twenty thousand, seven hundred and forty-six (1, 720,746) Common Shares are issued and outstanding as fully paid and non-assessable. 5. The beneficial owners of all of the issued and outstanding Voting Shares of Holdco are as follows: Name of Shareholder Number of Common Shares Gaspar 705,050 Clairvest 423,190 Mark and Lucy, as joint tenants 94,010 Larson 118,209 Newman 28,203 Day 8,994 Allen 5,672 ARTICLE II RECITALS CORRECT II.1 Recitals Each of the parties hereto respectively acknowledges and declares that the foregoing recitals, insofar as they relate to such party, are true and correct both in substance and in fact. ARTICLE III DEFINITIONS AND INTERPRETATION III.1 Definitions In this Agreement, including the above recitals, the following terms have the following meanings unless the context otherwise requires: 5 5 "AFFILIATE" has the meaning attributed thereto in the Securities Act (Ontario); "AGREEMENT" means this agreement including the recitals and the following schedules: Schedule "A" - Assumption Agreement Schedule "B" - Consolidated Sparkling Spring Water Income Statement and EBTDAPS Projections Schedule "C" - Registration Procedures Schedule "D" - Fair Market Value Determination Procedures Schedule "E" - Outstanding Options Schedule "F" - Subscription Agreement "ASSUMPTION AGREEMENT" means an agreement pursuant to which a Person who is not a Shareholder agrees to be bound by this Agreement in the same manner as if it had been an original party hereto and, in the case of Share transfers, to the same extent as the transferor, which Assumption Agreement shall be in the form attached hereto as Schedule "A"; "BOARD" means the board of directors of Holdco; "BUSINESS DAY" means any day other than a Saturday, Sunday or statutory holiday in the Province of Nova Scotia; "CANADIAN SECURITIES LAWS" means statutes and regulations applicable to the trading of securities in any province or territory of Canada including applicable rules, policies, statements and blanket rulings and orders made by Canadian securities regulatory authorities; "CORPORATION BOARD" means the board of directors of the Corporation; "CORPORATION DIRECTOR" means a director of the Corporation; "CLASS E SHAREHOLDERS" means the following Shareholders who own the number of Class E Shares set opposite their name and who have all signed the subscription agreement in the form attached hereto as Schedule "F": Stephen Larson 1,000 Class E Non-Voting Shares Arthur Goodick 180 Class E Non-Voting Shares John Stiles 3,500 Class E Non-Voting Shares Tom Ferries 1,800 Class E Non-Voting Shares 6 6 Helen Martin 1,700 Class E Non-Voting Shares Tim Dougherty 1,000 Class E Non-Voting Shares Larry Brookes 180 Class E Non-Voting Shares "DIRECTOR" means a director of Holdco; "EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time; "LIQUID PUBLIC MARKET" means an average daily volume of Shares traded over the facilities of The Toronto Stock Exchange, The Montreal Exchange, the Vancouver Stock Exchange, the New York Stock Exchange, the London Stock Exchange or the NASDAQ over the preceding thirty (30) days equal to or greater than five (5%) percent of the number of Clairvest's Shares; "MANAGEMENT SHAREHOLDERS" means, at the date hereof, Gaspar and Larson, and shall also include G. John Krediet ("KREDIET") at such time as Shares are registered in the name of Krediet, collectively, and "Management Shareholder" means any one of them; "PERSON" includes an individual, partnership, association, body corporate, trustee, executor, administrator or legal representative; "PROPORTIONATE SHARE" means the fraction that results when the number of Shares held by a Shareholder is divided by the total number of Shares excluding, in the case of Section 5.3, the number of Shares owned by the Shareholder who delivers a Refusal Right under Section 5.3 hereof; "PUBLIC OFFERING" means an underwritten or best efforts public offering of Shares pursuant to an effective prospectus or registration statement under the Securities Laws; "PUBLIC SALE" means a sale (i) pursuant to a Public Offering, or (ii) under Rule 144 of the Securities Act and its equivalent under Canadian Securities Laws; "REGISTRATION EXPENSES" means (i) all registration and prospectus filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Shares), (iii) printing expenses, (iv) internal expenses of Holdco (including, without limitation, all salaries and expenses 7 7 of its officers performing legal or accounting duties), (v) reasonable fees and disbursements for counsel for Holdco and customary fees and expenses for independent certified public or chartered accountants retained by Holdco (including the expenses of any comfort letters or costs associated with the delivery by accountants of a comfort letter or comfort letters requested pursuant to paragraph (g) of Schedule "C" hereto), (vi) the reasonable fees and expenses of any special experts retained by Holdco in connection with such registration or qualification, (vii) reasonable fees and expenses of one counsel for Clairvest, in the case of an offering in which Clairvest participates or of the Holders (as defined in Section 6.1), in any other case, (viii) fees and expenses in connection with any review of underwriting arrangements by the National Association of Securities Dealers, Inc. or any comparable Canadian association including fees and expenses of any "qualified independent underwriter", (ix) fees and expenses of listing the Shares on an exchange or other trading system, and (x) fees and disbursements of underwriters customarily paid by issuers or sellers of securities; but shall not include any underwriting fees, discounts or commission attributable to the sale of Shares, or any out-of-pocket expenses (except as set forth in clause (vii) above) of the Shareholders (or the agents who manage their accounts) or any fees and expenses of underwriter's counsel; "RULE 144" means Rule 144 and Rule 144A (or any successor provisions under the Securities Act; "SEC" means the Securities and Exchange Commission; "SECURITIES ACT" means the United States Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time; "SECURITIES LAW" shall mean the Securities Act, The Exchange Act and Canadian Securities Laws; "SHAREHOLDERS" means the Persons who are from time to time (i) shareholders of Holdco and parties to this Agreement and for the time being Gaspar, Clairvest, Day, Larson, Newman, Mark, Lucy and Allen and (ii) Persons who exercise options after the date hereof pursuant to the Holdco stock option plan, as amended from time to time, including the options set out in Schedule E hereto; but, for greater certainty, shall not include the Class E Shareholders who have signed the subscription agreement in the form attached as Schedule F hereto; "SHARES" means shares in the capital stock of Holdco; 8 8 "STITZER GROUP" means, collectively, Mark and Lucy and the survivor of them; "VOTING SHARES" means all shares of the company that have the right to vote, for the time being Class A Common Shares, Class B Common Shares, Class C Common Shares, Class D Common Shares and Class F Common Shares; III.2 Headings The headings of the Sections and Articles of this Agreement are inserted for convenience and reference only and shall not affect the construction or interpretation of any provision of this Agreement. III.3 Number and Gender Words importing the singular shall include the plural and vice versa and words importing the masculine gender shall include the feminine and neuter and vice versa. ARTICLE IV TERM IV.1 Term This Agreement shall come into force and effect as of the date set out above and shall continue in force, as may be amended from time to time in the manner provided herein, until the earlier of the date on which only one Shareholder holds Shares or the date on which Holdco makes a Public Offering. IV.2 Termination of Prior Shareholder Agreement This Agreement shall supersede and replace all other agreements whether written or oral regarding the matters contained herein, including, without limiting the generality of the foregoing, the Shareholders' Agreement made as of the 12th day of January, 1996 among the Corporation, Clairvest, Gaspar, MeesPierson Investeringsmaatschappij II BV, Larson, Newman, Mark, Lucy, Todd Stitzer and Marenda Stitzer, and the assumption agreements dated May 23, 1996 and April 18, 1997, between the Corporation and Allen, and the Corporation and Day, respectively, which Shareholder Agreement and assumption agreements shall be terminated effective the date hereof. 9 9 ARTICLE V PRE-EMPTIVE RIGHT V.1 Pre-Emptive Right (a) Any Shares in the capital of Holdco of a class to be issued by Holdco, or other securities, convertible into Shares, other than a Public Offering and other than senior secured debt, such additional Shares or securities hereinafter referred to as "ADDITIONAL SECURITIES", shall first be offered by Holdco to all the then Shareholders holding shares of that class in their respective Proportionate Share; provided, however, that the first issue by Holdco of any class of its shares other than Voting Shares shall first be offered to all then Shareholders holding Voting Shares in their respective Proportionate Share of Voting Shares. (b) In addition to its pre-emptive rights contained in Section 4.1(a), Clairvest shall also have a right of first refusal, exercisable by Clairvest within twenty (20) days from Clairvest's receipt of notice of Holdco's intention to issue Additional Securities, to subscribe for, purchase or finance all such Additional Securities that the Management Shareholders would otherwise be entitled to subscribe for, purchase or finance pursuant to this Section 4.1 ("MANAGEMENTS' ADDITIONAL SECURITIES"), provided however that Clairvest's right of first refusal shall be exercisable upon the following terms: (i) if at any time, Clairvest is a Shareholder and owns less than 30% of all Shares, on a fully diluted basis, it shall have the right to subscribe for, purchase or finance, at Clairvest's discretion, up to 75% of all Managements' Additional Securities; (ii) if at any time, Clairvest owns 30% or more of all outstanding Shares on a fully diluted basis, and such Share ownership is not more than 99% of all outstanding Shares owned by Gaspar and Krediet in aggregate, on a fully diluted basis, Clairvest shall have the right to subscribe for, purchase or finance, at Clairvest's discretion, up to 50% of all of Managements' Additional Securities. (c) Within twenty (20) days of receipt of notice of Holdco's intention to issue Additional Securities, any Shareholder who wishes to acquire its Proportionate Share or less of Additional Securities shall submit a subscription therefor to the secretary of Holdco. Such 10 10 subscription shall specify the number, if any, of Additional Securities in excess of its Proportionate Share the Shareholder desires to purchase. If any Shareholder does not subscribe for its Proportionate Share, the unsubscribed shares shall be used to satisfy the subscription of the Shareholders for shares in excess of their Proportionate Share. (d) If the subscriptions in excess are more than sufficient to exhaust the unsubscribed shares, the unsubscribed shares shall be divided pro-rata among the Shareholders desiring shares in excess of their Proportionate Share in accordance with their Proportionate Share, but no Shareholder shall be bound to take any shares in excess of the amount it so desires. (e) If the Additional Securities are not fully subscribed by the then Shareholders holding shares of the class of Additional Securities being offered, Holdco shall then offer such unsubscribed Additional Securities to all the then Shareholders holding Shares of any other class of capital stock of Holdco. Any such offer shall be made to each class of Shareholders in the Proportionate Share of value such class holds of Holdco's entire capital (excluding for purposes of this calculation the class of Additional Securities being offered) and to each Shareholder of each class in its respective Proportionate Share of such class. (f) Any Additional Securities not subscribed for in accordance with this Section 4.1 may be offered by Holdco to Persons other than Shareholders. Every issue of Additional Securities by Holdco shall be subject to the condition that the subscriber therefor, shall, if not a party hereto, agree to be bound by the terms of this Agreement and become a party hereto in accordance with the provisions of Section 9.3 hereof by executing an Assumption Agreement. (g) Notwithstanding anything to the contrary contained in this Section 4.1, the pre-emptive rights provided by this Section 4.1 shall not apply to Shares issued by Holdco upon the exercise of the options granted by Holdco as set out in Schedule "E" hereto, or upon the exercise of options hereafter granted by the Holdco pursuant to Holdco's stock option plan; provided that the optionee, shall, if not a party hereto, agree to be bound by the terms of this Agreement and become a party hereto in accordance with the provisions of Section 9.4 hereof by executing an Assumption Agreement. ARTICLE VI DISPOSAL OF INTEREST VI.1 Restrictions on Transfer 11 11 Except as otherwise provided for herein or as specifically consented to in writing by the Shareholders, the Shareholders shall not, and shall not make any agreement to, directly or indirectly, sell, assign, transfer, give, devise, bequeath, mortgage, charge, pledge, hypothecate or otherwise dispose of, alienate or in anyway encumber or create a security interest in, or grant any option on, any of the Shares. Any attempt to accomplish or effect any or all of the acts prohibited hereby shall be null and void. For greater certainty, any change or attempt to effect a change in the beneficial ownership of Shares by any Shareholder (other than any transfer of shares of Clairvest) shall be deemed to be a transfer or an attempt to transfer Shares by such Shareholder. VI.2 Permitted Transfers (a) Each of the Shareholders hereby agrees that, simultaneously with the execution of this Agreement, it will execute and deliver to National Westminster Bank Plc a mortgage, hypothecation and pledge of all of its Shares to National Westminster Bank Plc as security for the debts and other obligations of the Corporation to National Westminster Bank Plc. (b) If at any time, or from time to time, the Board determines for any reason that it is necessary or desirable that the Corporation change lenders, each of the Shareholders hereby agrees that it will, at the request of such new lender or lenders from time to time, execute and deliver in favour of such lender or lenders a new mortgage, hypothecation and pledge of all its Shares as security for the debts and other obligations of the Corporation in a form approved by such lender or lenders provided, however, that such pledge shall be limited in recourse to the Shares and shall contain substantially the same terms and conditions, and shall be no more restrictive to the Shareholders than, the pledge to National Westminster Bank Plc referred to in paragraph 5.2(a) and further provided that no Shareholder will be required to grant such mortgage, hypothecation and pledge unless all Shareholders are required to do so. (c) It is agreed that no Shareholder shall be permitted to obtain a release of any pledge of its Shares given pursuant to either paragraph 5.2(a) or (b) hereof unless the pledges given by all Shareholders pursuant to paragraph 5.2(a) or (b), as the case may be, are released. (d) Any Shareholder (herein referred to as the "BORROWING SHAREHOLDER") may pledge (herein called the "SECOND PLEDGE") its Shares to another Shareholder (herein referred to as the "LENDING SHAREHOLDER") as security for a loan made by the Lending Shareholder to the Borrowing Shareholder provided always that such Second Pledge is fully subordinated to any mortgage, pledge or charge of such Shares in favour of National Westminster Bank Plc or a new lender as contemplated in paragraphs 5.2(a) and (b) hereof. 12 12 (e) Upon death, by gift or otherwise, a Shareholder (in this Section 5.2 called the "TRANSFEROR") may transfer all, but not less than all, of the Shares held by the Transferor to a spouse or lineal descendant of a Transferor or to a holding company all the shares of which are owned exclusively by the Transferor or to a trust the primary beneficiary of which is the Transferor or the spouse or lineal descendant of the Transferor (the spouse, lineal descendant, holding company or trust, as the case may be, of the Transferor being in this Section 5.2 called the "TRANSFEREE") and nothing in this Agreement shall prohibit such transfer of Shares, provided that no such transfer shall be made until such time as the Transferee shall become a party to this Agreement in accordance with Section 9.3 hereof by executing an Assumption Agreement and that the Transferor shall continue to be bound by this Agreement thereafter. (f) The legal personal representative or representatives of a deceased Shareholder may become registered as a Shareholder or Shareholders in respect of any Shares held by such deceased Shareholder at the time of his death provided that no such transfer shall be registered until the proposed transferee has become a party to this Agreement in accordance with Section 9.3 hereof by executing an Assumption Agreement. (g) Subject to paragraphs (a), (b), (c) and (d) of this Section 5.2, any Shareholder may sell, sign, transfer, give, devise, bequest, mortgage, charge, pledge, hypothecate or otherwise dispose of, alienate or encumber or create a security interest or grant any option on, any of such Shareholder's Shares to any Affiliate of such Shareholder, provided that no such transfer shall be registered until the proposed transferee has become a party to this Agreement in accordance with Section 9.3 hereof by executing an Assumption Agreement. Notwithstanding the foregoing, the execution by such Affiliate transferee shall not release the transferor Shareholder from its obligations hereunder. (h) It is hereby acknowledged and agreed that a change of control of Clairvest shall not be considered or deemed to be a transfer by Clairvest of any Shares owned or held, directly or indirectly, by Clairvest. VI.3 Right of First Refusal (a) Any Shareholder (in this Section 5.3 called the "OFFEROR") may sell all (but not less than all) of its Shares if the Offeror shall have received a bona fide offer (in this Section 5.3 called the "OFFER") from a Person with whom the Offeror is dealing at arm's length (as the term arm's length is construed for purposes of the Income Tax Act (Canada) at the date hereof) to buy such 13 13 Shares for a fixed price per Share (in this Section 5.3 called the "OFFER PRICE") and the Offeror wishes to accept the Offer and complies with the provisions of this Section 5.3. (b) To comply with the provisions of this Section 5.3 the Offeror shall deliver to each of the other Shareholders (in this Section 5.3 called the "OFFEREES") an offer in writing (in this Section 5.3 called a "REFUSAL RIGHT") offering to sell to the Offerees all of the Shares of the Offeror at the Offer Price, which Refusal Right shall be irrevocable for twenty (20) days. (c) Each of the Offerees shall be entitled to purchase at least his Proportionate Share of the Shares of the Offeror at the Offer Price by giving written notice to all of the Shareholders (including the Offeror) within twenty (20) days of the receipt of the Refusal Right of the number of Shares of the Offeror that such Offeree wishes to purchase. If any Offeree fails to give such written notice within twenty (20) days as aforesaid, such Offeree shall be deemed to have given notice that it wishes to buy none of such Shares; and (d) If any of the Offerees wishes to purchase less than its respective Proportionate Share, the unclaimed Shares shall be utilized to satisfy the claims of other Offerees for Shares of the Offerees in excess of their respective Proportionate Share and, if the claims in excess are more than sufficient to exhaust such unclaimed Shares, the unclaimed Shares shall be divided pro rata among the Offerees desiring excess Shares in the proportions that the number of Shares in excess of their respective Proportionate Share claimed by each such Offeree bears to the aggregate number of Shares claimed by all of the Offerees in excess of their respective proportions, provided that no Offeree shall be bound to take any Shares in excess of the number which it desires. (e) If one or more of the Offerees have agreed to purchase in the aggregate all of the Shares owned by the Offeror in accordance with the preceding subparagraphs of this Section 5.3 there shall thereupon be an agreement of purchase and sale among the Offeror and such Offerees and each such Offeree shall deliver to the Offeror, within sixty (60) days of the delivery of the Refusal Right to the Offerees, its respective proportion of the purchase price for the Shares by cash or certified cheque of the Offeree as the case may be in accordance with the payment terms under the Offer. (f) If fewer than all of the Shares of the Offeror are claimed by the Offerees pursuant to either of subparagraphs (c) or (d) of this Section 5.3, or if the Offerees who complied with subparagraph (c) have not complied with the provisions of subparagraph (e) of this Section 5.3, the Offeror may then (but only then) sell, all (but, except as provided in Section 5.4 hereof, not less than all) of its Shares in accordance with the provisions of the Offer (but not otherwise), 14 14 provided that the purchaser under the Offer agrees to be bound by the terms of this Agreement as a Shareholder in accordance with Section 9.3 hereof and executes an Assumption Agreement. VI.4 Sale by Controlling Shareholder or Management Shareholders - Drag Along (a) Subject to the right of first refusal contained in Section 5.3 hereof, if any Shareholder or group of Shareholders acting in concert (the "CONTROLLING SHAREHOLDER") owning more than 50% of the Shares on a fully diluted basis proposes to sell more than 50% of the Shares to a Third Party, or if the Management Shareholders propose to sell all, but not less than all, of the Shares owned, directly or indirectly, by them to a Third Party (as such term is defined in Section 5.5), the Controlling Shareholder or Management Shareholders, as the case may be, may, at their option, by written notice to the other Shareholders, accompanied by an irrevocable offer (the "DRAG ALONG OFFER") from the Third Party to the other Shareholders to purchase, for a consideration that is the same as, or the cash equivalent of, the consideration per Share at which the Controlling Shareholder or Management Shareholders, as the case may be, propose to sell their Shares to the Third Party, require the other Shareholders to sell to the Third Party, all (but not less than all) of the Shares owned by such other Shareholders (the "DRAGGED SHARES") at the price specified in the Drag Along Offer. Subject to paragraph (b), the delivery by the Controlling Shareholder or the Management Shareholders, as the case may be, of an irrevocable Drag Along Offer shall bind the other Shareholders to sell the Dragged Shares. The date on which the sale is to close and the other closing arrangements (which shall be the same as those for the purchase and sale between the Third Party and the Controlling Shareholder or the Management Shareholders, as the case may be) shall be as specified in the Drag Along Offer. Except as specifically provided for above, the Drag Along Offer shall contain only such terms and conditions, if any, as are identical to those pursuant to which the Controlling Shareholder or Management Shareholders, as the case may be, propose to sell their shares to the Third Party. (b) Notwithstanding the foregoing paragraph (a), this Section 5.4 shall not apply to Clairvest unless either (i) Clairvest's realized price per share yields Clairvest a compounded annual rate of return of at least twelve (12%) percent, or (ii) after eighteen (18) months from the date hereof, the Corporation has achieved the fully-diluted per share earnings before tax, depreciation and amortization ("EBTDAPS") projections as shown on Schedule "B" hereto. The irrevocable Drag Along Offer given by the Management Shareholders to Clairvest shall include a calculation of the compounded annual rate of return or EBTDAPS, as the case may be, and shall be accompanied by a copy of the audited or unaudited financial results upon which such calculation is based. The delivery by the Management Shareholders to Clairvest of an irrevocable Drag Along Offer shall bind Clairvest to sell its Shares, provided that the compounded annual rate of 15 15 return or EBTDAPS calculation, as the case may be, is approved by Clairvest, such approval not to be unreasonably withheld. VI.5 Sale by Controlling Shareholder or Management Shareholder - Tag Along Subject to the right of first refusal contained in Section 5.3 hereof and notwithstanding the provisions of Section 5.4 hereof, if any Controlling Shareholder or Management Shareholder, alone or in concert, receives a bona fide offer from a Person (other than a "related person" as defined in the Income Tax Act (Canada)) or a series of offers from a group of such Persons acting in concert (a "THIRD PARTY") to purchase some or all of the Shares owned, directly or indirectly, by them, such Controlling Shareholder(s) or Management Shareholder(s), as the case may be, shall not accept the offer unless the Third Party shall make an offer to purchase the Third Party's desired number of Shares pro rata from such Controlling Shareholder(s) or Management Shareholder(s),as the case may be, and the other Shareholders, at the same price and on the same terms and conditions as are contained in the offer made to the Controlling Shareholder(s) or Management Shareholder(s), as the case may be. VI.6 Sale by Clairvest - Tag Along Subject to the right of first refusal contained in Section 5.3 hereof and notwithstanding the provisions of Section 5.4 hereof, provided that Clairvest owns in excess of twenty-five (25%) percent of the Common Shares, on a fully-diluted basis, if Clairvest receives a bona fide offer from a Third Party to purchase some or all of such Shares owned, directly or indirectly, by it, Clairvest shall not accept the offer unless the Third Party shall make an offer to purchase the Third Party's desired number of Shares pro rata from each of the Shareholders, including Clairvest, at the same price and on the same terms and conditions as contained in the offer made to Clairvest. The tag along rights provided by this Section 5.6 shall not apply in respect of any such offer for Shares of a class in respect of which Clairvest does not own, directly or indirectly, in excess of twenty-five (25%) percent of the outstanding Shares of said class of Shares. VI.7 Sale by Clairvest - Right of First Opportunity and Drag Along Provided that there does not exist a Liquid Public Market for Shares, if at any time after March 31, 2003, Clairvest desires to sell all (but not less than all) of its Shares of Holdco, such Shares shall first be offered by Clairvest to Holdco for repurchase, at a price per Share equal to the per Share fair market value of the Shares, to be determined in accordance with the 16 16 principles set out in Schedule "D" hereto. The fair market value of the Shares shall then be negotiated in good faith among Clairvest and Holdco in accordance with the principles set out in Schedule "D" hereto. If Holdco does not advise Clairvest in writing of its desire to repurchase from Clairvest all of Clairvest's Shares at the agreed upon fair market value of the Shares, or if Clairvest and Holdco cannot agree upon the fair market value of the Shares within thirty (30) days following receipt of Clairvest's notice of its desire to sell its Shares, Holdco shall, within fifteen (15) days thereafter, deliver to Clairvest a notice stating the per Share consideration (the "BEST OFFER") at which Holdco would be willing to repurchase all (but not less than all) of Clairvest's Shares, and Clairvest may (i) within fifteen (15) days, accept the Best Offer, failing which the Best Offers shall expire, or (ii) within one hundred and eighty (180) days, by written notice to the other Shareholders accompanied by an irrevocable Drag Along Offer from a Third Party to such Shareholders to purchase, for consideration that is the same as, or the cash equivalent of, the consideration per Share at which Clairvest proposes to sell its Shares to the Third Party, require the other Shareholders to sell to the Third Party all (but not less than all) of the Shares owned, directly or indirectly, by the other Shareholders, at the price specified in the Drag Along Offer; provided that such consideration shall not be less than the Best Offer. In the event that Clairvest accepts the Best Offer, Holdco shall repurchase Clairvest's Shares within sixty (60) days from the date of such acceptance. The delivery by Clairvest of an irrevocable Drag Along Offer shall bind the other Shareholders to sell all (but not less than all) of the Shares owned, directly or indirectly, by such Shareholders to which the Drag Along Offer relates. ARTICLE VII REGISTRATION RIGHTS VII.1 Demand Registration (a) Provided that Clairvest owns, directly or indirectly, in excess of twenty (20%) percent of the Shares, on a fully-diluted basis, Clairvest may at any time after January 12, 2001, upon written request that Holdco effect the registration or qualification under the Securities Laws of Clairvest's Shares, and specifying the intended method of disposition thereof, Holdco will promptly give written notice of such requested registration (a "DEMAND REGISTRATION") at least twenty (20) days prior to the anticipated filing date of the prospectus or registration statement relating to such Demand Registration to all other Shareholders, and thereupon will use its best 17 17 efforts to effect, as expeditiously as possible, the registration under the Securities Laws of: (i) the Shares that Holdco has been so requested to qualify or register by Clairvest, then held by Clairvest; and (ii) all other Shares that any other Shareholder (all such Shareholders, together with Clairvest, the "HOLDERS") has requested Holdco to qualify or register, subject to Section 6.2 hereof, by written request received by Holdco within ten (10) days after the receipt by such Holders of such written notice given by Holdco, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Shares so to be registered; provided that (i) Holdco shall not be obligated to effect more than one Demand Registration in any six-month period, and (ii) Holdco shall not be obligated to effect more than three (3) Demand Registrations for Clairvest pursuant to this Section 6.1, unless Holdco shall be eligible to file a registration statement on Form S-3 under the Securities Act (or other comparable short form, including a short form prospectus under National Policy No. 47 of the Canadian Securities Administrators), in which event there shall be no limit on the number of such Demand Registrations pursuant to this Section 6.1; provided that the number of Demand Registrations that Holdco shall be obligated to effect pursuant to this Section 6.1 shall be reduced by one (1) in the event that Clairvest requests one or more Incidental Registrations as defined in and pursuant to Section 6.2, regardless of the number of Incidental Registrations requested by Clairvest. Promptly after the expiration of the ten (10) day period referred to in Section 6.1(a)(ii) hereof, Holdco will notify all the Holders to be included in the Demand Registration of the other Holders and the number of Shares requested to be included therein. Clairvest may, at any time prior to the effective date of the prospectus or registration statement relating to such registration, revoke such request, without liability to any of the other Holders, by providing a written notice to Holdco and such other Holders revoking such request, in which case such request, so revoked shall not be considered a Demand Registration if any fees incurred by Holdco as a result of such revoked request are paid by Clairvest. (b) Subject to Section 6.1(c), Holdco will pay all Registration Expenses in connection with any Demand Registration; provided that if Holdco is required to undertake an audit of Holdco that it would not otherwise have been required to undertake, the costs associated with such audit shall be for the account, pro rata, of Clairvest and the other Holders, if any, 18 18 participating in the Demand Registration. (c) A qualification or registration requested pursuant to this Section 6.1 shall not be deemed to have been effected unless the prospectus or registration statement relating thereto (i) has become effective under the Securities Laws, and (ii) has remained effective for a period of at least ninety (90) days (or such shorter period in which all Shares of the Holders included in such registration has actually been sold thereunder); provided that if after any prospectus or registration statement requested pursuant to this Section 6.1 becomes effective such prospectus or registration statement is interfered with by any stop order, cease trade order, injunction or other order or requirement of the SEC, the Canadian securities regulatory authorities or other governmental agency or court solely due to the actions or omissions to act of Holdco, such prospectus or registration statement shall be at the sole expense of Holdco and shall not be considered a Demand Registration. In the event that less than seventy-five (75%) percent of Clairvest's Shares initially proposed to be included in such prospectus or registration have been sold thereunder and Clairvest pays all Registration Expenses in connection with such prospectus or registration, such requested qualification or registration shall be deemed not be a Demand Registration pursuant to this Section 6.1. (d) If a Demand Registration involves a Public Offering and the managing underwriter shall advise Holdco and Holders that, in its view, (i) the number of Shares requested to be included in such registration or qualification (including Shares which Holdco proposes to be included), or (ii) the inclusion of some or all of the Shares owned by the Holders, in either case, exceeds the largest number of Shares which can be sold without having an adverse effect on such offering, including the price at which such Shares can be sold (the "MAXIMUM OFFERING SIZE"), Holdco will include in such registration or qualification, in the priority listed below, up to the Maximum Offering Size: (i) first, so much of the Shares requested to be included in such registration or qualification by Clairvest, as would not cause the offering to exceed the Maximum Offering Size; (ii) second, such number of Shares requested to be included in such registration or qualification by the other Holders (allocated, if necessary, for the offering not to exceed the Maximum Offering Size, pro rata among such other Holders on the basis of the relative number of Shares requested by such other Holders to be included in such registration or qualification); and 19 19 (iii) third, any Shares proposed to be registered or qualified by Holdco. (e) No Shareholder shall have the right to restrain or delay any registration or qualification of Shares by Holdco on the basis of any dispute or controversy concerning a Demand Registration. VII.2 Incidental Registration (a) If Holdco proposes to register any of its Shares under the Securities Laws, it will each such time, subject to the provisions of Section 6.2(b) hereof, give prompt written notice at least twenty (20) days prior to the anticipated filing date of the prospectus or registration statement relating to such registration to each Shareholder which notice shall set forth such Shareholders' rights under this Section 6.2 and shall offer all Shareholders the opportunity to include in such prospectus or registration statement such number of Shares as each such Shareholder may request (an "INCIDENTAL REGISTRATION"). Upon the written request of any such Shareholder made within ten (10) days after the receipt of notice from Holdco (which request shall specify the number of Shares intended to be disposed of by such Shareholder), Holdco will use its best efforts to effect the qualification or registration under the Securities Laws of all Shares which Holdco has been so requested to quality or register by such Shareholders, to the extent requisite to permit the disposition of the Shares so to be qualified or registered; provided that (A) if such qualification or registration involves a Public Offering, all such Shareholders requesting to be included in Holdco's prospectus or registration must sell their Shares to the underwriters of the Public Offering on the same terms and conditions as apply to Holdco, and (B) if, at any time after giving written notice of its intention to qualify or register any Shares pursuant to this Section 6.2(a) and prior to the effective date of the prospectus or registration statement filed in connection with such qualification or registration, Holdco shall determine for any reason not to qualify or register such Shares, Holdco shall give written notice to all such Shareholders and, thereupon, shall be relieved of its obligation to register any Shares in connection with such qualification or registration (without prejudice, however, to rights of any of the Shareholders under Section 6.1 hereof). No qualification or registration effected under this Section 6.2 shall relieve Holdco of its obligations to effect a Demand Registration to the extent required by Section 6.1 hereof. Holdco will pay all Registration Expenses in connection with each qualification or registration of Shares requested pursuant to this Section 6.2. (b) If a qualification or registration pursuant to this Section 6.2 involves a Public Offering (other than in the case of a Public Offering requested by Clairvest, in a Demand 20 20 Registration, in which case the provisions with respect to priority of inclusion in such offering set forth in Section 6.1(d) shall apply) and the managing underwriter advises Holdco that, in its view, the number of Shares that Holdco and such Shareholders intend to include in such qualification or registration exceeds the Maximum Offering Size, Holdco will include in such qualification or registration the Maximum Offering Size: (i) first, so much of the Shares proposed to be qualified or registered by Holdco, not to exceed two-thirds (_) of the Maximum Offering Size; (ii) second, all Shares requested to be included in such qualification or registration by any Shareholder pursuant to this Section 6.2 (allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Shareholders on the basis of the relative number of Shares so requested to be included in such qualification or registration); and (iii) so much of the remainder of the Shares proposed to be qualified or registered by Holdco as would not cause the offering to exceed the Maximum Offering Size. VII.3 Holdback Agreements If any qualification or registration of Shares shall be in connection with a Public Offering, each Shareholder agrees not to effect any Public Sale of any Shares or of any securities convertible into or exchangeable or exercisable for any Shares (in each case, other than as part of such Public Offering) except as the managing underwriter may advise reasonably. ARTICLE VIII CORPORATE GOVERNANCE VIII.1 Voting and Replacement Each of the Shareholders shall vote or cause to be voted the Shares beneficially owned or controlled by it and exercise its influence so that: (a) The Board shall consist of seven (7) Directors; 21 21 (b) The Corporation Board shall consist of seven (7) Corporation Directors, who shall be the same seven (7) individuals as comprise the Board; (c) Four (4) nominees of Gaspar, two (2) nominees of Clairvest and one (1) nominee of the Stitzer Group, shall be elected and maintained in office as Directors and as Corporation Directors; (d) On the appointment or election of each Director, the secretary of Holdco shall make note of the nominator of the Director in the records of Holdco, and the nominator shall be entitled by direction in writing, from time to time, to remove its nominee or nominees and to nominate his successor or successors who shall promptly be elected a Director as contemplated herein; (e) On the appointment or election of each Corporation Director, the secretary of the Corporation shall make note of the nominator of the Corporation Director in the records of the Corporation, and the nominator shall be entitled by direction in writing, from time to time, to remove its nominee or nominees and to nominate his successor or successors who shall promptly be elected a Corporation Director as contemplated herein; (f) The number of Directors from time to time constituting a quorum at the meetings of the Board shall be a majority of the Directors, provided that at least one (1) Director nominated by Clairvest must be present; (g) Notwithstanding Section 7.1(f) hereof, if notice of a meeting of the Board has been duly given and on two consecutive occasions there is no quorum by reason of the absence of the Clairvest nominee, a third notice of meeting of the Board may be issued, a quorum for such meeting constituted and the meeting held without the Clairvest nominee being present; (h) The number of Corporation Directors from time to time constituting a quorum at the meetings of the Corporation Board shall be a majority of the Corporation Directors, provided that at least one (1) Director nominated by Clairvest must be present; (i) Notwithstanding Section 7.1(h) hereof, if notice of a meeting of the Corporation 22 22 Board has been duly given and on two consecutive occasions there is no quorum by reason of the absence of the Clairvest nominee, a third notice of meeting of the Board may be issued, a quorum for such meeting constituted and the meeting held without the Clairvest nominee being present; (j) Subject to Section 7.1(k) hereof, resolutions of the Directors and the Corporation Directors shall be decided by a majority of those voting; (k) A resolution to amend any provision of the Management Agreement among the Corporation, C.F. Capital Corporation, G. John Krediet and Stephen L. Larson dated January 12, 1996, as amended from time to time, may only be passed with the unanimous approval of the Corporation Directors; (l) A resolution authorizing or approving any of the following matters in respect of Holdco may only be passed provided at least one (1) of the Directors nominated by Clairvest approves the resolution, such approval not to be unreasonably withheld: (i) any acquisition over Five Million ($5,000,000) Canadian Dollars; (ii) capital expenditures which, in the aggregate, would exceed the annual budget of Holdco by in excess of ten (10%) percent thereof; (iii) any issuance of debt or equity securities or options to acquire such securities; (iv) any sale or disposition of any material part of the business of Holdco other than the sale of all or substantially all of the assets of Holdco in circumstances in which either Clairvest's realized price per Share yields Clairvest a simple annual rate of return of at least twelve (12%) percent, or after eighteen (18) months from the date hereof, Holdco has achieved the earnings before tax, depreciation and amortization ("EBTDAPS") projections as shown on Schedule "B"; (v) any winding-up, liquidation or dissolution of Holdco or any of its subsidiaries; 23 23 (vi) any merger, amalgamation or arrangement with any other entity, corporate or otherwise, other than the amalgamation contemplated in Section 11.1 hereof; (vii) any approval of the annual budget of Holdco, or any amendments or modifications thereof; (viii) any transaction or course of action which may cause Holdco to deviate materially from its annual budget; (ix) any determination concerning compensation of the Management Shareholders; and (x) any declaration or payment of a dividend or other distribution to any Shareholder. provided, that such approval of at least one (1) of the Directors nominated by Clairvest upon such matters need not be obtained if there has been a change of control of Clairvest at any time after the date of this Agreement; (m) A resolution authorizing or approving any of the following matters in respect of the Corporation may only be passed provided at least one (1) of the Corporation Directors nominated by Clairvest approves the resolution, such approval not to be unreasonably withheld (i) any acquisition over Five Million ($5,000,000) Canadian Dollars; (ii) capital expenditures which, in the aggregate, would exceed the annual budget of the Corporation by in excess of ten (10%) percent thereof; (iii) any issuance of debt or equity securities or options to acquire such securities; (iv) any sale or disposition of any material part of the business of the Corporation other than the sale of all or substantially all of the assets of the Corporation in circumstances in which either 24 24 Clairvest's realized price per Share yields Clairvest a simple annual rate of return of at least twelve (12%) percent, or after eighteen (18) months from the date hereof, the Corporation has achieved the earnings before tax, depreciation and amortization ("EBTDAPS") projections as shown on Schedule "B"; (v) any winding-up, liquidation or dissolution of the Corporation or any of its subsidiaries; (vi) any merger, amalgamation or arrangement with any other entity, corporate or otherwise, other than the amalgamation contemplated in Section 11.1 hereof;; (vii) any approval of the annual budget of the Corporation, or any amendments or modifications thereof; (viii) any transaction or course of action which may cause the Corporation to deviate materially from its annual budget; (ix) any determination concerning compensation of the Management Shareholders; and (x) any declaration or payment of a dividend or other distribution to any Shareholder. provided, that such approval of at least one (1) of the Directors nominated by Clairvest upon such matters need not be obtained if there has been a change of control of Clairvest at any time after the date of this Agreement; (n) The Chairman of a meeting of the Board or the Corporation Board shall not have a second or casting vote; (o) The Directors shall be paid such remuneration as may from time to time be determined by the Board. Such remuneration shall be in addition to any salary or professional fees payable to a Director who services Holdco in any other capacity. In addition, the Directors shall be reimbursed for their out-of-pocket expenses incurred in attending Board meetings or meetings 25 25 of Shareholders or otherwise in the performance by them of their duties as the Board may from time to time determine; (p) The Corporation Directors shall be paid such remuneration as may from time to time be determined by the Corporation Board. Such remuneration shall be in addition to any salary or professional fees payable to a Corporation Director who services the Corporation in any other capacity. In addition, the Corporation Directors shall be reimbursed for their out-of-pocket expenses incurred in attending Corporation Board meetings or meetings of Shareholders or otherwise in the performance by them of their duties as the Corporation Board may from time to time determine; (q) A meeting of the Board, in person or, if agreed unanimously by the Board, by teleconference, shall, at a minimum, be held no later than six (6) months from the date of the last meeting of the Board. (r) A meeting of the Corporation Board, in person or, if agreed unanimously by the Corporation Board, by teleconference, shall, at a minimum, be held no later than six (6) months from the date of the last meeting of the Corporation Board. VIII.2 Meetings with Management Clairvest may request a meeting with management of Holdco, the date, location, which members of senior management shall be in attendance, and the agenda of which meeting shall be set by Clairvest, provided that senior management of Holdco shall only be obliged to participate in two (2) such meetings in any particular fiscal year. ARTICLE IX RESOLUTION OF DISPUTES IX.1 Arbitration Any dispute, difference or disagreement arising out of or relating to this Agreement which cannot be settled by the Shareholders may be submitted by any of the Shareholders to arbitration in Halifax pursuant to the provisions of the Arbitration Act of Nova Scotia. There shall be a single arbitrator jointly appointed by the Shareholders or, if they are 26 26 unable to agree, pursuant to the provisions of the Arbitration Act of Nova Scotia. The arbitrator may order the parties to produce any documents prior to the arbitration or to submit any witness to pre-arbitration discovery. IX.2 Arbitrator's Fees The arbitrator's fees and disbursements and all other reasonable fees and disbursements including legal fees, incurred by the Parties in connection with the arbitration shall be borne by the unsuccessful party, provided however, that if there is no clear unsuccessful party, the parties agree to pay such fees and expenses in opposite proportion to how their respective position is upheld by the arbitrator. ARTICLE X ENFORCEMENT OF SHAREHOLDERS' AGREEMENT X.1 Voting Power - Holdco The Shareholders shall at all times use their voting powers (whether expressed by way of vote or written consent) in accordance with the provisions of this Agreement for the purposes of giving effect to the same and to ensure that the Directors shall exercise their powers as members of the Board consistent with this Agreement and for the purposes of effectuating the same. The Board shall ensure that the officers and employees of Holdco shall carry out all duties which they are required to perform under the provisions of this Agreement. X.2 Voting Power - Corporation Holdco shall at all times use its voting powers (whether expressed by way of vote or written consent) in accordance with the provisions of this Agreement for the purposes of giving effect to the same and to ensure that the Corporation Directors shall exercise their powers as members of the Corporation Board consistent with this Agreement and for the purposes of effectuating the same. The Board shall ensure that the officers and employees of the Corporation shall carry out all duties which they are required to perform under the provisions of this Agreement. X.3 Legend Reference to and notice of this Agreement shall be endorsed on all certificates 27 27 issued by the Corporation and by Holdco representing Shares. X.4 Additional Parties Every issue and transfer of Shares shall be subject to the condition that each subscriber or transferee, as the case may be, shall, if not a party hereto execute an Assumption Agreement. The President and Secretary of Holdco are hereby expressly authorized to execute Assumption Agreements from time to time on behalf of the Shareholders. Any agreement to be bound hereby and any other agreement in favour of the parties hereto shall be effectively delivered to each party hereto by delivering to the secretary of Holdco a signed copy thereof and the secretary shall thereupon forward a photocopy of such copy to each party hereto. X.5 Conflict with Memorandum and Articles of Association In the event of a conflict or inconsistency between the terms of this Agreement and the Memorandum and Articles of Association of Holdco or the Corporation, the provisions of this Agreement shall prevail. ARTICLE XI BUSINESS OF HOLDCO AND CORPORATION XI.1 Except with the written consent of Clairvest and the holders of not less than 50% of the Shares, Holdco shall not engage in any business other the holding of the shares of the Corporation, and the Corporation shall not engage in any business other than the manufacturing, bottling, distribution and/or sale of beverages of any nature or kind. ARTICLE XII FUTURE TRANSACTION XII.1 The parties hereto acknowledge and agree that Holdco, the Corporation and certain of its wholly owned Canadian subsidiaries shall amalgamate in the future, and in any event prior to January 1, 1999, and that following such amalgamation this shareholder's agreement shall continue to apply to the amalgamated company, mutatis mutandis. For greater certainty and without limiting the generality of the foregoing, it is acknowledged and agreed that following such amalgamation, references herein to Holdco or the Corporation shall be deemed to be references to the corporation continuing from such amalgamation. 28 28 XII.2 The parties further acknowledge and agree that the capital structure of Holdco shall be reorganized on or prior to June 1, 1998, such that the holders of Class A Common Shares, Class B Common Shares, Class C Common Shares and Class F Common Shares of Holdco shall exchange such Shares on a one for one basis for Class D Common Shares of Holdco, which Class D Common Shares shall have the same rights and attributes as the Class A Common Shares of the Corporation. Notwithstanding anything in this Agreement, until such capital reorganization shall have been effected and so long as there remains outstanding more than one class of shares, references in this Agreement to any one class of shares shall be deemed to be references to all outstanding classes of shares, as if there were only one class of shares outstanding at the relevant time. ARTICLE XIII COVENANTS, REPRESENTATIONS AND WARRANTIES XIII.1 Holdco represents and warrants to the Shareholders that as of the date hereof: (a) Holdco has the necessary corporate power to own or lease its property and to carry on its business as now being conducted by it and is duly qualified as a corporation to do business in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary; and (b) No person, firm or corporation has any agreement or option or any right or privilege capable of becoming an agreement, for the purchase, subscription, allotment or issuance of any of the unissued shares in the capital of Holdco. XIII.2 The Corporation represents and warrants to the Shareholders that as of the date hereof: (a) The Corporation has the necessary corporate power to own or lease its property and to carry on its business as now being conducted by it and is duly qualified as a corporation to do business in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary; and (b) Other than the options set out in Schedule E, no person, firm or corporation has any agreement or option or any right or privilege capable of becoming an 29 29 agreement, for the purchase, subscription, allotment or issuance of any of the unissued shares in the capital of the Corporation. XIII.3 Holdco covenants and agrees that it will deliver to each of the Shareholders audited financial statements of Holdco within ninety (90) days of each fiscal year end of Holdco. Holdco further covenants and agrees that it will deliver to each of the Shareholders periodic financial statements for each of its subsidiaries, and on a consolidated basis, within thirty (30) days after the end of the period, which will include an income statement, a statement of cash flows, balance sheet, and exhibits detailing net cooler placements and water sales in units. For the purposes of this agreement, a "PERIOD" shall mean a period of four (4) calendar weeks, of which there are thirteen (13) such periods in a particular fiscal year. XIII.4 Except as otherwise provided for herein or as specifically consented to in writing by the Shareholders, Holdco shall not, and shall not make any agreement to, directly or indirectly, sell, assign, transfer, give, devise, bequeath, mortgage, charge, pledge, hypothecate or otherwise dispose of, alienate or in anyway encumber or create a security interest in, or grant any option on, any shares in the capital stock of the Corporation. Any attempt to accomplish or effect any or all of the acts prohibited hereby shall be null and void. For greater certainty, any change or attempt to effect a change in the beneficial ownership of shares in the capital stock of the Corporation by Holdco shall be deemed to be a transfer or an attempt to transfer shares in the capital stock of the Corporation by Holdco. ARTICLE XIV MISCELLANEOUS XIV.1 Amendments This Agreement represents the entire agreement among the parties and may be amended only in writing signed by all parties affected thereby. XIV.2 Notices All notices given pursuant to this Agreement shall be in writing and given by mail, courier, fax or personal delivery to the parties as follows: To Holdco and the Corporation: 19 Fielding Avenue Dartmouth, Nova Scotia B3B 1C9 30 30 Fax No. 468-2751 Attention: President To Clairvest: 22 St. Clair Avenue East Suite 1700 Toronto, Ontario M4T 2S3 Fax No. (416) 964-5828 Attention: Kenneth B. Rotman To Gaspar: Cartrust Corporation Limited White Park House White Park Road P.O. Box 806 E Bridgetown, Barbados Fax No. (246) 436-7867 Attention: Marry Ellen Bourque To C. Sean Day: c/o Navios Corporation Stamford Harbour Park 333 Ludlow Street Stamford, CT 06902 Fax No. 203-961-0650 To Larson: c/o C.F. Capital Corporation One Landmark Square Eighteen Floor Stamford, Connecticut U.S.A. 06901 Fax No. 203-325-1057 To Newman: Kevin Newman 200 Park Avenue Suite 2200 New York, New York 10166 Fax No. 212-297-4024 To Mark Stitzer: 290 Round Hill Road Greenwich, Connecticut USA 06831 31 31 Fax No. 203-629-0939 To Lucy Stitzer: 290 Round Hill Road Greenwich, Connecticut USA 06831 Fax No. 203-629-0939 To Stewart Allen: c/o Canadian Springs Water Company 17-3771 North Fraser Way Burnaby, BC V5J 5K6 Fax No. 604-437-4002 or to such other address, fax number or office of a party as that party may notify all other parties from time to time. XIV.3 Effective Time of Notice Notices shall be deemed given upon the earlier of the following: (a) If mailed, on the fifth Business Day following deposit in the mails; (b) If given by fax, on transmission; (c) On receipt. XIV.4 Governing Law This Agreement shall be governed by and construed in accordance with the laws of the Province of Nova Scotia and the federal laws of Canada applicable therein. XIV.5 Assigns This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. XIV.6 Further Assurances 32 32 The parties hereto shall do such further acts, execute and deliver such further documents and give such further assurances as may be necessary or desirable to give full effect to this Agreement. XIV.7 Time Time is of the essence of this Agreement. XIV.8 Counterparts This Agreement may be executed in one or more counterparts each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF the parties hereto have properly executed this Agreement on the date and at the place first written above. SPARKLING SPRING WATER GROUP LIMITED Per: /s/Stephen Larson ------------------------------- c/s Per: /s/Art Goodick ------------------------------- SPARKLING SPRING WATER LIMITED Per: /s/Stephen Larson ------------------------------- c/s Per: /s/Art Goodick ------------------------------- CLAIRVEST GROUP INC. 33 33 Per: /s/Ken Rotman ------------------------------- c/s Per: /s/Abby Strahl ------------------------------- GASPAR LIMITED Per: /s/Mary Ellen Bourque ------------------------------- c/s Per: ------------------------------- 34 34 /s/C. Sean Day - -------------------------------- ------------------------------- Witness to C. Sean Day C. SEAN DAY /s/Stephen Larson - -------------------------------- ------------------------------- Witness to Stephen L. Larson STEPHEN L. LARSON /s/Kevin Newman - -------------------------------- ------------------------------- Witness to Kevin Newman KEVIN NEWMAN /s/ Mark Stitzer - -------------------------------- ------------------------------- Witness to Mark Stitzer MARK STITZER /s/Lucy Stitzer - -------------------------------- ------------------------------- Witness to Lucy Stitzer LUCY STITZER /s/Stewart Allen - -------------------------------- ------------------------------- Witness to Stewart Allen STEWART ALLEN 35 SCHEDULE "A" THIS ASSUMPTION AGREEMENT made the day of 19 ; B E T W E E N: SPARKLING SPRING WATER GROUP LIMITED (hereinafter called "Holdco") - and - , of , and , of acting on behalf of themselves and the Shareholders - and - , of , and , of acting on behalf of themselves and the Shareholders (hereinafter the "NEW SHAREHOLDER") WHEREAS Holdco and the Shareholders entered into an agreement dated o , 1997 (hereinafter the "AGREEMENT"), a copy of which is attached hereto, affecting the transfer or pledge of shares in Holdco and other rights of the holders of shares. AND WHEREAS the Agreement provides that no shares shall be issued to any other party unless and until such party executes this Assumption Agreement; AND WHEREAS the New Shareholder is desirous of having ( ) shares in Holdco registered in the name of the New Shareholder; NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants and agreements herein contained and subject to the terms and conditions hereinafter set out, the parties agree as follows: 1. All terms in this Assumption Agreement shall have the same meaning as in the Agreement and this Assumption Agreement shall amend the Agreement as provided herein and shall be read and construed therewith as if they constituted but one document. 36 2. The New Shareholder agrees to be bound by the terms and conditions of the Agreement as if the New Shareholder were one of the Shareholders named in such Agreement. 3. Holdco and the Shareholders agree to accept the New Shareholder as a shareholder in Holdco and to be bound to the New Shareholder as if the New Shareholder had been one of the Shareholders originally named in the Agreement. 4. The New Shareholder agrees to assume all the rights and obligations of under the Agreement so that as of the date hereof, the New Shareholder shall replace as a Shareholder. 5. Any notices or other communications given pursuant to the Agreement to the New Shareholder shall be given in accordance with Section 12.2 of the Agreement to the New Shareholder, addressed as follows: Name of Party Address Fax No. Attention:____________________ (insert office such as President) IN WITNESS WHEREOF the parties hereto have executed these presents by affixing their hands and seals the day and year first above written. SIGNED, SEALED AND DELIVERED ) SPARKLING SPRING WATER in the presence of: ) GROUP LIMITED ) ) ) Per:____________________________________ ) ) ) Per:____________________________________ ) ) ) _____________________________________ ) President ) ) ) _____________________________________ ) Secretary ) ) The President and Secretary signing on their ) own behalf and on behalf of the Shareholders ) ) ) ______________________________________ 37 SCHEDULE B - PAGE 1 (Shareholders Agreement) CONSOLIDATED SPARKLING SPRING WATER INCOME STATEMENT
(C$ Thousands) Revenue 1991 1992 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- ---- ---- Buxton 5,770 7,440 7,876 8,902 11,436 13,151 14,729 Aquaporte 0 1,224 1,592 2,324 2,823 3,244 3,568 SSW 3,813 4,595 4,975 6,109 7,246 8,129 8,775 CS 5,419 6,461 8,079 10,179 12,138 13,331 14,853 -------------------------------------------------------------------------------------------- 15,002 19,720 22,522 27,515 33,642 37,856 41,926 Growth 31.5% 14.2% 22.2% 22.3% 12.5% 10.8% Cost of Sales and Operating Costs Buxton 6,273 6,682 6,266 6,624 7,724 8,627 9,226 Aquaporte 0 1,146 1,224 1,763 1,874 1,945 2,030 SSW 2,908 3,873 3,925 4,728 5,440 5,938 6,346 CS 3,650 4,491 6,392 7,601 9,205 9,707 9,860 -------------------------------------------------------------------------------------------- 12,831 16,172 17,808 20,713 24,243 26,217 27,463 Operating Cash Flow Buxton (503) 778 1,609 2,278 3,711 4,524 5,503 Aquaporte 0 78 368 562 949 1,299 1,538 SSW 905 722 1,050 1,384 1,806 2,191 2,439 CS 1,769 1,970 1,687 2,578 2,933 3,624 4,993 -------------------------------------------------------------------------------------------- 2,171 3,548 4,714 6,801 9,399 11,639 14,463 Margin % 14.5% 18.0% 20.9% 24.7% 27.9% 30.7% 34.5% Growth % 63.4% 32.9% 44.3% 38.2% 23.8% 24.3% Corporate Overhead, which includes Larson & Krediet Compensation & C.F. Capital expenses 1,367 1,469 ---------------------------- EBITDA 10,272 12,994 Depreciation and Amort. 4,205 4,289 Interest Expense 3,059 2,852 Other Expense/(Income) 126 126 ---------------------------- Pre-Tax Income 2,881 5,727 Income Tax 299 2,205 Dividends 0 0 ---------------------------- Net Income Available to Common 2,582 3,522
Revenue 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- Buxton 16,202 17,822 19,605 21,565 23,721 Aquaporte 3,925 4,318 4,750 5,225 5,747 SSW 9,464 10,208 11,013 11,882 12,823 CS 16,338 17,972 19,419 20,603 21,861 --------------------------------------------------------------- 45,930 50,320 54,785 59,275 64,152 Growth 9.5% 9.6% 8.9% 8.25 8.2% Cost of Sales and Operating Costs Buxton 10,028 10,908 11,874 12,934 14,102 Aquaporte 2,229 2,392 2,588 2,760 2,970 SSW 6,787 7,262 7,775 8,330 8,930 CS 10,817 11,888 12,799 13,560 14,366 --------------------------------------------------------------- 29,862 82,430 35,016 37,585 40,368 Operating Cash Flow Buxton 6,174 6,914 7,731 8,631 9,619 Aquaporte 1,696 1,926 2,181 2,484 2,777 SSW 2,677 2,946 3,237 3,552 3,893 CS 5,521 6,104 6,620 7,043 7,494 --------------------------------------------------------------- 16,068 17,890 19,769 21,690 23,783 Margin % 35.0% 35.6% 36.1% 36.6% 37.1% Growth % 11.1% 11.3% 10.5% 9.7% 9.6% Corporate Overhead, which includes Larson & Krediet Compensation & C.F. Capital expenses 1,569 1,679 1,790 1,903 2,024 ---------------------------------------------------------------- EBITDA 14,499 16,211 17,979 19,788 21,759 Depreciation and Amort. 4,024 4,043 3,882 2,395 2,403 Interest Expense 2,404 1,840 1,153 379 (465) Other Expense/(Income) 126 83 0 0 0 ---------------------------------------------------------------- Pre-Tax Income 7,945 10,265 12,945 17,014 19,811 Income Tax 3,059 3,952 4,984 6,550 7,627 Dividends 0 0 0 0 0 ---------------------------------------------------------------- Net Income Available to Common 4,886 6,313 7,961 10,463 12,184
Notes (1) Prior to 1996 CS figures represent a March 31 Year-end. (The 3/31/95 year is placed in the 1994 column.) 38 SCHEDULE B - PAGE 2 (Shareholders Agreement) EBTDAPS PROJECTION For the purposes of section 5.04(b) of the Shareholders Agreement and sections 2.02 and 2.04 of the Management Agreement EBTDAPS shall mean: Net Income plus (i) Income Taxes, (ii) Depreciation, (iii) Amortization, and (iv) payments made to Krediet, Larson and C.F. as described in sections 2.04(a) and (b) of the Management Agreement, DIVIDED BY the number of fully diluted shares outstanding at the time. The depreciation of assets and amortization of goodwill will utilize the same accounting practices as in the December 31, 1995 audited financials for the company as prepared by Ernst & Young. For greater clarity, the calculation will be on an after interest expense basis. EBTDAPS Target in Canadian Dollars
1996 $ 3.86 1977 $ 5.31 1998 $ 6.30 1999 $ 7.45 2000 $ 8.68 2001 $ 9.98 2002 $11.16
39 3 ) [New Shareholder] SCHEDULE "C" REGISTRATION PROCEDURES Whenever Shareholders request that any Shares be qualified or registered pursuant to Section 6.1 or 6.2, Holdco will, subject to the provisions of such Sections, use its best efforts to effect the qualification or registration and the sale of such Shares in accordance with the intended method of disposition thereof as quickly as practicable, and in connection with any such request: (a) Holdco will as expeditiously as possible prepare and file with the SEC and/or with the relevant Canadian securities regulatory authority a prospectus and/or registration statement on any form for which Holdco then qualifies or which counsel for Holdco shall deem appropriate and which form shall be available for the sale of the Shares to be qualified or registered thereunder in accordance with the intended method of distribution thereof, and use its best efforts to cause such filed prospectus and/or registration statement to become and remain effective for a period of not less than ninety (90) days. (b) Holdco will, if requested, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Shareholder and each underwriter, if any, of the Shares covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter Holdco will furnish to such Shareholder and underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Shareholder or underwriter may reasonably request in order to facilitate the disposition of the Shares owned by such Shareholder. (c) After the filing of the prospectus and/or registration statement, Holdco will promptly notify each Shareholder holding Shares covered by such prospectus and/or registration statement of any stop order or cease trade order issued or threatened by the SEC or by any relevant Canadian securities regulatory authority and take all reasonable actions required to prevent the entry of such stop order or cease trade order or to remove or revoke it if entered. (d) Holdco will use its best efforts to (i) register or qualify the Shares covered by such prospectus or registration statement under such other securities or blue sky laws of such 40 3 jurisdictions in the United States and Canada as any Shareholder holding such Shares reasonably (in light of such Shareholder's intended plan of distribution) requests and (ii) cause such Shares to be qualified or registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of Holdco and do any and all other acts and things that may be reasonably necessary or advisable to enable such Shareholder to consummate the disposition of the Shares owned by such Shareholder; provided that Holdco will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction, or (C) consent to general service of process in any such jurisdiction. (e) Holdco will immediately notify each Shareholder holding such Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Laws, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Shares, such prospectus will contain full, true and plain disclosure of all material facts relating to the securities covered thereby and will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made and promptly prepare and make available to each such Shareholder any such supplement or amendment. (f) Upon the execution of confidentiality agreements in form and substance satisfactory to Holdco, Holdco will make available for inspection by any Shareholder and any underwriter participating in any disposition pursuant to a prospectus or registration statement being filed by Holdco and any attorney, accountant or other professional retained by any such Shareholder or underwriter (collectively, the "INSPECTORS"), all financial and other records, pertinent corporate documents and properties of Holdco (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause Holdco's officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such prospectus or registration statement. Records that Holdco determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such prospectus or registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or from any Canadian securities regulatory authority. (g) Holdco will furnish to each such Shareholder and to each such underwriter, if any, a signed counterpart, addressed to such underwriter, of (i) an opinion or opinions of counsel to Holdco and (ii) a comfort letter or comfort letters from Holdco's independent public or chartered 41 4 accountants, each in customary form and covering such matters the type customarily covered by opinions or comfort letters, the case may be, as the Holders or managing underwriter therefor reasonably requests. (h) Holdco will otherwise use its best efforts comply with all applicable rules and regulations of the SEC and the relevant Canadian securities regulatory authorities. (i) Holdco may require each such Shareholder to promptly furnish in writing to Holdco such information regarding the distribution of the Shares as Holdco may from time to time reasonably request and such other information as may be legally required in connection with such registration or qualification. Each such Shareholder agrees that, upon receipt of a notice from Holdco of the happening of any event of the kind described in paragraph (e) above, such Shareholder will forthwith discontinue disposition of Shares pursuant to the prospectus or registration statement covering such Shares until such Shareholder's receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (e) above, and, so directed by Holdco, such Shareholder will deliver to Holdco all copies, other than any permanent file copies then in such Shareholder's possession, of the most recent prospectus covering such Shares at the time of receipt of such notice. In the event that Holdco shall give such notice, Holdco shall extend the period during which such prospectus or registration statement shall be maintained effective (including the period referred to in paragraph (a) above) by the number of days during the period from and including the date of the giving of notice pursuant to paragraph (e) above to the date when Holdco shall make available to such Shareholder a prospectus supplemented or amended to conform with the requirements of paragraph (e) above. Holdco agrees to indemnify and hold harmless each Shareholder holding Shares covered by a prospectus or registration statement, its officers, directors and agents, and each person, if any, who controls such Shareholder within the meaning of Section 15 of the Securities Act, Section 20 of the Exchange Act or Section 1 of the Securities Act (Ontario) from and against any and all losses, claims, damages and liabilities (including those resulting from any order made or any inquiry, investigation or proceeding commenced or threatened by any securities regulatory authority, stock exchange or by any other competent authority) caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Shares (as amended or supplemented if Holdco shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, 42 5 except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information furnished in writing to Holdco by such Shareholder or on such Shareholder's behalf expressly for use therein; provided that Holdco shall not be liable for any untrue statement or omission contained in a preliminary prospectus which untrue statement or omission was corrected in a final prospectus or supplement which was furnished to such Shareholder. Holdco also agrees to indemnify any underwriters of the Shares, their officers, directors, employees and agents and each person who controls such underwriters (other than in respect of loss of profit or information relating solely to the underwriters) on substantially the same basis as that of the indemnification of the Shareholders provided in this paragraph and which indemnification shall provide, in addition, an indemnity in respect of any breach of representation or warranty of Holdco contained in any underwriting agreement in respect of Shares. 43 SCHEDULE "D" FAIR MARKET VALUE DETERMINATION PROCEDURES For the purposes of Section 5.7, "FAIR MARKET VALUE" shall mean the greater of: (ii) the potential public market value of the Shares being valued; (iii) the value at which a strategic buyer would pay for all of the outstanding Shares of Holdco multiplied by the relevant percentage of Holdco being appraised; and (iv) the value at which a financial buyer would pay for all of the outstanding Shares of Holdco multiplied by the relevant percentage of Holdco being appraised. Fair market value shall be determined on a per Share basis (based on the aggregate fair market value of all Shares assuming that all conversion rights attached thereto have been exercised). Fair market value shall be calculated: (b) on the basis that the buyer is under no compulsion to buy and the seller is under no compulsion to sell, (c) on a going-concern basis, (d) without any discount for minority interest or any premium for control; (e) assuming that all non-arm's length agreements are no longer in place, including the Management Agreement; and (f) there are no restrictions on transfer and that there are no costs associated with determining the fair market value. 44 SCHEDULE "E" OUTSTANDING OPTION 45 SCHEDULE "F" SUBSCRIPTION AGREEMENT FOR * TO: SPARKLING SPRING WATER GROUP LIMITED (the "COMPANY") WHEREAS the undersigned (the "SUBSCRIBER") is an employee of the Company or one of its operating subsidiaries or affiliated companies, and the Company deems it desirable to issue Class E non-voting common shares in the capital stock of the Company; AND WHEREAS the Subscriber has agreed to subscribe for Class E non-voting common shares upon the terms and conditions contained in this Subscription Agreement, and the Company has agreed to accept the subscription for Class E non-voting common shares upon the terms and conditions contained in this Subscription Agreement; NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby covenant and agree as follows: 1. SUBSCRIPTION AND ACCEPTANCE 1.1 The Subscriber hereby subscribes for _ Class E non-voting common shares (the "CLASS E SHARES") for an aggregate subscription price of U.S. $* payable to the Company in cash within 30 days from the date hereof. 1.2 The Company hereby accepts the subscription for Class E Shares and agrees to issue the Class E Shares provided that it receives an executed copy of this Agreement and the subscription price payable to "Stewart McKelvey Stirling Scales in trust" on or prior to January 15, 1998. 2. POWER OF ATTORNEY AND PROXY 2.1 The Subscriber hereby irrevocably constitutes and appoints the Vice-Chairman of the Company, and failing which, the Chairman of the Company: 46 (a) as proxyholder to attend and to vote on behalf of the Subscriber or otherwise act as its proxy or representative at every meeting of the Company at which the Subscriber as holder of Class E Shares or any shares or securities into which such Class E Shares shall have been converted or exchanged or any shares or other securities resulting from a reclassification thereof (hereinafter collectively referred to as the "SHARES"), is entitled to vote, including without limitation, any meeting at which a class vote is held in respect of non-voting shares of the Company; and (b) as its attorney for the Subscriber and in the Subscriber's name to vote and act in respect of the Shares (including signing resolutions in writing in lieu of meetings), to execute a proxy in respect of the Shares, to execute and deliver a pledge of the Shares to the lenders of the Company to secure loans to the Company, and to endorse and transfer to the Company, or its nominee, any of the Shares which may require endorsements or transfer, in order that full title to the Shares may be vested in the Company or its nominee, all as fully and effectually as the Subscriber could do. 2.2 The Subscriber declares that the power of attorney granted hereby is irrevocable and is coupled with an interest and will survive the death, incapacity and bankruptcy of the Subscriber and will extend to and be binding upon the heirs, executors, administrators, and legal personal representatives of the Subscriber. 3. REPRESENTATIONS AND WARRANTIES 3.1 By executing this Subscription Agreement, the Subscriber represents, warrants and covenants to the Company (and acknowledges that the Company is relying thereon) that: (a) the Subscriber acknowledges that no market exists for the Shares and none is expected to develop. The investment in the Shares is subject to a number of risks and the Subscriber acknowledges that no reliance has been made on any representation, express or implied; (b) the Subscriber has been independently advised about and is aware of the characteristics of the Shares, the risks relating to an investment therein and the fact that the Subscriber may not sell or transfer the Shares except in accordance with the provisions set out in this Subscription Agreement, and the Subscriber confirms that no representations have been made to the Subscriber by or on behalf of the Company with respect to the Shares; 47 (c) the Subscriber is a resident of _ ; (d) this Subscription Agreement constitutes a legal, valid, binding and enforceable obligation of the Subscriber; (e) the Subscriber is familiar with and understand the terms of this Subscription Agreement and that the Subscriber has such knowledge and experience in financial and business matters that the Subscriber is capable of evaluating the merits and risks of the investment in the Shares; (f) the Subscriber is purchasing the Shares as principal for its own account, not for the benefit of any other person, and not with a view to the resale or distribution of all or any of the Shares; (g) no offering memorandum has been delivered to the Subscriber in connection with the sale of the Shares, and the Subscriber has not become aware of any advertisement in printed media of general and regular paid circulation, radio or television with respect to the distribution of the Shares or any other advertising or sales literature (as defined in subsection 56(2) of the Securities Act (Nova Scotia)); (h) the Company is a "private company" within the meaning ascribed to that term in the Securities Act (Nova Scotia) and the articles of association of the Company contain restrictions on the transfer of the Shares, prohibit any invitation to the public to subscribe for securities of the Company and restrict the number of shareholders of the Company, exclusive of persons who are in the employment of the Company and persons who, having been formerly in the employment of the Company, were, while in that employment, and have continued after termination of that employment, to own at least one share of the Company, to not more than 50 in number; (i) the rights conferred on the Subscriber by this Subscription Agreement pertain only to the Shares and this Subscription Agreement does not constitute any agreement in respect of or create any rights with respect to any shares other than the Shares, and without restricting the generality of the foregoing, this Subscription Agreement shall not be construed as concerning any shares of the Company issued to the Subscriber under any stock option plan of the Company; and 48 (j) the calculation by the Company of Fair Market Value (as defined below) shall be final and absolute and shall be binding upon the Subscriber and all heirs, executors, administrators, and legal personal representatives of the Subscriber, notwithstanding that the Shares or other shares in the Company may be sold or valued at an amount different from Fair Market Value as determined by the Company. 4. SHARE TRANSFER RIGHTS 4.1 General Restriction Except as otherwise provided for herein or as specifically consented to in writing by the Company, no Subscriber shall be entitled to, directly or indirectly, sell, assign, transfer, give, devise, bequeath, mortgage, charge, pledge, hypothecate or otherwise dispose of, alienate or in anyway encumber or create a security interest in, or grant any option on, any of the Shares. Any attempt to accomplish or effect any or all of the acts prohibited hereby shall be absolutely null and void. 4.2 Put Option The Company hereby grants to the Subscriber the option to require the Company to redeem or purchase all but not less than all of the Shares held by the Subscriber at a purchase price equal to the Fair Market Value (as hereinafter defined) of the Shares at the time of giving notice of exercise. The option is subject to the following terms and conditions: (a) The Subscriber may exercise the option during the month of May in each year by delivering notice in writing to the Company on or before May 31 in each year; (b) The closing of the purchase and sale of the Shares shall take place within 30 days following receipt by the Company of notice of exercise; (c) The closing of the purchase and sale of the Shares shall be subject to the general purchase and sale provisions attached hereto as Schedule "A"; and (d) The right of the Subscriber to require the Company to purchase all of the Shares shall be subject to the financial covenants and financing requirements affecting the Company from time to time and all applicable solvency tests. 4.3 Company's Option To Purchase Shares The Subscriber hereby grants to the Company the option, but not the obligation, to 49 purchase all but not less than all the Shares for a purchase price equal to the Fair Market Value (as hereinafter defined) of the Shares at the time of giving notice of exercise. The option is subject to the following terms and conditions: (a) The right of the Company shall be exercisable at any time by delivery of notice in writing to the Subscriber or the Subscriber's representatives; (b) The closing of the purchase and sale of the Shares shall take place within 30 days following delivery by the Company of notice of exercise; and (c) The closing of the purchase and sale of the Shares shall be subject to the general purchase and sale provisions attached hereto as Schedule "A". 4.4 Company's Right of First Refusal In the event the Subscriber desires to sell or transfer any Shares, the Subscriber shall first make an offer in writing to the Company to sell all but not less than all of the Shares, specifying the price per Share, the manner of payment and the time and place of closing. The Company shall have the right, but not the obligation to accept such offer in or whole or in part by delivering notice of acceptance to the Subscriber within 30 days following receipt of such offer. In the event that no acceptance is received by the Subscriber from the Company within such period, the offer shall be deemed to have been refused. If the Company does not accept the offer by the Subscriber, the Subscriber shall not sell or transfer any Shares at a lower price per Share or in a manner or on terms and conditions more favourable than those offered to the Company. The right of first refusal is subject to the following terms and conditions: (a) The closing of the purchase and sale of the Shares shall take place within 30 days following delivery by the Company of notice of acceptance; and (b) The closing of the purchase and sale of the Shares shall be subject to the general purchase and sale provisions attached hereto as Schedule "A". 4.5 Fair Market Value In this Subscription Agreement: (a) "FAIR MARKET VALUE" at any particular time means the amount per share that is the result of (w) the Net Value at the particular time, divided by (x) the sum of (i) the number of shares in the capital stock of the Company issued and outstanding immediately before the particular time, and (ii) the number of shares in the capital 50 stock of the Company that would have been issued and outstanding on the conversion or exchange into or for shares or exercise of all securities and options issued and outstanding immediately before the particular time that were convertible, exchangeable or carried the right to subscribe for shares (whether or not such other securities or options were convertible, exchangeable or carried the right to subscribe for shares as at the particular time); (b) "NET VALUE" at any particular time means the balance remaining when (y) the total amount of outstanding debt of the Company at the particular time calculated on a consolidated basis, is subtracted from (z) the product obtained when 7.66 is multiplied by the Operating Cash Flow; and (c) "OPERATING CASH FLOW" at any particular time means the consolidated earnings of the Company for the four immediately preceding fiscal quarters, before interest, taxes, depreciation, amortization and corporate overhead, calculated in accordance with generally accepted accounting principles applied on a basis consistent with historical policies. 5. PLEDGE OF SHARES AND CUSTODY OF SHARE CERTIFICATES 5.1 As security for the performance by the Subscriber of the Subscriber's obligations hereunder, the Subscriber hereby pledges the Shares to and in favour of the Company and directs the Company to hold all certificates representing the Shares until released upon mutual agreement of the Subscriber and the Company or upon the event of a sale or transfer of the Shares in accordance with this Subscription Agreement. 5.2 Upon a default or breach of any term of this Subscription Agreement by the Subscriber, the Company, without notice, advertisement, demand for payment or any other formality (all of which are hereby waived) may repurchase the Shares or sell by public or private sale or otherwise deal with the Shares in such manner as it thinks fit, and may hold the proceeds in lieu of any Shares realized and appropriate the same on account of any liability of the Subscriber to the Company as the Company may reasonably determine. 5.3 The Subscriber, until there has been a default or breach of any term of this Subscription Agreement, the Subscriber is entitled to receive dividends or other distributions made by the Company in respect of the Shares. 5.4 The Subscriber shall execute and deliver upon request by the Company a pledge of the Shares to the lenders of the Company for the purpose of securing loans to the Company. 51 The Subscriber acknowledges that for the purposes of securing such loans, the Company may execute and deliver on behalf of and in the name of the Subscriber a pledge of the Shares. 6. EMPLOYMENT TERMS UNAFFECTED 6.1 This Subscription Agreement is a special benefit, not a regular benefit, and shall not be construed as an agreement or understanding, express or implied, for the employment of the Subscriber for any specific period or for the issuance of any shares other than the Class E Shares described above. The Subscriber shall remain subject to discipline and termination to the same extent as if this Subscription Agreement had not been entered into by the parties. 7. TERMINATION 7.1 The rights, obligations and liabilities of the Subscriber and the Company arising from this Subscription Agreement shall terminate with respect to the Subscriber, upon the sale of his Shares in accordance with this Agreement. 7.2 At the sole discretion of the Company, the Company may, by written notice to the Subscriber, terminate this Agreement upon the Shares being listed for trading on a recognized stock exchange in Canada or the United States of America. 8. GENERAL 8.1 The Subscriber agrees to execute and deliver to the Company such further agreements, documents and assurances as may be required to give effect to the matters contemplated by this Subscription Agreement. 8.2 This Subscription Agreement shall be governed by the laws of Nova Scotia and the parties irrevocably attorn to the jurisdiction of the Courts of Nova Scotia. 8.3 This Subscription Agreement may not be assigned by the Subscriber. 8.4 This agreement shall enure to the benefit of and be binding upon the parties and their respective successors, heirs, executors, administrators, and legal personal representatives. IN WITNESS WHEREOF the Subscriber has executed this Agreement this day 52 of October, 1997. - ----------------------------- ------------------------------- Signature Witness - ----------------------------- ------------------------------- - ----------------------------- Street Address - ----------------------------- City and Province - ----------------------------- Postal Code Receipt and acceptance of the foregoing subscription for Class E Shares and consideration therefor is acknowledged by the Company this__________ day of________________________ , 1997. SPARKLING SPRING WATER GROUP LIMITED BY: ------------------------- EX-10.5 46 MANAGEMENT AGREEMENT 1 Exhibit 10.5 THIS MANAGEMENT AGREEMENT dated the 16th day of December, 1993, as amended and restated the 12th day of January, 1996; B E T W E E N: SPARKLING SPRING WATER LIMITED ("SSWL") OF THE FIRST PART - and - C.F. CAPITAL CORPORATION ("C.F.") OF THE SECOND PART - and - G. JOHN KREDIET ("Krediet") OF THE THIRD PART - and - STEPHEN L. LARSON ("Larson") OF THE FOURTH PART WHEREAS C.F. provides management services to SSWL pursuant to the terms and premises of that certain management agreement (the "Management Agreement") dated the 16th day of December, 1993, among SSWL, C.F., Krediet and Larson; AND WHEREAS Krediet and Larson are principles of C.F.; AND WHEREAS the parties hereto desire to amend and restate the terms and premises 2 of the Management Agreement; NOW THEREFORE in consideration of the premises and the mutual agreements and covenants herein contained and the sum of Ten Dollars ($10.00) now paid by each of the parties hereto to the other (the receipt and sufficiency whereof as to each of the parties is mutually admitted), the parties covenant and agrees as follows: ARTICLE I INTERPRETATION 1.01 Words importing the singular include the plural and vice versa and words importing gender include all genders. 1.02 The titles or headings contained herein are included solely for convenience, are not intended to be full accurate descriptions of the context thereof and shall not be considered part of this Agreement. 1.03 The Management Agreement is hereby amended and restated and replaced by the provisions of this agreement. ARTICLE II SERVICES AGREEMENT 2.01 C.F. agrees to provide management services to SSWL including, without restricting the generality of the foregoing, managing the operations of SSWL and negotiating such contracts, financial agreements and other arrangements and performing such other services as may be directed from time to time by the Board of Directors of SSWL. 2.02. The parties acknowledge that nothing in this Agreement shall be construed as a delegation of any of the duties or powers of the Board of Directors of SSWL to manage the business 3 -3- and affairs of SSWL and all of such powers and duties, including policy and decision making powers, are hereby expressly reserved. For greater certainty, and without limiting the generality of the foregoing, C.F. shall not, and shall ensure that management of SSWL shall not, authorize or take any action in furtherance of the following matters without the approval of the Board of Directors of SSWL; (i) any acquisition over One Million ($1,000,000) Canadian dollars; (ii) capital expenditures which, in the aggregate, would exceed the annual budget of SSWL by in excess of ten (10%) percent thereof; (iii) any issuance of debt or equity securities or options to acquire such securities; (iv) any sale or disposition of any material part of the business of SSWL other than the sale of all or substantially all of the assets of SSWL in circumstances in which either Clairvest Group Inc.'s ("Clairvest") realized price per share yields Clairvest a simple annual rate of return of at least twelve (12%) percent, or after June 12, 1997, SSWL has achieved the fully-diluted per share earnings before tax, depreciation and amortization ("EBTDAPS") projections as shown on Schedule "A" hereto; (v) any winding-up, liquidation or dissolution of SSWL or any of its subsidiaries; (vi) any merger, amalgamation or arrangement with any other identity, corporate or otherwise; 4 -4- (vii) any approval of the annual budget of SSWL, or any amendments or modifications thereof; (viii) any transaction or course of action which may cause SSWL to deviate materially from its annual budget; (ix) any determination concerning compensation of C.F.; and (x) any declaration or payment of a dividend or other distribution to any shareholder of SSWL. 2.03 The parties agree that Krediet and Larson shall be the individuals who shall provide, on behalf of C.F., the services to SSWL described above. Krediet shall devote the majority of his time and attention to the affairs of SSWL and shall use his best efforts to promote the best interests of SSWL, and covenants and agrees that SSWL shall be his principle business interest; it being understood and acknowledged that, subject to Section 2.05 hereof, Krediet has and may continue to have other investments in which he undertakes a passive function. Larson shall devote his entire time and attention during business hours to the affairs of SSWL and shall use his best efforts to promote the best interests of SSWL; it being acknowledge that Larson currently and may continue to hold the office of a director of companies including and other than SSWL. 2.04 In consideration for C.F.'s services to SSWL hereunder, SSWL agrees to pay to C.F.: (a) Base Fee: (i) a base fee of Four Hundred (U.S. $400,000.00) United States Dollars for services rendered by C.F. to SSWL hereunder during the fiscal year ended December 31, 1996; 5 -5- (ii) in each successive fiscal year of SSWL, a base fee equal to the base fee paid to C.F. in the immediately preceding fiscal year of SSWL multiplied by the percentage increase or decrease, as the case may be, of the total annual revenue of SSWL for the fiscal year then ended from the total annual revenue of SSWL in the immediately preceding fiscal year, such base fee to be calculated and payable monthly and commencing March 31, 1997, to be adjusted quarterly; provided that the base fee payable by SSWL to C.F. in any particular fiscal year shall not in any event exceed Seven Hundred and Fifty (U.S. $750,000.00) Thousand United States Dollars. (b) Bonus: (i) in each fiscal year of SSWL through the fiscal year ended December 31, 2002, a bonus equal to fifty (50%) percent of the base fee paid to C.F. in such fiscal year, provided that SSWL achieves the fully-diluted per share earnings before tax depreciation and amortization ("EBTDAPS") target for such fiscal year as set out in Schedule "A" hereto; (ii) in the event that the SSWL does not achieve the EBTDAPS target for the fiscal year ended December 31, 1997 as set out in Schedule "A" hereto, C.F. shall, provided that SSWL achieves an EBTDAPS for the fiscal year ended December 31, 1997 equal to one hundred and five (105%) percent of the EBTDAPS for the fiscal year ended December 31, 1996, be entitled to a bonus equal to that fraction of the base fee paid to C.F. for the fiscal year ended December 31, 1997 that is obtained by multiplying (i) the quotient of (A) the number obtained by subtracting one hundred and five (105%) percent of the EBTDAPS for the fiscal year ended December 31, 6 -6- 1996 from the EBTDAPS achieved by SSWL during the fiscal year ended December 31, 1997, and (B) the number obtained by subtracting one hundred and five (105%) of the EBTDAPS achieved by SSWL during the fiscal year ended December 31, 1996 from the EBTDAPS target for the fiscal year ended December 31, 1997 as set out in Schedule "A" hereto, by (ii) 0.5; and, (iii) in the event that SSWL does not achieve the EBTDAPS target for any fiscal year ended after December 31, 1997 as set out in Schedule "A" hereto, C.F. shall, provided that SSWL achieves an EBTDAPS for such fiscal year then ended equal to one hundred and three (103%) percent of the EBTDAPS achieved by SSWL in the immediately preceding fiscal year ended, be entitled to a bonus equal to that fraction of the base fee paid to C.F. for the fiscal year then ended that is obtained by multiplying (i) the quotient of (A) the number obtained by subtracting one hundred and three (103%) percent of the EBTDAPS achieved by SSWL in the immediately preceding fiscal year ended from the EBTDAPS achieved by SSWL during the fiscal year then ended, and (B) the number obtained by subtracting one hundred and three (103%) of the EBTDAPS achieved by SSWL in the immediately preceding fiscal year ended from the EBTDAPS target for the fiscal year then ended as set out in Schedule "A" hereto, by (ii) 0.5; provided, that for the purposes of this paragraph (b), all EBTDAPS calculations shall be calculated without giving effect to the payment of base salary under paragraph (a) of this Section 2.04, and all revenue calculations shall be calculated on a consolidated basis; provided further that no bonus calculated pursuant to this Section 2.04 may be less than zero ($0.00) dollars. 2.05 Neither C.F., Krediet nor Larson shall, directly or indirectly, pursue, participate, provide 7 -7- advice with respect to or have any interest in any transaction (a "Corporate Opportunity") involving the manufacturing, bottling, sale or distribution of beverages unless such participation or interest shall have first been offered to SSWL. C.F. will also be permitted to charge, and SSWL hereby agrees to pay, reasonable and customary fees in respect of investment banking advisory services provided by C.F. to SSWL from time to time in connection with successful acquisitions of Corporate Opportunities but, in any case, not for raising capital whether or not in connection with an acquisition. Provided, however, that such fees will be on a cash basis only and will be a percentage of the value of the transaction subject to the following limits: 2% on the first Cdn. $3,000,000; 1% on any amount in excess thereof; 2.06 In addition to the fees described in Section 2.03 and 2.04 hereof, SSWL shall reimburse C.F. for all reasonable out-of-pocket disbursements and office expenses incurred by C.F. from time to time in the performance of its services pursuant to this Agreement, not to exceed One Hundred Thousand (U.S. $100,000.00) United States Dollars per annum; 2.07 C.F., Krediet and Larson recognize and acknowledge that in the course of carrying out, performing and fulfilling their respective obligations to SSWL hereunder, each will have access to and will be entrusted with information that would reasonably be considered confidential to SSWL, the disclosure of which to competitors of SSWL or to the general public, will be highly detrimental to the best interest of SSWL. Such information includes, without limitation, trade secrets, know-how, marketing plans, cost figures, client lists, software, and information relating to employees, suppliers and persons in contractual relationships with SSWL. Except as may be required in the course of carrying out their respective duties hereunder, C.F., Krediet and Larson covenant and agree that they will not disclose, for the duration of this Agreement or at any time thereafter, any of such information to any person, other than to the directors, officers or employees of SSWL that have a need to know of such information, nor shall they use, nor exploit, 8 -8- directly or indirectly, the same information for any purpose other than for the purpose of SSWL. Without limiting the generality of the foregoing, neither C.F., Krediet and Larson shall for the duration of this Agreement or for a period of three (3) years thereafter have any interest or investment in any corporation, joint venture or other enterprise, directly or indirectly, involved in the manufacturing, bottling, sale or distribution of bottled water or the rental of coolers. ARTICLE III TERM, RENEWAL AND TERMINATION 3.01 The term of this Agreement (the "initial term") is ten (10) years commencing December 16, 1993. Unless otherwise cancelled or extended in accordance with the terms of this Agreement, this Agreement expires on December 15, 2003. 3.02 This Agreement shall be automatically renewed for a further term of ten (10) years upon the expiration of any term hereof unless at least thirty (30) days prior to the expiration of any such term, either party hereto notifies the other that the Agreement is to terminate on the expiration of that term. 3.03 Either party may terminate this Agreement at any time upon one hundred and eighty (180) days written notice to the other party, and all payments due to each party hereunder shall be paid in full as at the effective date of such termination. ARTICLE IV AMENDMENTS 4.01 Subject to Section 4.02 hereof, no amendment of this Agreement shall be binding unless executed or initialled in writing by each of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof 9 -9- (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. Furthermore, any amendment of this Agreement and any waiver by SSWL of any provision of this Agreement must be approved by each director of SSWL. 4.02 SSWL hereby expressly acknowledges and agrees that additional non-cash management options, incentives or other remuneration consistent with industry standards may be granted from time to time to C.F., Krediet and Larson and that the entering into of this Agreement shall not preclude the future negotiation and payment of such options, incentives and remuneration. In no event shall any such additional option, incentive or other remuneration arrangement exceed 15% of the fully diluted common share ownership of SSWL as such ownership exists from time to time. Any option, incentive or other remuneration granted pursuant to this Section 4.02 shall be at a price that is no less than the fair market value at the time of such grant. ARTICLE V GENERAL 5.01 The parties hereto shall with reasonable diligence do all such things, provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement and carry out its provisions whether in the present or future. 5.02 This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and assigns. 5.03 This Agreement shall be governed by and construed in accordance with the laws of the province of Nova Scotia. 5.04 This Agreement may be executed in one or more counterparts each of which shall be deemed to be an original and all of which taken together shall constitute one and the same 10 -10- instrument. ARTICLE VI ARBITRATION 6.01 In the event that any disagreement arises between the parties hereto with reference to this Agreement, any matter arising hereunder or any matter arising in connection herewith in respect of which the parties cannot agree, then every such disagreement may be submitted by either party hereto to arbitration in Halifax pursuant to the provisions of the Arbitration Act (Nova Scotia). The party desiring arbitration shall give written notice thereof to the other parties hereto setting forth the matter or matters to be arbitrated. The reference to arbitration shall be made to one arbitrator who shall be mutually agreeable to all parties or, if they are unable to agree, pursuant to the provisions of the Arbitration Act (Nova Scotia). The decision of the arbitrator, where practicable, shall be within one (1) month of the appointment as arbitrator. The decision of the arbitrator shall be final and be binding upon the parties with the cost of the arbitrator borne equally by C.F. and SSWL. IN WITNESS WHEREOF the parties hereto have set their hands and affixed their seals on the day and year first above written. SIGNED, SEALED AND DELIVERED SPARKLING SPRING WATER LIMITED in the presence of: Per: /s/Stephen Larson - ---------------------------------- ---------------------------------------- 11 C.F. CAPITAL CORPORATION Per: /s/Stephen Larson - ---------------------------------- ---------------------------------------- /s/G. John Krediet - ---------------------------------- ---------------------------------------- G. JOHN KREDIET /s/Stephen Larson - ---------------------------------- ---------------------------------------- STEPHEN L. LARSON 12 SCHEDULE A - PAGE 1 (Management Agreement) CONSOLIDATED SPARKLING SPRING WATER INCOME STATEMENT (C$ Thousands)
Revenue 1991 1992 1993 1994 1995 1996 1997 ---- ---- ---- ---- ---- ---- ---- Buxton 5,770 7,440 7,876 8,902 11,436 13,151 14,729 Aquaporte 0 1,224 1,592 2,324 2,823 3,244 3,568 SSW 3,813 4,595 4,975 6,109 7,246 8,129 8,775 CS 5,419 6,461 8,079 10,179 12,138 13,331 14,853 ------------------------------------------------------------------------------------------------- 15,002 19,720 22,522 27,515 33,642 37,856 41,926 Growth 31.5% 14.2% 22.2% 22.3% 12.5% 10.8% Cost of Sales and Operating Costs Buxton 6,273 6,682 6,266 6,624 7,724 8,627 9,226 Aquaporte 0 1,146 1,224 1,763 1,874 1,945 2,030 SSW 2,908 3,873 3,925 4,728 5,440 5,938 6,346 CS 3,650 4,491 6,392 7,601 9,205 9,707 9,860 ------------------------------------------------------------------------------------------------- 12,831 16,172 17,808 20,713 24,243 26,217 27,463 Operating Cash Flow Buxton (503) 778 1,609 2,278 3,711 4,524 5,503 Aquaporte 0 78 368 562 949 1,299 1,538 SSW 905 722 1,050 1,384 1,806 2,191 2,439 CS 1,769 1,970 1,687 2,578 2,933 3,624 4,993 ------------------------------------------------------------------------------------------------- 2,171 3,548 4,714 6,801 9,399 11,639 14,463 Margin % 14.5% 18.0% 20.9% 24.7% 27.9% 30.7% 34.5% Growth % 63.4% 32.9% 44.3% 38.2% 23.8% 24.3% Corporate Overhead, which includes Larson & Krediet Compensation & C.F. Capital 1,367 1,469 ------------------------ EBITDA 10,272 12,994 Depreciation and Amort. 4,205 4,289 Interest Expense 3,059 2,852 Other Expense/(Income) 126 126 ------------------------ 2881 5,727 Income Tax 299 2,205 Dividends 0 0 ------------------------ Net Income Available to Common 2,582 3,522
Revenue 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- Buxton 16,202 17,822 19,605 21,565 23,721 Aquaporte 3,925 4,318 4,750 5,225 5,747 SSW 9,464 10,208 11,013 11,882 12,823 CS 16,338 17,972 19,419 20,603 21,861 -------------------------------------------------------- 45,930 50,320 54,785 59,275 64,152 Growth 9.5% 9.6% 8.9% 8.25 8.2% Cost of Sales and Operating Costs Buxton 10,028 10,908 11,874 12,934 14,102 Aquaporte 2,229 2,392 2,588 2,760 2,970 SSW 6,787 7,262 7,775 8,330 8,930 CS 10,817 11,888 12,799 13,560 14,366 -------------------------------------------------------- 29,862 82,430 35,016 37,585 40,368 Operating Cash Flow Buxton 6,174 6,914 7,731 8,631 9,619 Aquaporte 1,696 1,926 2,181 2,484 2,777 SSW 2,677 2,946 3,237 3,552 3,893 CS 5,521 6,104 6,620 7,043 7,494 -------------------------------------------------------- 16,068 17,890 19,769 21,690 23,783 Margin % 35.0% 35.6% 36.1% 36.6% 37.1% Growth % 11.1% 11.3% 10.5% 9.7% 9.6% Corporate Overhead, which includes Larson & Krediet Compensation & C.F. Capital 1,569 1,679 1,790 1,903 2,024 -------------------------------------------------------- EBITDA 14,499 16,211 17,979 19,788 21,759 Depreciation and Amort. 4,024 4,043 3,882 2,395 2,403 Interest Expense 2,404 1,840 1,153 379 (465) Other Expense/(Income) 126 83 0 0 0 -------------------------------------------------------- 7,945 10,265 12,945 17,014 19,811 Income Tax 3,059 3,952 4,984 6,550 7,627 Dividends 0 0 0 0 0 -------------------------------------------------------- Net Income Available to Common 4,886 6,313 7,961 10,463 12,184
Notes (1) Prior to 1996 CS figures represent a March 31 Year-end. (The 3/31/95 year is placed in the 1994 column.) 13 SCHEDULE A - PAGE 2 (Management Agreement) EBTDAPS PROJECTION For the purposes of section 5.04(b) of the Shareholders Agreement and sections 2.02 and 2.04 of the Management Agreement EBTDAPS shall mean: Net Income plus (i) Income Taxes, (ii) Depreciation, (iii) Amortization, and (iv) payments made to Krediet, Larson and C.F. as described in sections 2.04(a) and (b) of the Management Agreement, DIVIDED BY the number of fully diluted shares outstanding at the time. The depreciation of assets and amortization of goodwill will utilize the same accounting practices as in the December 31, 1995 audited financials for the company as prepared by Ernst & Young. For greater clarity, the calculation will be on an after interest expense basis. EBTDAPS Target in Canadian Dollars
1996 $ 3.86 1977 $ 5.31 1998 $ 6.30 1999 $ 7.45 2000 $ 8.68 2001 $ 9.98 2002 $ 11.16
EX-10.6 47 AMENDMENT AGREEMENT 1 Exhibit 10.6 THIS AMENDMENT AGREEMENT dated October 22, 1997 ; AMONG: SPARKLING SPRING WATER LIMITED, ("SSWL") OF THE FIRST PART - and - C.F. CAPITAL CORPORATION, ("C.F.") OF THE SECOND PART - and - G. JOHN KREDIET, ("KREDIET") OF THE THIRD PART - and - STEPHEN L. LARSON, ("LARSON") OF THE FOURTH PART - and - SPARKLING SPRING WATER GROUP LIMITED, ("GROUP") OF THE FIFTH PART WITNESS THAT in consideration of the premises and the mutual agreements and covenants herein contained and the sum of $10 now paid by each of the parties to the other (the receipt and sufficiency whereof as to each of the parties is mutually admitted), the parties covenant and agrees as hereinafter set out. 2 -2- ARTICLE I. INTERPRETATION I.1 In this Agreement, unless the context requires otherwise: (a) "ORIGINAL AGREEMENT" means the Management Agreement dated the 16th day of December. 1993, as amended and restated the 12th day of January, 1996 among SSWL, C.F., Krediet and Larson; (b) "EFFECTIVE DATE" means October 22, 1997; (c) Words and expressions defined in the Original Agreement have the same meaning when used herein as contained therein. I.2 The provisions contained herein shall be deemed to be additions to the provisions contained in the Original Agreement to the extent necessary to give full and complete effect to the provisions contained herein, and this Agreement shall be supplemental to the Original Agreement and shall be read and construed therewith as if the Original Agreement and this Agreement constituted but one document. ARTICLE II. INTENT II.1 C.F. provides management services to SSWL pursuant to the terms and premises of the Original Agreement. II.2 The parties have agreed to amend the Original Agreement with effect on and from the Effective Date in accordance with the provisions set out herein. ARTICLE III. AMENDMENT AGREEMENT III.1 Notwithstanding anything contained in the Original Agreement, the parties hereby agree that on and from the Effective Date the Original Agreement be and is hereby amended by: 3 -3- (i) adding the following immediately following paragraph 2.04(iii) "(iv) C.F. shall be entitled to an additional bonus commencing January 1, 1998 for any year that the base fee is greater than or equal to US$750,000, such additional bonus to be an amount equal to 25% of the base fee paid to C.F. in respect of such fiscal year, provided that SSWL achieves the EBTDAPS target for such year as set out in Schedule "B" attached hereto. For greater certainty, the EBTDAPS target in Schedule "B" is for this additional bonus only and shall not affect any other bonus paid under the Original Agreement;" and (ii) adding the attached schedule as "Schedule "B" to the Original Agreement; ARTICLE IV. GENERAL IV.1 This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. IV.2 The parties hereto shall with reasonable diligence do all such things, provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement and carry out its provisions whether in the present or future. IV.3 This Agreement shall be governed by and construed in accordance with the laws of the Province of Nova Scotia. IV.4 This Agreement may be executed in one or more counterparts each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. 4 -4- IN WITNESS WHEREOF the parties hereto have set their hands and affixed their seals on the day and year first above written. SIGNED, SEALED AND DELIVERED in the presence of: SPARKLING SPRING WATER LIMITED Per: /s/Stephen Larson - ---------------------------------- ----------------------------------- SPARKLING SPRING WATER GROUP LIMITED Per: /s/Stephen Larson - ---------------------------------- ----------------------------------- C.F. CAPITAL CORPORATION Per: /s/Stephen Larson - ---------------------------------- ----------------------------------- Per: - ---------------------------------- ----------------------------------- /s/G. John Krediet - ---------------------------------- --------------------------------------- G. JOHN KREDIET /s/Stephen Larson - ---------------------------------- --------------------------------------- STEPHEN L. LARSON 5 SCHEDULE A CONSOLIDATED SPARKLING SPRING WATER INCOME STATEMENT (C$ Thousands) Revenue 1991 1992 1993 1994 1995 1996 1997 ------- ------- ------- ------- ------- ------- ------- Buxton 5,770 7,440 7,876 8,902 11,436 13,151 14,729 Aquaporte 0 1,224 1,592 2,324 2,823 3,244 3,568 SSW 3,813 4,595 4,975 6,109 7,246 8,128 8,776 CS 5,419 6,461 8,079 10,179 12,138 13,331 14,853 ------- ------- ------- ------- ------- ------- ------- 15,002 19,720 22,522 27,515 33,642 37,856 41,926 Growth 31.5% 14.2% 22.2% 22.3% 12.5% 10.8% Cost of Sales and Operating Costs Buxton 6,273 6,682 6,266 6,624 7,724 8,627 9,226 Aquaporte 0 1,146 1,224 1,763 1,874 1,945 2,030 SSW 2,908 3,873 3,925 4,728 5,440 5,938 6,346 CS 3,650 4,491 6,392 7,601 9,205 9,707 9,860 ------- ------- ------- ------- ------- ------- ------- 12,831 16,172 17,808 20,713 24,243 26,217 27,463 Operating Cash Flow Buxton (503) 778 1,609 2,278 3,711 4,524 5,503 Aquaporte 0 78 368 562 949 1,299 1,538 SSW 905 722 1,050 1,384 1,806 2,191 2,439 CS 1,769 1,970 1,687 2,578 2,933 3,624 4,993 ------- ------- ------- ------- ------- ------- ------- 2,171 3,548 4,714 6,801 9,399 11,639 14,463 Margin % 14.5% 18.0% 20.9% 24.7% 27.9% 30.7% 34.5% Growth % 63.4% 32.9% 44.3% 38.2% 23.8% 24.3% Corporate Overhead, which includes Larson & Krediet Compensation & C.F. Capital expenses 1,367 1,469 ------- ------- EBITDA 10,272 12,994 Depreciation and Amort. 4,205 4,289 Interest Expense 3,059 2,852 Other Expense/(Income) 126 126 ------- ------- Pre-Tax Income 2,881 5,727 Income Tax 299 2,205 Dividends 0 0 ------- ------- Net Income Available to Common 2,582 3,522
Revenue 1998 1999 2000 2001 2002 ------- ------- ------- ------- ------- Buxton 16,202 17,822 19,605 21,565 23,721 Aquaporte 3,925 4,318 4,76 0,225 5,747 SSW 9,464 10,208 11,013 11,882 12,823 CS 16,339 17,972 19,419 20,603 21,861 ------- ------- ------- ------- ------- 45,930 50,320 54,785 59,275 64,152 Growth 9.5% 9.6% 8.9% 8.25 8.2% Cost of Sales and Operating Costs Buxton 10,028 10,908 11,874 12,934 14,102 Aquaporte 2,229 2,392 2,588 2,760 2,970 SSW 6,787 7,262 7,775 8,330 8,930 CS 10,817 11,888 12,799 13,560 14,366 ------- ------- ------- ------- ------- 29,862 82,430 35,016 37,585 40,368 Operating Cash Flow Buxton 6,174 6,914 7,731 8,631 9,619 Aquaporte 1,696 1,926 2,181 2,484 2,777 SSW 2,677 2,946 3,237 3,552 3,893 CS 5,521 6,104 6,620 7,043 7,494 ------- ------- ------- ------- ------- 16,068 17,890 19,769 21,690 23,783 Margin % 35.0% 35.6% 36.1% 36.6% 37.1% Growth % 11.1% 11.3% 10.5% 9.7% 9.6% Corporate Overhead, which includes Larson & Krediet Compensation & C.F Capital expenses 1,569 1,679 1,790 1,903 2,024 ------- ------- ------- ------- ------- EBITDA 14,499 16,211 17,979 19,788 21,759 Depreciation and Amort 4,024 4,043 3,882 2,395 2,403 Interest Expense 2,404 1,840 1,153 379 (465) Other Expense/(Income) 126 83 0 0 0 ------- ------- ------- ------- ------- Pre-Tax Income 7,945 10,265 12,945 17,014 19,811 Income Tax 3,059 3,952 4,984 6,550 7,627 Dividends 0 0 0 0 0 ------- ------- ------- ------- ------- Net Income Available to Common 4,886 6,313 7,961 10,463 12,184
Notes (1) Prior to 1996 CS figures represent a March 31 Year-end. (The 3/31/95 year is placed in the 1994 column.) 6 CONSOLIDATED SPARKLING SPRING WATER INCOME STATEMENT ($ Thousands)
Revenues 1992 1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- --------- United Kingdom 7,490 8,590 10,607 14,360 16,345 18,968 Maritime Provinces 3,358 3,635 4,519 5,153 5,595 6,284 British Columbia 4,721 5,904 9,326 10,928 12,855 14,980 United States 0 6,066 7,227 8,588 9,463 10,252 --------- --------- --------- --------- --------- --------- $ 15,569 $ 24,195 $ 31,680 $ 39,029 $ 44,257 $ 50,485 Growth 109.9% 55.4% 30.9% 23.2% 13.4% 14.1% Cost of Sales/Operating Costs United Kingdom 6,668 6,720 7,805 10,236 11,224 12,305 Maritime Provinces 2,830 3,006 3,695 4,219 4,485 4,985 British Columbia 3,282 4,671 6,949 8,264 8,770 10,133 United States 0 4,590 5,523 6,540 7,140 7,466 --------- --------- --------- --------- --------- --------- 12,779 18,986 23,971 29,258 31,618 34,889 --------- --------- --------- --------- --------- --------- Operating Cash Flow $ 2,789 $ 5,209 $ 7,708 $ 9,771 $ 12,639 $ 15,596 ========= ========= ========= ========= ========= ========= Margin % 17.9% 21.5% 24.3% 25.0% 28.6% 30.9% Growth % 981.9% 86.7% 48.0% 26.8% 29.4% 23.4% Performance to Forecast 100.0% 100.0% Corporate Overhead $ 764 $ 1,430 Depreciation and Amort 6,354 Interest Expense 2,455 8,805 Other Expense/(Income) 136 --------- --------- Pre-Tax Income ($ 1,130) Income Tax @ 40.0% 0 Dividends 0 ========= Net Income Available to Common ($ 1,130) ========= Fully Diluted Shares Outstanding 1,612 EPS ($ 0.70)
Revenues 1998 1999 2000 2001 2002 2003 --------- --------- --------- --------- --------- --------- United Kingdom 21,895 25,106 28,695 32,577 36,992 42,014 Maritime Provinces 6,810 7,380 7,995 8,659 9,378 10,158 British Columbia 16,660 18,395 20,163 21,767 23,501 25,375 United States 11,488 12,765 14,021 15,245 16,488 17,836 --------- --------- --------- --------- --------- --------- $ 56,852 $ 63,646 $ 70,874 $ 78,247 $ 86,359 $ 95,383 Growth 12.6% 12.0% 11.4% 10.4% 10.4% 10.4% Cost of Sales/Operating Costs United Kingdom 13,271 14,507 15,840 17,228 18,760 20,451 Maritime Provinces 5,287 5,611 5,960 6,335 6,741 7,178 British Columbia 11,093 12,129 13,206 14,224 15,327 16,522 United States 7,788 8,491 9,191 9,874 10,522 11,218 --------- --------- --------- --------- --------- --------- 37,438 40,739 44,197 47,663 51,350 55,369 --------- --------- --------- --------- --------- --------- Operating Cash Flow $ 19,414 $ 22,908 $ 26,677 $ 30,585 $ 35,009 $ 40,014 ========= ========= ========= ========= ========= ========= Margin % 34.1% 36.0% 37.6% 39.1% 40.5% 42.0% Growth % 24.5% 18.0% 16.5% 14.7% 14.5% 14.3% Performance to Forecast 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Corporate Overhead $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 $ 1,500 Depreciation and Amort 6,302 6,447 6,582 6,504 6,089 6,176 Interest Expense 8,726 8,514 8,195 7,749 7,167 6,462 Other Expense/(Income) 136 136 35 35 35 35 --------- --------- --------- --------- --------- --------- Pre-Tax Income $ 2,750 $ 6,311 $ 10,365 $ 14,797 $ 20,218 $ 25,841 Income Tax @ 40.0% 648 2,524 4,146 5,919 8,087 10,336 Dividends 0 0 0 0 0 0 ========= ========= ========= ========= ========= ========= Net Income Available to Common $ 2,102 $ 3,787 $ 6,219 $ 8,878 $ 12,131 $ 15,505 ========= ========= ========= ========= ========= ========= Fully Diluted Shares Outstanding 1,612 1,612 1,612 1,612 1,612 1,612 EPS $ 1.30 $ 2.35 $ 3.86 $ 5.51 $ 7.53 $ 9.62
Revenues 2004 2005 2006 2007 --------- --------- --------- --------- United Kingdom 45,795 49,917 54,409 59,306 Maritime Provinces 11,072 12,069 13,155 14,339 British Columbia 27,658 30,148 32,861 35,818 United States 19,441 21,191 23,098 25,177 --------- --------- --------- --------- $ 103,967 $ 113,324 $ 123,523 $ 134,640 Growth 9.0% 9.0% 9.0% 9.0% Cost of Sales/Operating Costs United Kingdom 22,291 24,298 26,484 28,868 Maritime Provinces 7,824 8,528 9,296 10,133 British Columbia 18,009 19,630 21,397 23,323 United States 12,227 13,328 14,527 15,835 --------- --------- --------- --------- 60,352 65,784 71,705 78,158 --------- --------- --------- --------- Operating Cash Flow $ 43,615 $ 47,540 $ 51,819 $ 56,482 ========= ========= ========= ========= Margin % 42.0% 42.0% 42.0% 42.0% Growth % 9.0% 9.0% 9.0% 9.0% Performance to Forecast 100.0% 100.0% 100.0% 100.0% Corporate Overhead $ 1,500 $ 1,500 $ 1,500 $ 1,500 Depreciation and Amort 6,732 7,338 7,998 8,718 Interest Expense 5,627 4,654 3,545 (127) Other Expense/(Income) 0 0 0 0 --------- --------- --------- --------- Pre-Tax Income $ 29,755 $ 34,048 $ 38,776 $ 46,391 Income Tax @ 40.0% 11,902 13,619 15,510 18,556 Dividends 0 0 0 0 ========= ========= ========= ========= Net Income Available to Common $ 17,853 $ 20,429 $ 23,265 $ 27,835 ========= ========= ========= ========= Fully Diluted Shares Outstanding 1,612 1,612 1,612 1,612 EPS $ 11.08 $ 12.67 $ 14.43 $ 17.27
Notes - ------------- 1) All acquisitions are included from 1991. 2) No new acquisitions are assumed. Pre-Senior Mgmt EBTDA 6,421 10,318 14,024 18,112 22,466 Pre-Senior Mgmt EBTDA per share US$ $ 3.98 $ 6.40 $ 8.70 $ 11.24 $ 13.94 Pre-Senior Mgmt EBTDA per share C$ C$5.49 C$8.83 C$12.00 C$15.50 C$19.22
Pre-Senior Mgmt EBTDA 27,472 33,182 37,617 42,516 47,904 56,239 Pre-Senior Mgmt EBTDA per share US$ $ 17.04 $ 20.58 $ 23.34 $ 26.37 $ 29.72 $ 34.89 Pre-Senior Mgmt EBTDA per share C$ C$23.51 C$28.39 C$32.19 C$36.38 C$40.99 C$48.12
Page 1 7 CONSOLIDATED SPARKLING SPRING WATER POST REORGANIZATION SHARE OWNERSHIP ($ Thousands)
OPTIONS -------------------------------------------- Total Warrants Mgmt Mgmt Mgmt Description Voting % @$1 @ C$1.82 @ C$5.5 @ $4.326 ------------ ------- ----- -------- -------- ------- -------- Gaspar/Krediet Management 705,050 50.6% 0 Mark and Lucy Stitzer Cargill Family 94,010 6.8% Stephen Larson Management 119,209 8.6% 41,787 Stewart Allen Management 5,672 0.4% 55,111 39,595 Kevin Newman Financial Advisor 28,203 2.0% Art Goodick Management 180 0.0% 5,000 5,000 Peter Kooman Cargill Family 0 0.0% 9,354 John Stiles Management 3,500 0.3% Robert Sedgeman Management 0 0.0% Clairvest Merchant Banker 423,190 30.4% 0 Sean Day Investor 8,994 0.6% Tom Ferries Management 1,800 0.1% Helen Martin Management 1,700 0.1% Tim Daugherty Management 1,000 0.1% Larry Brookes Management 180 0.0% Natwest Markets Senior Lender 0 0.0% 51,100 ------- ----- ------ ------ ----- ------ 1392688 100.0% 51,100 55,111 5,000 95,736 ======= ===== ====== ====== ===== ====== Proceeds from Issuance 1 100 28 567 Exchange 0.73
OPTIONS Fully --------------------------------- Mgmt Mgmt Mgmt Diluted @ $10.27 @ $14 @ $20 Shares % -------- ------ ------ ------- ----- Gaspar/Krediet 8,250 713,300 43.4% Mark and Lucy Stitzer 94,010 5.7% Stephen Larson 12,000 172,996 10.5% Stewart Allen 10,000 110,378 6.7% Kevin Newman 28,203 1.7% Art Goodick 5,000 15,180 0.9% Peter Kooman 9,354 0.6% John Stiles 5,000 8,500 0.5% Robert Sedgeman 5,000 5,000 0.3% Clairvest 423,190 25.7% Sean Day 8,994 0.5% Tom Ferries 1,800 0.1% Helen Martin 1,700 0.1% Tim Daugherty 1,000 0.1% Larry Brookes 180 0.0% Natwest Markets 51,100 3.1% ----- ----- ------ ------- ----- 5,000 5,000 35,250 1644885 100.0% ===== ===== ====== ======= ===== Proceeds from Issuance 70 96 966 1,732 Exchange 0.73
Page 1 EX-10.7 48 FORM OF EXCHANGE AGREEMENT 1 Exhibit 10.7 SPARKLING SPRING WATER GROUP LIMITED One Landmark Square Stamford, Connecticut 06901 (203) 325-0077 ______________, 1997 The ____________________ Corporate Trust Trustee Administration ___________________ ______________ New York, NY _____ Re: EXCHANGE AGENT AGREEMENT Ladies and Gentlemen: Sparkling Spring Water Group Limited, a Nova Scotia corporation (the "Issuer"), and the Guarantors (the "Guarantors") identified in the Registration Statement (as defined herein) propose to make an offer (the "Exchange Offer") to exchange up to $100,000,000 aggregate principal amount of the Issuer's 11 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes") (and the related guarantees of the Guarantors) for a like principal amount of the Issuer's outstanding 11 1/2% Senior Subordinated Notes due 2007 (the "Private Notes") (and the related guarantees of the Guarantors). The terms and conditions of the Exchange Offer are set forth in a prospectus (the "Prospectus") included in the Issuer's and the Guarantors' registration statement on Form F-4 (File No. 333-_____), as amended (the "Registration Statement"), filed with the Securities and Exchange Commission (the "Commission"), and proposed to be distributed to all record holders of the Private Notes. The Private Notes and the Exchange Notes are collectively referred to herein as the "Notes." Capitalized terms used herein and not defined shall have the respective meanings ascribed to them in the Prospectus or the Letter of Transmittal which constitutes part of the Prospectus. The Issuer hereby appoints ____________________ to act as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. References hereinafter to "You" shall refer to ____________________. The Exchange Offer is expected to be commenced by the Issuer on or about ______________, 1997. The Letter of Transmittal accompanying the Prospectus is to be used by the holders of the Private Notes to accept the Exchange Offer, and contains instructions with respect to the delivery of Private Notes tendered. The Exchange Offer shall expire at 5:00 P.M., New York City time, on ______________, 1997, or on such later date or time to which the Issuer may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set forth in the Prospectus, the Issuer 2 expressly reserves the right to extend the Exchange Offer from time to time, and may extend the Exchange Offer by giving notice (such notice if given orally, to be confirmed in writing) to you before 9:00 A.M., New York City time, on the next New York Stock Exchange trading day after the previously scheduled Expiration Date. The Issuer expressly reserves the right, in its sole discretion, to amend or terminate the Exchange Offer, and not to accept for exchange any Private Notes not theretofore accepted for exchange. The Issuer will give notice (such notice if given orally, to be confirmed in writing) of any amendment, termination or nonacceptance to you as promptly as practicable. In carrying out your duties as Exchange Agent, you are to act in accordance with the following instructions: 1. You will perform such duties and only such duties as are specifically set forth in the section of the Prospectus captioned "The Exchange Offer," in the Letter of Transmittal accompanying the Prospectus, or as specifically set forth herein; provided, however, that in no way will your general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing. 2. You will establish an account with respect to the Private Notes at the Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within two New York Stock Exchange trading days after the date of the Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of the Private Notes by causing the Book-Entry Transfer Facility to transfer such Private Notes by causing the Book-Entry Transfer Facility to transfer such Private Notes into your account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. 3. You are to examine each of the Letters of Transmittal and certificates for Private Notes (and confirmation of book-entry transfers of Private Notes into your account at the Book-Entry Transfer Facility) and any other documents delivered or mailed to you by or for holders of the Private Notes, to ascertain whether (i) the Letters of Transmittal, certificates and any such other documents are duly executed and properly completed in accordance with instructions set forth therein and that such book-entry confirmations are in due and proper form and contain the information required to be set forth therein, and (ii) the Private Notes have otherwise been properly tendered. In each case where the Letter of Transmittal or any other document has been improperly completed or executed, or where book-entry confirmations are not in due and proper form or omit certain information, or any of the certificates for Private Notes are not in proper form for transfer or some other irregularity in connection with the acceptance of the Exchange Offer exists, you will endeavor to inform the presenters of the need for fulfillment of all requirements and to take any other action as may be necessary or advisable to cause such irregularity to be corrected. 4. With the approval of the Chairman, the President or any of the Vice Presidents of the Issuer (such approval, if given orally, to be confirmed in writing) or any other person 2 3 designate by such an officer in writing, you are authorized to waive any irregularities in connection with any tender of Private Notes pursuant to the Exchange Offer. 5. Tenders of Private Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer--Procedures for Tendering," and Private Notes shall be considered properly tendered to you only when tendered in accordance with the procedures set forth therein. Notwithstanding the provisions of this paragraph 4, Private Notes which the Chairman, the President, the Executive Vice President, the Senior Vice President or any of the Vice Presidents of the Issuer or any other officer of the Issuer designated by any such person shall approve as having been properly tendered shall be considered to be properly tendered (such approval, if given orally, shall be confirmed in writing). 6. You shall advise the Issuer with respect to any Private Notes received subsequent to the Expiration Date and accept its instructions with respect to disposition of such Private Notes. 7. You shall accept tenders: (a) in cases where the Private Notes are registered in two or more names only if signed by all named holders; (b) in cases where the signing person (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity only when proper evidence of his or her authority so to act is submitted; and (c) from persons other than the registered holder of Private Notes provided that customary transfer requirements, including those regarding any applicable transfer taxes, are fulfilled. You shall accept partial tenders of Private Notes when so indicated and as permitted in the Letter of Transmittal and deliver certificates for Private Notes to the transfer agent for split-up and return any untendered Private Notes to the holder (or such other person as may be designated in the Letter of Transmittal) as promptly as practicable after expiration or termination of the Exchange Offer. 8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer, the Issuer will notify you (such notice if given orally, to be confirmed in writing) of its acceptance, promptly after the Expiration Date, of all Private Notes properly tendered and you, on behalf of the Issuer, will exchange such Private Notes for Exchange Notes and cause such Private Notes to be canceled. Delivery of Exchange Notes will be made on behalf of the Issuer by you at the rate of $1,000 principal amount of Exchange Notes for each $1,000 principal amount of Exchange Notes if given orally, to be confirmed in writing ***TEXT CUT OFF*** Private Notes by the Issuer; provided, however, that in all cases, Private Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by you of certificates for such Private Notes (or confirmation of book-entry transfer into 3 4 your account at the Book-Entry Transfer Facility), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. Unless otherwise instructed by the Issuer, you shall issue Exchange Notes only in denominations of $1,000 or any integral multiple thereof. 9. Tenders, pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and upon the conditions set forth in the Prospectus and the Letter of Transmittal, Private Notes tendered pursuant to the Exchange Offer may be withdrawn at any time on or prior to the Expiration Date in accordance with the terms of the Exchange Offer. 10. The Issuer shall not be required to exchange any Private Notes tendered in any of the conditions set forth in the Exchange Offer are not met. Notice of any decision by the Issuer not to exchange any Private Notes tendered shall be given (and confirmed in writing) by the Issuer to you. 11. If, pursuant to the Exchange Offer, the Issuer does not accept for exchange all or part of the Private Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus or otherwise, you shall as soon as practicable after the expiration or termination of the Exchange Offer return those certificates for unaccepted Private Notes (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in your possession, to the persons who deposited them (or effected such book-entry transfer). 12. All certificates for reissued Private Notes, unaccepted Private Notes or for Exchange Notes (other than those effected by book-entry transfer) shall be forwarded by first-class certified mail, return receipt requested. 13. You are not authorized to pay or offer to pay any concessions, commissions or other solicitation fees to any broker, dealer, commercial bank, trust company or other nominee or to engage or use any person to solicit tenders. 14. As Exchange Agent hereunder, you: (a) shall have no duties or obligations other than those specifically set forth in the Prospectus, the Letter of Transmittal or herein, or as may be subsequently agreed to in writing by you and the Issuer; (b) will be regarded as making no representations and having no responsibilities as to the validity, sufficiency, value or genuineness of any of the certificates for the Private Notes deposited with you pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value of genuineness of the Exchange Offer; (c) shall not be obligated to taken any legal action hereunder which might in your reasonable judgment involve any expense or liability, unless you shall have been furnished with reasonable indemnity; 4 5 (d) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; (e) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which you shall in good faith believe to be genuine or to have been signed or represented by a proper person or persons; (f) may rely on and shall be protected in acting upon written or oral instruments from any officer of the Issuer; (g) may consult with your counsel with respect to any questions relating to your duties and responsibilities, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by you hereunder in good faith and in accordance with the opinion of such counsel; and (h) shall not advise any person tendering Private Notes pursuant to the Exchange Offer as to whether to tender or refrain from tendering all or any portion of Private Notes or as to the market value, decline or appreciation in market value of any Private Notes that may or may not occur as a result of the Exchange Offer or as to the market value of the Exchange Notes; provided, however, that in no way will your general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing. 15. You shall take such action as may from time to time be requested by the Issuer or its counsel (and such other action as you may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery (as described in the Prospectus) or such other forms as may be approved from time to time by the Issuer to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer; provided, that such information shall relate only to the procedures for accepting (or withdrawing from) the Exchange Offer. The Issuer will furnish you with copies of such documents at your request. 16. You shall advise by facsimile transmission or telephone, and promptly thereafter confirm in writing to Steven L. Larson, President of the Issuer (telephone number (203) 325-0500[?], facsimile number (203) ___-____) and such other person or persons as the Issuer may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise requested), up to and including the Expiration Date, as to the aggregate principal amount of Private Notes which have been duly tendered pursuant to the Exchange Offer and the items received by you pursuant to the Exchange Offer and 5 6 this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, you will also inform, and cooperate in making available to, the Issuer or any such other person or persons upon oral request made from time to time prior to the Expiration Date of such other information as it or he or she reasonably requests. Such cooperation shall include, without limitation, the granting by you to the Issuer and such person as the Issuer may request of access to those persons on your staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Issuer shall have received information in sufficient detail to enable it to decide whether to extend the Exchange Offer. You shall prepare a final list of all persons whose tenders were accepted, the aggregate principal amount of Private Notes tendered, the aggregate principal amount of Private Notes accepted and the identity of any broker-dealer if you have knowledge that such person is a broker-dealer who will receive Exchange Notes for its own account in exchange for Private Notes and the aggregate principal amount of Exchange Notes delivered to each, and deliver said list to the Issuer. 17. Letters of Transmittal, book-entry confirmations and Notices of Guaranteed Delivery received by you shall be preserved by you for a period of time at least equal to the period of time you preserve other records pertaining to the transfer of securities, or two years, whichever is longer, and thereafter shall be delivered by you to the Issuer. You shall dispose of unused Letters of Transmittal and other surplus materials as instructed by the Issuer. 18. You hereby expressly waive any lien, encumbrance or right of set-off whatsoever that you may have with respect to funds deposited with you for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Issuer, or any of its subsidiaries or affiliates pursuant to any loan or credit agreement with you or for compensation owed to you hereunder. 19. For services rendered as Exchange Agent hereunder, you shall be entitled to such compensation as set forth on Schedule I attached hereto. 20. You hereby acknowledge receipt of the Prospectus and the Letter of Transmittal and further acknowledge that you have examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal (as they may be amended from time to time), on the other hand, shall be resolved in favor of the latter two documents, except with respect to the duties, liabilities and indemnifications of you as Exchange Age, which shall be controlled by this Agreement. 21. The Issuer covenants and agrees to indemnify and hold you harmless in your capacity as Exchange Agent hereunder against any loss, liability, cost or expense, including reasonable attorneys' fees and expenses arising out of or in connection with any act, omission, delay or refusal made by you in reliance upon any signature, endorsement, assignment, certificate, order, request, notice, instruction or other instrument or document reasonably believed by you to be valid, genuine and sufficient and in accepting any tender or effecting nay transfer of Private Notes reasonably believed by you in good faith to be authorized, 6 7 and in delaying or refusing in good faith to accept any tenders or effect any transfer of Private Notes; provided, however that anything in this Agreement to the contrary notwithstanding, the Issuer shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of your gross negligence or willful misconduct. In no case shall the Issuer be liable under this indemnity with respect to any claim against you unless the Issuer shall be notified by you, by letter or cable or by facsimile which is confirmed by letter, of the written assertion of a claim against you or of any other action commenced against you, promptly after you shall have received any such written assertion or notice of commencement of action. The Issuer shall be entitled to participate, at its own expense, in the defense of any such claim or other action, and, if the Issuer so elects, the Issuer may assume the defense of any pending or threatened action against you in respect of which indemnification may be sought hereunder, in which case the Issuer shall not thereafter be responsible for the subsequently incurred fees and disbursements of legal counsel for you under this paragraph, so long as the issuer shall retain counsel reasonably satisfactory to you to defend such action, and unless the Issuer is also a party to such proceeding and you have reasonably determined in good faith that joint representation would be inappropriate. You understand and agree that the Issuer shall not be liable under this paragraph for the fees and expenses of more than one legal counsel for you; provided, however, that this sentence shall not be construed to prohibit you from engaging successor counsel to continue to represent you in connection with a proceeding under this paragraph in the event that you have terminated counsel initially chosen by you or such counsel has terminated its representation of you. 22. You shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. The Issuer understands that you are required, in certain instances, to deduct thirty-one percent (31%) with respect to interest paid on the Exchange Notes and proceeds from the sale, exchange, redemption or retirement of the Exchange Notes from holders who have not supplied their correct Taxpayer Identification Numbers or required certification. Such funds will be turned over to the Internal Revenue Service in accordance with applicable regulations. 23. You shall notify the Issuer of the amount of any transfer taxes payable in respect of the exchange of Private Notes and, upon receipt of a written approval from the Issuer, shall deliver or cause to be delivered, in a timely manner to each governmental authority to which any transfer taxes are payable in respect of the exchange of Private Notes, your check in the amount of all transfer taxes so payable, and the Issuer shall reimburse you for the amount of any and all transfer taxes payable in respect of the exchange of Private Notes; provided, however, that you shall reimburse the Issuer for amounts refunded to you in respect of your payment of any such transfer taxes, at such time as such refund is received by you. 24. This Agreement and your appointment as Exchange Agent hereunder shall be construed and enforced in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within such state, and without regard to conflicts of law principles. 7 8 25. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Without limitation of the foregoing, the parties hereto expressly agree that no holder of Private Notes or Exchange Notes shall have any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 26. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. 27. In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 28. This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. 29. Unless otherwise provided herein, all notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Issuer, to: Sparkling Spring Water Water Group Limited One Landmark Square Stamford, Connecticut 06901 Telephone: (203) 325-0077 Telecopy: (203) ___-____ Attention: Steven L. Larson President with a copy to: Robinson & Cole LLP 695 E. Main Street Stamford, CT 06904 Telephone: (203) 462-7500 Telecopy: (203) 462-7599 Attention: Richard A. Krantz, Esq. 8 9 If to the Exchange Agent, to: ________________________ ________________________ ________________________ New York, NY Telephone: Telecopy: (212) ___-____ Attention: Corporate Trust Trustee Administration 30. Unless terminated earlier by the parties hereto, this Agreement shall terminate 90 days following the Expiration Date. Notwithstanding the foregoing, paragraphs 17, 19, 21, 23 and 24 shall survive the termination of this Agreement. Upon any termination of this Agreement you shall promptly deliver to the Issuer any certificates for Notes, funds or property then held by you as Exchange Agent under this Agreement. 31. This Agreement shall be binding and effective as of the date hereof. Please acknowledge receipt of this Agreement and confirm the arrangements herein provided by signing and returning the enclosed copy. SPARKLING SPRING WATER GROUP LIMITED By: --------------------------------- Name: Title: Accepted as of the date first above written: ____________________, as Exchange Agent By: ------------------------------------ Name: Title: 9 10 SCHEDULE I FEE SCHEDULE FOR EXCHANGE AGENT SERVICES $2,500 plus $500 per extension. EX-21 49 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Sparkling Spring Water Limited Spring Water, Inc. Cullyspring Water Co., Inc. Crystal Spring Acquisition, Inc. Mountain Fresh Acquisition Corp. Water Jug Enterprises Limited Withey's Water Softening & Purification Ltd. Aqua Care Water Softening & Purification Inc. High Valley Water Limited 3003969 Nova Scotia Limited Canadian Springs Water Company Limited Sparkling Spring Water (UK) Limited Aquaporte (UK) Limited Marlborough Employment Limited Water at Work Limited Natural Water Limited EX-23.1 50 CONSENT OF ERNST AND YOUNG LLP 1 EXHIBIT 23.1 [ERNST & YOUNG LETTERHEAD] We consent to the reference to our firm under the caption "Experts" and to the use of (i) our report dated November 19, 1997 to the directors of Sparkling Spring Water Group Limited (the "Company") on the consolidated financial statements of the Company as at December 31, 1996 and 1995 and for each of the years in the three year period ended December 31, 1996, (ii) our report dated July 11, 1997 to the directors of Sparkling Spring Water Limited on the financial statements of Canadian Springs Water Company Limited as at January 17, 1996 and March 31, 1995 and for the 292 days ended January 17, 1996 and the year ended March 31, 1995, (iii) our report dated October 10, 1997 to the directors of Sparkling Spring Water Limited on the financial statements of Cullyspring Water Co., Inc. as at December 31, 1996 and 1995 and for the years then ended and (iv) our report dated October 10, 1997 to the directors of Sparkling Spring Water Limited on the financial statements of D&D and Company, Inc. as at December 31, 1996 and for the year then ended, in the Registration Statement (Form F-4) for the registration of $100,000,000 of the Company's 11 1/2% Senior Subordinated Notes due 2007. /s/ Ernst & Young Halifax, Canada December ____, 1997 EX-23.2 51 CONSENT OF KIDSONS IMPEY 1 EXHIBIT 23.2 [KIDSONS IMPEY LETTERHEAD] To the Board of Directors and Stockholders of Sparkling Spring Water Group Limited We consent to the use in this Registration Statement of Sparkling Spring Water Group Limited (the "Company") and the Additional Registrants named therein on Form F-4 of our report dated October 28, 1997 of Marlborough Employment Limited and Subsidiaries, for the year ended January 31, 1997 and to the reference to us under the heading "Experts" in the Prospectus, which is part of the Registration Statement. /s/ Kidsons Impey Glasgow, Scotland December 1997 EX-25 52 T-1 1 EXHIBIT 25 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) BANKERS TRUST COMPANY (Exact name of trustee as specified in its charter) NEW YORK 13-4941247 (Jurisdiction of Incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification no.) FOUR ALBANY STREET NEW YORK, NEW YORK 10006 (Address of principal (Zip Code) executive offices) BANKERS TRUST COMPANY LEGAL DEPARTMENT 130 LIBERTY STREET, 31ST FLOOR NEW YORK, NEW YORK 10006 (212) 250-2201 (Name, address and telephone number of agent for service) SPARKLING SPRING WATER GROUP LIMITED (Exact name of obligor as specified in its charter) NOVA SCOTIA, CANADA (State or other jurisdiction of (I.R.S. employer Incorporation or organization) Identification no.) ONE LANDMARK SQUARE STAMFORD, CT 06901 (203) 325-0077 (Address of principal executive offices) 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 (Title of the indenture securities) 2 ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee. (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS Federal Reserve Bank (2nd District) New York, NY Federal Deposit Insurance Corporation Washington, D.C. New York State Banking Department Albany, NY (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 3. -15. NOT APPLICABLE ITEM 16. LIST OF EXHIBITS. EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 7, 1990, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated June 21, 1995 - Incorporated herein by reference to Exhibit 1 filed with Form T-1 Statement, Registration No. 33-65171, Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated March 20, 1996, incorporate by referenced to Exhibit 1 filed with Form T-1 Statement, Registration No. 333-25843 and Certificate of Amendment of the Organization Certificate of Bankers Trust Company dated September 17, 1997, copy attached. EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers Incorporated herein by reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047. EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on February 18, 1997, Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 333-24509-01. -2- 3 EXHIBIT 5 - Not applicable. EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b) of the Act. Incorporated herein by reference to Exhibit 4 filed with Form T-1 Statement, Registration No. 22-18864. EXHIBIT 7 - The latest report of condition of Bankers Trust Company dated as of June 30, 1997. Copy attached. EXHIBIT 8 - Not Applicable. EXHIBIT 9 - Not Applicable. -3- 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Bankers Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 25th day of November, 1997. BANKERS TRUST COMPANY By: /s/ Kevin Weeks Kevin Weeks Assistant Vice President -4- 5 Legal Title of Bank: Bankers Trust Company Call Date: 6/30/97 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1 City, State ZIP: New York, NY 10006 11 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS JUNE 30, 1997 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, reported the amount outstanding as of the last business day of the quarter. SCHEDULE RC--BALANCE SHEET
------------------- | C400 | Dollar Amounts in Thousands | RCFD Bil Mil Thou | ASSETS | ////////////////// | 1. Cash and balances due from depository institutions (from Schedule RC-A): | //////////////////| a. Noninterest-bearing balances and currency and coin(1) ............................ | 0081 1,724,000|1.a. b. Interest-bearing balances(2) ..................................................... | 0071 2,648,000|1.b. 2. Securities: | ////////////////// | a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... | 1754 0|2.a. b. Available-for-sale securities (from Schedule RC-B, column D)...................... | 1773 3,990,000|2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic offices | 1350 26,430,000|3. of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// | a. Federal funds sold ............................................................... | b. Securities purchased under agreements to resell .................................. | 4. Loans and lease financing receivables: | ////////////////// | a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 17,815,000 | ////////////////// |4.a. b. LESS: Allowance for loan and lease losses.................. RCFD 3123 723,000 | ////////////////// |4.b. c. LESS: Allocated transfer risk reserve ..................... RCFD 3128 0 | ////////////////// |4.c. d. Loans and leases, net of unearned income, | ////////////////// | allowance, and reserve (item 4.a minus 4.b and 4.c) .............................. | 2125 17,092,000|4.d. 5. Assets held in trading accounts ....................................................... | 3545 40,350,000|5. 6. Premises and fixed assets (including capitalized leases) .............................. | 2145 937,000|6. 7. Other real estate owned (from Schedule RC-M) .......................................... | 2150 195,000|7. 8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 96,000|8. 9. Customers' liability to this bank on acceptances outstanding .......................... | 2155 691,000|9. 10. Intangible assets (from Schedule RC-M) ................................................ | 2143 85,000|10. 11. Other assets (from Schedule RC-F) ..................................................... | 2160 4,633,000|11. 12. Total assets (sum of items 1 through 11) .............................................. | 2170 98,871,000|12.
- -------------------------- (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held in trading accounts. 6 Legal Title of Bank: Bankers Trust Company Call Date: 6/30/97 ST-BK: 36-4840 FFIEC 031 Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2 City, State Zip: New York, NY 10006 12 FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
SCHEDULE RC--CONTINUED
------------------------------------- Dollar Amounts in Thousands | //////// Bil Mil Thou | LIABILITIES | ////////////////// | 13. Deposits: | ////////////////// | a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 18,026,000|13.a. (1) Noninterest-bearing(1) ......................RCON 6631 3,184,000.... | ////////////////// |13.a.(1) (2) Interest-bearing ............................RCON 6636 14,842,000.... | ////////////////// |13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | ////////////////// | part II) | RCFN 2200 22,173,000|13.b. (1) Noninterest-bearing ........................RCFN 6631 1,454,000 | ////////////////// |13.b.(1) (2) Interest-bearing ...........................RCFN 6636 20,719,000 | ////////////////// |13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in | // // 2800 14,623,000|14. domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | ////////////////// | a. Federal funds purchased .......................................................... | RCFD 0278 |14.a. b. Securities sold under agreements to repurchase ................................... | RCFD 0279 |14.b. 15. a. Demand notes issued to the U.S. Treasury ......................................... | RCON 2840 0|15.a. b. Trading liabilities .............................................................. | RCFD 3548 19,819,000|15.b. 16. Other borrowed money: | ////////////////// | a. With original maturity of one year or less ..................................... | RCFD 2332 6,877,000|16.a. b. With original maturity of more than one year ................................... | A547 217,000|16.b. c. With a remaining maturity of more than three years ............................. | A548 4,848,000|16.c. 17. Mortgage indebtedness and obligations under capitalized leases ...................... 18. Bank's liability on acceptances executed and outstanding ............................ | RCFD 2920 691,000|18. 19. Subordinated notes and debentures ................................................... | RCFD 3200 1,251,000|19. 20. Other liabilities (from Schedule RC-G) .............................................. | RCFD 2930 4,872,000|20. 21. Total liabilities (sum of items 13 through 20) ...................................... | RCFD 2948 93,397,000|21. | ////////////////// | 22. Limited-life preferred stock and related surplus .................................... | RCFD 3282 0|22. EQUITY CAPITAL | ////////////////// | 23. Perpetual preferred stock and related surplus ....................................... | RCFD 3838 1,000,000|23. 24. Common stock ........................................................................ | RCFD 3230 1,001,000|24. 25. Surplus (exclude all surplus related to preferred stock) ............................ | RCFD 3839 540,000|25. 26. a. Undivided profits and capital reserves ........................................... | RCFD 3632 3,314,000|26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ........... | RCFD 8434 (3,000)|26.b. 27. Cumulative foreign currency translation adjustments ................................. | RCFD 3284 (378,000)|27. 28. Total equity capital (sum of items 23 through 27) ................................... | RCFD 3210 5,474,000|28. 29. Total liabilities, limited-life preferred stock, and equity capital | ////////////////// | (sum of items 21, 22, and 28) ....................................................... | RCFD 3300 98,871,000|29. Memorandum To be reported only with the March Report of Condition. 1. Indicate in the box at the right the number of the statement below that best describes the most comprehensive level of auditing work performed for the bank Number by independent external auditors as of any date during 1996 ......................... | RCFD 6724 N/A | M.1
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed with generally accepted auditing standards by a certified by other external auditors (may be required public accounting firm which submits a report on the bank by state chartering authority) 2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements conducted in accordance with generally accepted auditing by external auditors standards by a certified public accounting firm which 6 = Compilation of the bank's financial submits a report on the consolidated holding company statements by external auditors (but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work) 3 = Directors' examination of the bank conducted in 8 = No external audit work accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority)
- ---------------------- (1) Including total demand deposits and noninterest-bearing time and savings deposits. (2) Includes limited-life preferred stock and related surplus. 7 State of New York, Banking Department I, MANUEL KURSKY, Deputy Superintendent of Bank of the State of New York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE BANKING LAW," dated September 17, 1997, providing for an increase in authorized capital stock from $2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each designated as Common Stock and 500 shares with a par value of $1,000,000 each designated as Series Preferred Stock to $2,201,666,670 consisting of 120,166,667 shares with a par value of $10 each designated as Common Stock and 1,000 shares with a par value of $1,000,000 each designated as Series Preferred Stock. WITNESS, my hand and official seal of the Banking Department at the City of New York, this 26TH day of SEPTEMBER in the Year of our Lord one thousand nine hundred and NINETY-SEVEN. Manuel Kursky ------------------------------ Deputy Superintendent of Banks 8 CERTIFICATE OF AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST Under Section 8005 of the Banking Law ----------------------------- We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing Director and an Assistant Secretary of Bankers Trust Company, do hereby certify: 1. The name of the corporation is Bankers Trust Company. 2. The organization certificate of said corporation was filed by the Superintendent of Banks on the 5th of march, 1903. 3. The organization certificate as heretofore amended is hereby amended to increase the aggregate number of shares which the corporation shall have authority to issue and to increase the amount of its authorized capital stock in conformity therewith. 4. Article III of the organization certificate with reference to the authorized capital stock, the number of shares into which the capital stock shall be divided, the par value of the shares and the capital stock outstanding, which reads as follows: "III. The amount of capital stock which the corporation is hereafter to have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares with a par value of $10 each designated as Common Stock and 1000 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." is hereby amended to read as follows: "III. The amount of capital stock which the corporation is hereafter to have is Two Billion, Two Hundred and One Million, Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars ($2,201,666,670), divided into One Hundred Twenty Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (120,166,667) shares with a par value of $10 each designated as Common Stock and 1000 shares with a par value of One Million Dollars ($1,000,000) each designated as Series Preferred Stock." 9 6. The foregoing amendment of the organization certificate was authorized by unanimous written consent signed by the holder of all outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, we have made and subscribed this certificate this 17th day of September, 1997. /s/ James T. Byrne, Jr. ----------------------- James T. Byrne, Jr. Managing Director /s/ Lea Lahtinen ---------------- Lea Lahtinen Assistant Secretary State of New York ) ) ss: County of New York ) Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant Secretary of Bankers Trust Company, the corporation described in the foregoing certificate; that she has read the foregoing certificate and knows the contents thereof, and that the statements herein contained are true. /s/ Lea Lahtinen ---------------- Lea Lahtinen Sworn to before me this 17th day of September, 1997. Josephine A. Monti ------------------ Notary Public JOSEPHINE A. MONTI Notary Public State of New York No. 52-4519901 Qualified in New York County Commission Expires October 19, 1997 EX-99.1 53 FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL FOR 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 OF SPARKLING SPRING WATER GROUP LIMITED PURSUANT TO THE OFFER TO EXCHANGE 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 FOR ALL OUTSTANDING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 ---------- PURSUANT TO THE PROSPECTUS, DATED _____________, 1997 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _____________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF PRIVATE NOTES (AS DEFINED HEREIN) MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. TO: ____________________, EXCHANGE AGENT (THE "EXCHANGE AGENT") Facsimile Transmissions: By Hand Or Overnight (Eligible Institutions Only) By Registered Or Delivery: Certified Mail: (212) ________ To Confirm by Telephone or for Information Call: (212) ________ DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS (AS DEFINED HEREIN) WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES (AS DEFINED HEREIN) FOR THEIR PRIVATE NOTES PURSUANT TO THE EXCHANGE OFFER (AS DEFINED HEREIN) MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR PRIVATE NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 2 By execution hereof, the undersigned acknowledges receipt of the Prospectus (the "Prospectus"), dated December __, 1997, of Sparkling Spring Water Group Limited., a Nova Scotia corporation (the "Issuer"), which, together with this Letter of Transmittal and the instructions hereto (the "Letter of Transmittal"), constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000 principal amount of its registered 11 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes"), for each $1,000 principal amount of its outstanding unregistered 11 1/2% Senior Subordinated Notes due 2007 (the "Private Notes" and, together with the Exchange Notes, the "Notes"), of which $100,000,000 aggregate principal amount was outstanding on the date of the Prospectus. The Exchange Notes have been registered under the Securities Act of 1933, as amended. The Issuer reserves the right, at any time or from time to time, to extend the Exchange Offer at its sole discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Issuer shall notify the holders of the Private Notes of any extension by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. This Letter of Transmittal is to be used by Holders of Private Notes if: (i) a certificate representing Private Notes is to be physically delivered to the Exchange Agent herewith by Holders; or (ii) tender of Private Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer --Book-Entry Transfer" section of the Prospectus by any financial institution that is a participant in The Depository Trust Company (the "Depository") whose name appears on a security position listing as the owner of the Private Notes; or (iii) tender of Private Notes is to be made by the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. DELIVERY OF DOCUMENTATION TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Holder" with respect to the Exchange Offer means any person: (i) in whose name Private Notes are registered on the books of the Issuer or any other person who has obtained a properly completed bond power, as applicable, from the registered holder, or (ii) whose Private Notes are held of record by the Depository (or its nominee), whose name appears on a security position listing as the owner of Private Notes (and is a participant in the Depository) and who desires to deliver such Private Notes by book-entry transfer at the Depository. ---------- The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. All capitalized terms used herein and not defined herein shall have the meaning ascribed to them in the Prospectus. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR PRIVATE NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. Ladies and Gentlemen: -2- 3 The undersigned hereby tenders to the Issuer the aggregate principal amount of Private Notes indicated in this Letter of Transmittal, upon the terms and subject to the conditions set forth in the Prospectus, dated ____________________, 1997 (the "Prospectus"), receipt of which is hereby acknowledged, and in this Letter of Transmittal. All capitalized terms used herein and not defined herein shall have the meanings ascribed to them in the Prospectus. Subject to, and effective upon, the acceptance for exchange of the Private Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Private Notes as are being tendered hereby and hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact with respect to such Private Notes (with full knowledge that the Exchange Agent acts as agent of the Issuer and as Trustee under the Indenture for the Private Notes and the Exchange Notes), with full power of substitution (such power of attorney being an irrevocable power coupled with an interest), to: (a) deliver such Private Notes in registered certificated form, or transfer ownership of such Private Notes through book-entry transfer at the Book-Entry Transfer Facility, to or upon the order of the Issuer, upon receipt by the Exchange Agent, as the undersigned's agent, of the same aggregate principal amount of Exchange Notes; and (b) present such Private Notes for transfer on the books of the Issuer and receive, for the account of the Issuer, all benefits and otherwise exercise, for the account of the Issuer, all rights of beneficial ownership of the Private Notes tendered hereby in accordance with the terms of the Exchange Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Private Notes tendered hereby and that the Issuer will acquire good, marketable and unencumbered title thereto, free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sale agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim when the same are accepted by the Issuer. The undersigned also acknowledges that this Exchange Offer is being made in reliance on the Issuer's belief, based upon interpretations by the staff of the Securities and Exchange Commission (the "Commission") set forth in no-action letters issued to third parties unrelated to the Issuer, that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Private Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than (i) any such holder that is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act or (ii) any broker-dealer that purchased Notes from the Issuer to resell pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act; provided that the holder acquires the Exchange Notes in the ordinary course of its business and is not engaging, and has no intention to engage, and has no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes. The undersigned hereby further represents that (i) the Exchange Notes acquired in exchange for Private Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the -3- 4 undersigned, (ii) neither the undersigned nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes and neither the holder of such Private Notes nor any such person is engaging in, or intends to engage in, the distribution of such Exchange Notes, and (iii) except as indicated herein, neither the undersigned nor any such other person is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act or, if such holder or any such other person is an affiliate of the Issuer, that such holder or such other person will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. The undersigned has read and agrees to all of the terms of the Exchange Offer as described in the Prospectus and herein. If the undersigned or any beneficial owner for whom the undersigned is tendering Private Notes is a broker-dealer that will receive Exchange Notes for its own account in exchange for Private Notes, where such Private Notes were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned or such beneficial owner will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Issuer has agreed that, subject to the provisions of the Registration Rights Agreement, the Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Private Notes acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities, for a period ending 90 days after the Expiration Date or, if earlier, when all such Exchange Notes have been disposed of by such Participating Broker-Dealer. In that regard, each Participating Broker-Dealer by tendering such Private Notes and executing this Letter of Transmittal, agrees that, upon receipt of notice from the Issuer of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein, in light of the circumstances under which they were made, not misleading, such Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to the Prospectus until the Issuer has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to the Participating Broker-Dealer or the Issuer has given notice that the sale of the Exchange Notes may be resumed, as the case may be. If the Issuer gives such notice to suspend the sale of the Exchange Notes, it shall extend the 90-day period referred to above during which Participating Broker-Dealers are entitled to use the Prospectus in connection with the resale of Exchange Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the supplemented or amended Prospectus necessary to permit resales of the Exchange Notes or to and including the date on which the Issuer has given notice that the sale of Exchange Notes may be resumed, as the case may be. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer or the Exchange Agent to be necessary or desirable to complete the sale, assignment and transfer of the Private Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter of Transmittal and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or -4- 5 incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer -- Withdrawal of Tenders" section of the Prospectus. For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted validly tendered Private Notes when the Issuer has given oral or written notice thereof to the Exchange Agent. If any tendered Private Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Private Notes will be returned (except as noted herein with respect to tenders through the Book-Entry Transfer Facility), without expense, to the undersigned at the address shown below or at a different address as may be indicated under "Special Issuance Instructions" as promptly as practicable after the Expiration Date. The undersigned understands that tenders of the Private Notes pursuant to any one of the procedures described under "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuer in accordance with the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus under "The Exchange Offer -- Certain Conditions to the Exchange Offer," the Issuer may not be required to accept for exchange any of the Private Notes tendered. Private Notes not accepted for exchange or withdrawn will be returned to the undersigned at the address set forth below unless otherwise indicated under "Special Delivery Instructions" herein. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions", please deliver the Exchange Notes (and, if applicable, substitute certificates representing Private Notes for any Private Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Private Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Exchange Notes (and, if applicable, substitute certificates representing Private Notes for any Private Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Private Notes." The undersigned recognizes that the Issuer has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Private Notes from the name of the registered holder(s) thereof if the Issuer does not accept for exchange any of the Private Notes so tendered. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF PRIVATE NOTES" AND SIGNING THIS LETTER OF TRANSMITTAL AND DELIVERING SUCH PRIVATE NOTES AND THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT, WILL BE DEEMED TO HAVE TENDERED THE PRIVATE NOTES AS SET FORTH IN SUCH BOX. -5- 6 List below the Private Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers and principal amounts on a separately executed schedule and affix the schedule to this Letter of Transmittal. Tenders of Private Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. DESCRIPTION OF PRIVATE NOTES TENDERED Name(s) and Address(es) of Holder(s) Certificate Number(s)* Aggregate Principal Amount (Please fill in if blank) (Attach signed list if Tendered (if less than all)** necessary) TOTAL PRINCIPAL AMOUNT OF PRIVATE NOTES TENDERED * Need not be completed by Holders tendering by book-entry transfer. ** Need not be completed by Holders who wish to tender with respect to all Private Notes listed. See Instruction 2. USE OF BOOK ENTRY TRANSFER [_] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING: Name of Tendering Institution:__________________________________________________ DTC Book-Entry Account No.:_____________________________________________________ Transaction Code No.:___________________________________________________________ USE OF GUARANTEED DELIVERY If Holders desire to tender Private Notes pursuant to the Exchange Offer and (i) certificates representing such Private Notes are not lost but are not immediately available, (ii) time will not permit this Letter of Transmittal, certificates representing such Private Notes or other required documents to reach the Exchange Agent prior to the Expiration Date or (iii) the procedures for book-entry transfer cannot be completed prior to the Expiration Date, such Holders may effect a tender of such Private Notes in accordance with the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." -6- 7 [_] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO THE NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Holder(s) of Private Notes: Window Ticket No. (if any): Date of Execution of Notice of Guaranteed Delivery: Name of Eligible Institution that Guaranteed Delivery: If Delivered by Book-Entry Transfer, Name of Tendering Institution: DTC Book-Entry Account No.: Transaction Code No.: BROKER-DEALER COPIES OF PROSPECTUS [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO Name: Address: Aggregate Principal Amount of Private Notes so held: FOR USE BY AFFILIATES [_] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU ARE TENDERING PRIVATE NOTES IS AN AFFILIATE OF THE ISSUER Name: Address: Aggregate Principal Amount of Private Notes so held: $ -7- 8 PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS OF PRIVATE NOTES REGARDLESS OF WHETHER PRIVATE NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH) If a Holder is tendering any Private Notes, this Letter of Transmittal must be signed by the Holder(s) of the Private Notes exactly as the name(s) appear(s) on the certificate(s) for the Private Notes or, if tendered by a participant in The Depository Trust Company, exactly as such participant's name appears on a security position listing as the owner of the Private Notes, or by any person(s) authorized to become Holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, please set forth full title and submit evidence satisfactory to the Issuer of each such person's authority to so act. See Instruction 3. If the signature appearing below is not of a registered Holder of the Private Notes, then the registered Holder must sign a valid proxy. X Date: ----------------------------------- ---------------------------------- Date: ----------------------------------- ---------------------------------- Signature(s) of Holder(s) or Authorized Signatory Name(s):____________________________ Address:_______________________________ ____________________________ _______________________________ (Please Print) (Including Zip Code) Capacity:___________________________ Area Code and Telephone No.:___________ Social Security No.:________________ PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION - -------------------------------------------------------------------------------- (Name of Eligible Institution Guaranteeing Signatures) - -------------------------------------------------------------------------------- (Address (including Zip Code) and Telephone Number (including Area Code) of Firm) - -------------------------------------------------------------------------------- (Authorized Signature) - -------------------------------------------------------------------------------- (Printed Name) - -------------------------------------------------------------------------------- (Title) Date:_____________________________ -8- 9 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4 HEREIN) To be completed ONLY if certificates for Private Notes not exchanged and/or Exchange Notes are to be issued in the name of and sent to someone other than the person or persons whose signature(s) appear(s) on this Letter of Transmittal, or if Private Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Name:____________________________________________ (Please Print) Address:_________________________________________ (Please Print) _________________________________________________ Zip Code _________________________________________________ Taxpayer Identification or Social Security Number (See Substitute Form W-9 herein) Credit unexchanged Private Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. ____________________________________________________________ (Book Entry Transfer Facility Account Number, if applicable) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4 HEREIN) To be completed ONLY if certificates for Private Notes not exchanged and/or Exchange Notes are to be sent to someone other than the person or persons whose signature(s) appear(s) above on this Letter of Transmittal or to such person or persons at an address other than shown above in the box entitled "Description of Private Notes" on this Letter of Transmittal. Mail Exchange Notes and/or Private Notes to: Name:________________________________________________ (Please Print) Address:_____________________________________________ (Please Print) _____________________________________________________ Zip Code _____________________________________________________ Taxpayer Identification or Social Security Number (See Substitute Form W-9 herein) -9- 10 TO BE COMPLETED BY ALL TENDERING HOLDERS PAYER'S NAME: ____________________, AS EXCHANGE AGENT SUBSTITUTE PART 1--PLEASE PROVIDE YOUR FORM W-9 TIN IN THE BOX AT RIGHT AND Social Security Number DEPARTMENT OF THE CERTIFY BY SIGNING AND TREASURY DATING BELOW INTERNAL REVENUE SERVICE OR PAYER'S REQUEST FOR Employer Identification TAXPAYER IDENTIFICATION Number NUMBER (TIN) PART 2--Certification--Under PART 3 - Penalties of Perjury, I Awaiting TIN [ ] certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Services ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certificate instructions-- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE__________________ DATE________________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. -10- 11 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me, and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number within 60 days, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. - ------------------------------------ -------------------------- Signature Date -11- 12 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by Holders of Private Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Private Notes, or a timely confirmation of the book-entry transfer of Private Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation"), as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile hereof) and any other documentation required by this Letter of Transmittal, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below and in the "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Private Notes may only be tendered in a principal amount of $1,000 and any integral multiple thereof. Holders of Private Notes whose certificates for Private Notes are not immediately available or who cannot deliver their certificates and all other required documentation to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Private Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier), mail or hand delivery), setting forth the name and address of the holder of Private Notes, the certificate number(s) of such Private Notes (if applicable) and the principal amount of Private Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange ("NYSE") trading days after the Expiration Date, this Letter of Transmittal (or a facsimile thereof), together with the certificates for all physically tendered Private Notes in proper form for transfer, or a Book-Entry Confirmation of such Private Notes, and any other documentation required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) a properly executed Letter of Transmittal (or a facsimile thereof), as well as the certificates for all physically tendered Private Notes in proper form for transfer or a Book-Entry Confirmation of such Private Notes, as the case may be, and all other documentation required by this Letter of Transmittal, must be received by the Exchange Agent within five NYSE trading days after the Expiration Date. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE PRIVATE NOTES AND ALL OTHER REQUIRED DOCUMENTATION IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY -12- 13 INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. DO NOT SEND THIS LETTER OF TRANSMITTAL OR ANY PRIVATE NOTES TO THE ISSUER. See "The Exchange Offer" section of the Prospectus. 2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF PRIVATE NOTES WHO TENDER BY BOOK-ENTRY TRANSFER); WITHDRAWAL RIGHTS. Tenders of Private Notes will be accepted only in the principal amount of $1,000 and integral multiples thereof. If less than all of the Private Notes evidenced by a submitted certificate are to be tendered, the tendering Holder(s) should fill in the aggregate principal amount of Private Notes to be tendered in the box above entitled "Description of Private Notes -- Aggregate Principal Amount Tendered." A reissued certificate representing the balance of nontendered Private Notes will be sent to such tendering Holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, promptly after the Expiration Date. ALL OF THE PRIVATE NOTES DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. Any Holder who has tendered Private Notes may withdraw the tender by delivering written notice of withdrawal (which may be sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier), mail or hand delivery) to the Exchange Agent prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private Notes to be withdrawn (including the certificate number or numbers and principal amount of such Private Notes), (iii) be timely received and signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Private Notes were tendered or as otherwise set forth in Instruction 3 below (including any required signature guarantees), or be accompanied by documents of transfer sufficient to have the Trustee (as defined in the Prospectus) register the transfer of such Private Notes pursuant to the terms of the Indenture into the name of the person withdrawing the tender and (iv) specify the name in which any such Private Notes are to be registered, if different from that of the Depositor. If Private Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Private Notes or otherwise comply with the Book-Entry Transfer Facility's procedures. See "The Exchange Offer -- Withdrawal of Tenders" section of the Prospectus. Withdrawals of tenders of Private Notes may not be rescinded. Private Notes properly withdrawn will not be deemed to have been validly tendered for purposes of the Exchange Offer, and no Exchange Notes will be issued with respect thereto unless the Private Notes so withdrawn are validly retendered. Properly withdrawn Private Notes may be retendered at any subsequent time on or prior to the Expiration Date by following the procedures described in "The Exchange Offer -- Procedures for Tendering" section of the Prospectus. All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Issuer, in its sole discretion, whose determination shall be final and binding on all parties. None of the Issuer, any Guarantor, any employees, agents, affiliates or assigns of the Issuer, the Exchange Agent or any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for -13- 14 failure to give such notification. Any Private Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder as promptly as practicable after withdrawal. 3. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the Holder of the Private Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on a securities position listing without any change whatsoever. If any tendered Private Notes are owned of record by two or more joint owners, all of such owners must sign this Letter of Transmittal. If any tendered Private Notes are registered in different names on several certificates or securities positions listings, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations. The signatures on this Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution unless the Private Notes tendered pursuant hereto are tendered (i) by a registered Holder of the Private Notes (including any participant in The Depository Trust Company whose name appears on a security position listing as the owner of Private Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in this Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that the signatures in this Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States, or another "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (collectively, "Eligible Institutions"). If this Letter of Transmittal is signed by a person other than the Holder of any Private Notes listed therein, such Private Notes must be endorsed or accompanied by a properly completed bond power signed by such Holder exactly as the name or names of such Holder or Holders appear(s) on such Private Notes with the signatures on the Private Notes or the bond power guaranteed by an Eligible Institution. If this Letter of Transmittal or any Private Notes or assignments or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, evidence satisfactory to the Issuer of their authority to so act must be submitted with this Letter of Transmittal. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders of Private Notes should indicate in the applicable box the name and address to which Exchange Notes issued pursuant to the Exchange Offer and/or substitute certificates evidencing Private Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the Employer Identification or Social Security Number of the person named must also be indicated. A Holder of Private Notes tendering Private Notes by book-entry transfer may request that Private Notes not exchanged be -14- 15 credited to such account maintained at the Book-Entry Transfer Facility as such Holder may designate hereon. If no such instructions are given, such Private Notes not exchanged will be returned to the name or address of the person signing this Letter of Transmittal or credited to the account listed beneath the box entitled "Description of Private Notes," as the case may be. 5. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires that a tendering Holder whose Private Notes are accepted for exchange must provide the Issuer (as payor) with such Holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which, in the case of a tendering Holder who is an individual, is his or her Social Security Number. If the Issuer is not provided with the current TIN or an adequate basis for an exemption, such tendering Holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering Holder of Exchange Notes may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt Holders of Private Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering Holder of Private Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such Holder is awaiting a TIN) and that (i) the Holder is exempt from backup withholding, (ii) the Holder has not been notified by the Internal Revenue Service that such Holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the Holder that such Holder is no longer subject to backup withholding. If the tendering Holder of Private Notes is a nonresident alien or foreign entity not subject to backup withholding, such Holder must give the Issuer a completed Form W-8, Certificate of Foreign Status. These forms may be obtained from the Exchange Agent. If the Private Notes are in more than one name or are not in the name of the actual owner, such Holder should consult the W-9 Guidelines for information on which TIN to report. If such Holder does not have a TIN, such Holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 3 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking such box and writing "applied for" on the form means that such Holder has already applied for a TIN or that such Holder intends to apply for one in the near future. If such Holder does not provide its TIN to the Issuer within 60 days, backup withholding will begin and continue until such Holder furnishes its TIN to the Issuer. 6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the transfer of Private Notes to it or its order pursuant to the Exchange Offer. If, however, Exchange Notes and/or substitute Private Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the Holder of the Private Notes tendered hereby, or if tendered Private Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the transfer of Private Notes to the Issuer or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder. -15- 16 EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE PRIVATE NOTES SPECIFIED IN THIS LETTER OF TRANSMITTAL. 7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. DETERMINATION OF VALIDITY. The Issuer will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Private Notes, which determination shall be final and binding on all parties. The Issuer reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for which, may be unlawful. The Issuer also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under the caption "The Exchange Offer - Certain Conditions to the Exchange Offer" or any conditions or irregularity in any tender of Private Notes of any particular Holder whether or not similar conditions or irregularities are waived in the case of other Holders. The Issuer's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Private Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Although the Issuer intends to notify holders of defects or irregularities with respect to tenders of Private Notes, none of the Issuer, the Guarantors, any employees, agents, affiliates or assigns of the Issuer, the Exchange Agent, or any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 9. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders of Private Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Private Notes for exchange. 10. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any Holder whose Private Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. The Holder will then be instructed as to the steps that must be taken to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the Private Notes have been replaced. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent, at the address and telephone number indicated above. 12. INADEQUATE SPACE. If the space provided herein is inadequate, the aggregate principal amount of Private Notes being tendered and the certificate number or numbers (if available) should be listed on a separate schedule attached hereto and separately signed by all parties required to sign this Letter of Transmittal. -16- 17 The Exchange Agent for the Exchange Offer is: -------------------- By Hand Or Overnight Facsimile Transmissions: By Registered Or Delivery: Certified Mail: (Eligible Institutions Only) (212) ________ To Confirm by Telephone or for Information Call: (212) ________ -17- EX-99.2 54 FORM OF NOTICE OF GUARANTEED DELIVERY 1 Exhibit 99.2 2 NOTICE OF GUARANTEED DELIVERY FOR 11 1/2% SENIOR SUBORDINATED NOTES DUE 2007 OF SPARKLING SPRING WATER GROUP LIMITED As set forth in the Prospectus, dated _____________, 1997 (the "Prospectus"), of Sparkling Spring Water Group Limited (the "Issuer"), and in the accompanying Letter of Transmittal and instructions thereto (the "Letter of Transmittal"), holders who wish to tender their 11 1/2% Senior Subordinated Notes due 2007 of the Issuer (the "Private Notes"), and (i) whose Private Notes are not immediately available, or (ii) who cannot deliver their Private Notes, the Letter of Transmittal or any other required documentation to the Exchange Agent prior to the Expiration Date (as hereinafter defined), may effect a tender if: (a) tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution this properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier), mailed or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Private Notes and the principal amount of the Private Notes being tendered, stating that the tender is being made hereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or a facsimile thereof) together with the certificate(s) representing the Private Notes (or a Book-Entry Confirmation), as the case may be, and any other documentation required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or a facsimile thereof), as well as the certificate(s) representing all tendered Private Notes in proper form for transfer or a Book-Entry Confirmation, as the case may be, and all other documentation required by the Letter of Transmittal, are received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. This Notice of Guaranteed Delivery may be delivered or transmitted by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight courier), mail or hand delivery to the Exchange Agent as set forth below. See "The Exchange Offer -- Procedures for Tendering" section of the Prospectus. Capitalized terms used herein but not defined herein have the respective meanings given to them in the Prospectus. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF PRIVATE NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE. THE EXCHANGE AGENT: ____________________ By Hand or Overnight Facsimile Transmissions: By Registered Or Delivery: Certified Mail: (Eligible Institutions Only) (212) ____________ To Confirm by Telephone or for Information Call: (212) ________ DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 3 The undersigned hereby tender(s) to the Issuer, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the aggregate principal amount of Private Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus. The undersigned understands that tenders of Private Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. Tenders of Private Notes may also be withdrawn if the Exchange Offer is terminated without any such Private Notes being exchanged thereunder or as otherwise provided in the Prospectus. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. PLEASE COMPLETE AND SIGN Signature(s) of Registered Owner(s) Name(s) of Registered Holder(s):_________ or Authorized Signatory:___________ _________________________________________ ___________________________________ _________________________________________ ___________________________________ Principal Amount of Private Address:_________________________________ Notes tendered: ___________________________________ Certificate No(s). of Private Notes Area Code and Telephone No.:_____________ (if available): ___________________________________ ___________________________________ If Private Notes will be delivered by book-entry transfer at The Depository Trust Company, insert Depository Account No.: Date:______________________________ _________________________________________ This Notice of Guaranteed Delivery must be signed by the holder(s) of Private Notes exactly as its (their) name(s) appear on certificates for Private Notes or on a security position listing as the owner of Private Notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): _______________________________________ Capacity: _______________________________________ Address(es): _______________________________________ _______________________________________ _______________________________________ Do not send Private Notes with this form. Private Notes should be sent to the Exchange Agent together with a properly completed and duly executed Letter of Transmittal. 2 4 GUARANTEE (Not to be used for signature guarantee) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank of trust company having an office or a correspondent in the United States, hereby (a) represents that each holder of Private Notes on whose behalf this tender is being made "own(s)" the Private Notes covered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that such tender of Private Notes complies with such Rule 14e-4, and (c) guarantees that, within five New York Stock Exchange trading days after the Expiration Date, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with certificates representing the Private Notes covered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Private Notes into the Exchange Agent's account at The Depository Trust Company, pursuant to the procedure for book-entry transfer set forth in the Prospectus) and required documents will be deposited by the undersigned with the Exchange Agent. The undersigned acknowledges that it must deliver the Letter of Transmittal and Private Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in financial loss to the undersigned. Name of Firm:___________________________________________________________________ Authorized Signature Address:______________________________ Name:_______________________________ Title:______________________________ ______________________________________ Date:_______________________________ Area Code and Telephone No.:__________ * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. 3 -----END PRIVACY-ENHANCED MESSAGE-----