Golden Sun Capital Inc.
TSX VENTURE : GST.P

July 18, 2014 18:09 ET

Golden Sun Capital Inc. Announces Letter of Intent and Additional Business to Be Considered at Shareholder Meeting in Contemplation of Qualifying Transaction

CALGARY, ALBERTA--(Marketwired - July 18, 2014) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OF AMERICA. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Golden Sun Capital Inc. (TSX VENTURE:GST.P) ("Golden Sun" or the "Corporation") is pleased to announce that it has entered into a non-binding letter of intent dated July 15, 2014 (the "LOI") whereby it will pursue a business combination with a private oil and gas company with international operations ("PrivateCo") as further described below (the "Proposed Transaction"). If completed, subject to the approval of the TSX Venture Exchange (the "Exchange"), the Proposed Transaction will constitute Golden Sun's Qualifying Transaction as set forth in Policy 2.4 of the Exchange.

The Proposed Transaction

Subject to any regulatory, director or other approvals that may be required, the completion of satisfactory due diligence by Golden Sun, PrivateCo and the shareholders of PrivateCo, and the satisfaction of other conditions contained in the LOI including the execution of a definitive agreement, it is currently contemplated in the LOI that the Qualifying Transaction will occur via a share exchange or other similar business combination. Pursuant to the LOI, the holders of the issued and outstanding common and preferred shares of PrivateCo (the "PrivateCo Shares") will exchange their PrivateCo Shares for common and preferred shares of Golden Sun (the "Golden Sun Shares") on the basis of one Golden Sun Share for each PrivateCo Share tendered. Prior to the share exchange, Golden Sun will consolidate the common shares in the capital of the Corporation ("Golden Sun Common Shares") on the basis of 23.5 presently outstanding Golden Sun Common Shares for each new consolidated Golden Sun Common Share resulting in approximately 243,183 shares being issued and outstanding prior to the share exchange. In addition, post-consolidation, Golden Sun will issue options and performance warrants to acquire Golden Sun Common Shares for each option or performance warrant of PrivateCo currently outstanding. The option and performance warrant exchange will occur on a one-for-one basis and apply to all such securities not exercised prior to closing of the Proposed Transaction. The Golden Sun replacement options and performance warrants will be exercisable on the same terms and conditions as the PrivateCo options and performance warrants.

PrivateCo currently has 16,550,004 common shares ("PrivateCo Common Shares"), 7,184,300 Series A convertible preferred shares ("Series A Preferred Shares") and 10,533,503 Series B convertible preferred shares ("Series B Preferred Shares", and together with the Series A Preferred Shares, the "PrivateCo Preferred Shares") issued and outstanding. In addition, PrivateCo has issued options and performance warrants to acquire a further 5,926,498 PrivateCo Common Shares. At closing of the Proposed Transaction it is expected that each Series A Preferred Share will be convertible into 1.8 PrivateCo Common Shares and each Series B Preferred Share will be convertible into one PrivateCo Common Share, subject to anti-dilution provisions. As completion of the Proposed Transaction will not trigger the conversion provisions of the PrivateCo Preferred Shares, such shares may be convertible into a higher number of Golden Sun Common Shares if converted at a later date.

Trading in the Golden Sun Shares was suspended on May 21, 2014 in view of the passing of the second anniversary of Golden Sun's initial public offering. Trading will be suspended until completion the Proposed Transaction. If the Proposed Transaction is not completed by August 19, 2014, it is anticipated that Golden Sun may be moved to the NEX Board of the Exchange or delisted. There can be no assurance that the Proposed Transaction will be completed prior to such deadline or at all.

Complete details of the Proposed Transaction will be provided in a subsequent comprehensive news release once the parties have entered into a definitive agreement.

New Business at Annual and Special Meeting of Shareholders

Golden Sun also wishes to announce that an additional matter of incidental business will be conducted at the annual and special meeting of shareholders scheduled for July 31, 2014 (the "Meeting"). Pursuant to the terms of the LOI, holders of PrivateCo Preferred Shares will exchange their Series A Preferred Shares and Series B Preferred Shares for preferred shares of Golden Sun, with identical attributes, on a one for one basis. In order to facilitate this exchange and the Proposed Transaction, Golden Sun will seek shareholder approval for an amendment to the Articles of the Corporation, authorizing the board of directors (the "Board") to cancel the current class of preferred shares and create a new class of preferred shares, issuable in series (the "Share Creation Resolution"). The Share Creation Resolution authorizes the directors to create additional series' of preferred shares of the same class, to set the number of shares in each additional series, and to determine the designation, rights, privileges, conditions and restrictions attaching to shares of each new series as, if and when issued. Upon the approval of the Share Creation Resolution by shareholders, it is the intention of the Board to create two series of such preferred shares with the first series to be unlimited in number and designated as Series A convertible preferred shares and the second series to be unlimited in number and designated as Series B convertible preferred shares (the "Golden Sun Preferred Shares"). The Share Creation Resolution, the full text of which is set forth in Appendix A to this press release, permits the Board to decide not to proceed with the amendment to the Articles of the Corporation without further Golden Sun shareholder approval. Shareholders are urged to read Appendix A in its entirety. The Board recommends that Shareholders vote in favour of the Share Creation Resolution.

The rights, privileges, conditions and restrictions of the Golden Sun Preferred Shares to be created by the Board upon approval of the Share Creation Resolution are set forth in Schedule 1 of Appendix A to this news release, and are identical to the rights, privileges, conditions and restrictions of the Series A Preferred Shares and Series B Preferred Shares. The Golden Sun Preferred Shares will convert into Golden Sun Common Shares when both a "Public Financing" and a specified "Liquidity Event" (as such terms are defined in the Golden Sun Preferred Share terms set forth in Schedule 1 of Appendix A to this news release) have occurred, in accordance with their terms.

The Share Creation Resolution must be passed by special resolution, meaning a resolution passed by a majority of not less than two-thirds of the votes cast by the Golden Sun shareholders present in person or by proxy at the Meeting. In the absence of contrary instructions, the persons named in the form of proxy mailed to shareholders on July 8, 2014 intend to vote the Golden Sun Common Shares represented thereby in favour of the Share Creation Resolution. The Corporation believes that the inability of the Corporation to issue Golden Sun Preferred Shares at closing of the Proposed Transaction will result in the termination of the LOI. The Board of Directors believes that the amendment to the articles to create the Golden Sun Preferred Shares is incidental to the other matters to be carried out at the Meeting as all such matters are being carried out in contemplation of completing a Qualifying Transaction and with a view to the best interests of the Corporation's shareholders.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements relating to the Proposed Transaction, including statements regarding the exchange ratio for the Proposed Transaction, the creation of the Golden Sun Preferred Shares, the receipt of all necessary regulatory and other approvals and satisfaction of all other conditions in connection with the Proposed Transaction and other statements that are not historical facts. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things: the risk that the Share Creation Resolution will not be approved, the Proposed Transaction will not be completed or that the necessary approvals and/or exemptions are not obtained or some other condition to the closing of the Proposed Transaction is not satisfied; the risk that closing of the Proposed Transaction could be delayed if Golden Sun and PrivateCo are not able to obtain the necessary approvals on the timelines planned; assumptions relating to the Proposed Transaction, its structure, and the timing thereof; the timing of obtaining required approvals and satisfying conditions for the Proposed Transaction; the state of the economy in general, and capital markets in particular, investor interest in the business and future prospects of Golden Sun.

The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, Golden Sun disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additionally, Golden Sun undertakes no obligation to comment on the expectations of, or statements made, by third parties in respect of the matters discussed above.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

APPENDIX A

SHARE CREATION RESOLUTION

"BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:

  1. The articles of Golden Sun Capital Inc. (the "Corporation") be amended to cancel the current class of preferred shares.

  2. The articles of the Corporation be amended to create a new class of preferred shares, to be issuable at any time or from time to time in one or more series, with the number, designation, rights, privileges, restrictions and conditions of each series to be determined by the Board of Directors of the Corporation if, as and when issued (the "Preferred Shares").

  3. Any one officer or director of the Corporation be and is hereby authorized and directed, for and on behalf of the Corporation, to negotiate, finalize, execute, deliver and file the articles of amendment, with such additions, deletions or other changes to give full effect to the creation of Preferred Shares as specified in the news release of the Corporation dated July 18, 2014 as such director or officer, in such director or officer's sole discretion, may authorize or approve, any such authorization or approval to be conclusively evidenced by such director or officer's execution, delivery and filing of the articles of amendment.

  4. Any one officer or director of the Corporation be and is hereby authorized and directed, for and on behalf of the Corporation to execute and deliver or file such documents and instruments, including the execution and filing of articles of amendment of the Corporation, and to do all such other acts and things as are required or as such officer or director, in such officer's or director's sole discretion, may deem necessary to give full effect to or carry out the provisions of the foregoing resolution.

  5. The board of directors of the Corporation may, in its sole discretion, decide not to act on this resolution and proceed with the amendment to the articles of the Corporation without further shareholder approval."

SCHEDULE I

SERIES B CONVERTIBLE PREFERRED SHARE PROVISIONS

The Corporation hereby creates an unlimited number of Series B Convertible Preferred Shares ("Series B Preferred Shares") having the following rights, privileges, restrictions and conditions:

1. Definitions

1.1 The following terms shall have the respective meanings ascribed to them below:

"Act" means the Business Corporations Act (Alberta) and the regulations promulgated thereunder, as the same may be amended or replaced from time to time.

"Adjustment Event" has the meaning ascribed to such term in Section 6.1.

"Automatic Conversion" has the meaning ascribed to it in Section 4.1.

"Automatic Conversion Event" has the meaning ascribed to it in Section 4.1.

"business day" means any day, other than a Saturday, a Sunday or a day generally observed as a holiday under applicable laws, on which the principal commercial banks in Calgary, Alberta are open for commercial banking business during normal banking hours.

"Conversion Effective Date" has the meaning ascribed to in Section 4.2

"Common Shares" means common shares in the capital of the Corporation.

"Conversion Value" means $1.25.

"Conversion Value Adjustment" means an adjustment to the Conversion Value as a result of which each outstanding Series B Preferred Share will be convertible into that number of Common Shares that is equal to the Conversion Value divided by the price per equity security of the lowest priced Private Offering or Public Financing completed by the Corporation prior to, or concurrent with, the conversion of the Series B Preferred Shares, subject to each Series B Preferred Share being convertible into a minimum of one (1) Common Share of the Corporation. If the Corporation completes multiple Private Offerings prior to conversion of the Series B Preferred Shares, the Conversion Value Adjustment will be calculated using the lowest price per equity security upon which any Private Offering was consummated.

"Corporation" means Golden Sun Capital Inc.

"Equivalent Treatment" has the meaning ascribed to such term in Section 6.1.

"Liquidation Amount" means $1.25 per Series B Preferred Share plus the amount of any accrued but unpaid dividends declared thereon less any amounts previously distributed in respect of the Series B Preferred Shares by way of a return of capital or analogous event.

"Liquidity Event" means the occurrence of any one or more of the following events or circumstances:

  1. the Common Shares are listed and posted for trading on any of the Toronto Stock Exchange, the TSX Venture Exchange, the New York Stock Exchange, the Nasdaq National Market, the Australian Stock Exchange, the London Stock Exchange or AIM market, the Hong Kong Stock Exchange or the Singapore Stock Exchange;

  2. all of the issued and outstanding Common Shares (other than Common Shares in respect of which dissent, appraisal or similar rights have been exercised) having been sold for cash pursuant to a take-over bid, arrangement, amalgamation or other transaction;

  3. all of the issued and outstanding Common Shares (other than Common Shares in respect of which dissent, appraisal or similar rights have been exercised) having been exchanged, pursuant to a take-over bid, arrangement, amalgamation or other transaction for securities of an entity that has a minimum of $10 million of assets (as determined by the board of directors of the Corporation in its sole discretion), for Successor Securities that are listed on any of the exchanges referred to in (a); or

  4. any combination of the events or circumstances described in the preceding clauses (a) through (c) such that at least one of such events or circumstances applies with respect to all of the Common Shares (excluding Common Shares in respect of which dissent, appraisal or similar rights have been exercised).

"Private Offering" means the completion of a financing of equity securities of the Corporation on a private placement basis prior to the closing of the first Public Financing or the completion of a Liquidity Event at less than $1.25 per equity security.

"Public Financing" means:

  1. completion of an initial public offering of Common Shares or Successor Securities; or

  2. completion of a private placement or prospectus offering of Common Shares, Successor Securities or securities convertible into either of the foregoing where it is a term of such offering that the Common Shares or Successor Securities, as applicable, be listed and posted for trading on one of the exchanges listed in part (a) of the definition of "Liquidity Event" within 60 days following the completion of such offering.

"Replacement Successor Securities" means in connection with an Automatic Conversion Event pursuant to which holders of Common Shares receive Successor Securities, that number of Successor Securities that would have been issued to a holder of a Series B Preferred Share had such holder converted such Series B Preferred Share into Common Shares in accordance with the terms hereof and participated in the Liquidity Event as a holder of such Common Shares.

"Series A Preferred Shares" means series A convertible preferred shares in the capital of the Corporation.

"Successor Securities" means securities issued to holders of Common Shares in exchange for such Common Shares upon the completion of a take-over bid, reverse take-over bid, arrangement, amalgamation, reorganization or analogous transaction.

2. Voting Rights

2.1 Holders of Series B Preferred Shares shall be entitled to receive notice of and to attend and vote at all meetings of voting shareholders of the Corporation, except meetings of holders of another class or series of shares of the Corporation required pursuant to the provisions of the Act. At any such meeting, holders of Series B Preferred Shares shall vote together with all other holders of voting shares of the Corporation as a single class, and each holder of Series B Preferred Shares shall be entitled to exercise that number of votes that is equal to the aggregate number of Common Shares into which the holders of Series B Preferred Shares are then convertible up to the nearest whole share.

3. Voluntary Conversion.

3.1 Prior to any Automatic Conversion, each holder of Series B Preferred Shares may, at its option, and from time to time, convert all or any part of its Series B Preferred Shares into Common Shares, with each Series B Preferred Share being convertible into one (1) Common Share subject to adjustment pursuant to Section 6, or, if applicable, convertible into such number of Common Shares as determined by application of the then prevailing Conversion Value Adjustment.

3.2 In order to exercise the voluntary conversion right attaching to the Series B Preferred Shares, a holder wishing to exercise such right shall:

  1. give written notice to the Corporation at its principal office or the office of any transfer agent for the Series B Preferred Shares:

    1. stating that such holder elects to convert such shares; and

    2. providing the name or names (with address or addresses) in which the certificate or certificates for Common Shares issuable upon such conversion are to be issued;

  2. surrender the certificate or certificates representing the Series B Preferred Shares being converted to the Corporation at its principal office or the office of any transfer agent for the Common Shares; and

  3. where the Common Shares are to be registered in the name of a person other than the holder of the Series B Preferred Shares to be converted, provide satisfactory evidence to the Corporation of proper assignment and transfer of the surrendered certificates, including evidence of compliance with all applicable laws and satisfaction of any taxes arising on transfer.

3.3 As soon as reasonably practicable after the receipt of a such written notice, but in any event, not more than ten business days after such receipt, the Corporation shall issue and deliver, or cause to be issued and delivered, at the expense of the Corporation, a certificate or certificates representing the Common Shares issuable in respect of such conversion registered in the manner directed by the converting holder in the written notice. Such conversion shall be deemed to have been made at the close of business on the date such Common Shares are issued so that the rights of the holder of the Series B Preferred Shares being converted, as the holder thereof, shall cease at that time and the person(s) entitled to receive Common Shares upon such conversion shall be treated for all purposes as having become the holder(s) of record of such Common Shares at such time.

3.4 If less than all of the Series B Preferred Shares represented by the certificate or certificates presented and surrendered as aforesaid are to be converted into Common Shares, the holder of the Series B Preferred Shares shall be entitled to receive, at the expense of the Corporation, a new certificate or certificates representing the balance of the Series B Preferred Shares represented by the certificate or certificates presented and surrendered as aforesaid which are not converted.

4. Automatic Conversion

4.1 Effective concurrent with the earlier of: (i) the closing of the first Public Financing; or (ii) completion of a Liquidity Event, each Series B Preferred Share will be automatically converted into one Common Share subject to adjustment in accordance with the provisions of Section 6 (or converted into the Replacement Successor Securities if applicable) or into such number of Common Shares (or Replacement Successor Securities) as determined by application of the then prevailing Conversion Value Adjustment. An event giving rise to an automatic conversion in the manner described above is referred to herein as an "Automatic Conversion Event" and any such conversion is referred to herein as an "Automatic Conversion".

4.2 Upon the occurrence of an Automatic Conversion Event, the Corporation shall promptly give written notice to the holders of the Series B Preferred Shares advising of the completion of such event, the effective date of the conversion of their Series B Preferred Shares (the "Conversion Effective Date") and the number of Common Shares (or Successor Securities, if applicable) to which they are entitled. Such conversion shall be deemed to be effective at the close of business on the Conversion Effective Date, or at such other time as determined by the Board of Directors of the Corporation, such that at such time, holders of the Series B Preferred Shares being converted shall cease to be holders of record of such Series B Preferred Shares and, from such time, shall be treated for all purposes as having become the holders of record of the Common Shares issuable on Automatic Conversion. At and following the effective time of Automatic Conversion of the Series B Preferred Shares as aforesaid, the certificates representing the Series B Preferred Shares shall cease to represent any rights against the Corporation other than the right to receive the Common shares issuable upon such Automatic Conversion.

4.3 The Corporation will issue and deliver to such former holder of Series B Preferred Shares, promptly, and in any event, within not more than ten business days after the Conversion Effective Date the number of Common Shares (or Successor Securities, if applicable) into which such Series B Preferred Shares are converted. The Corporation will issue the Common Shares or Successor Securities in the name of the registered holder of the Series B Preferred Shares that were converted on the Conversion Effective Date and deliver such certificate to the address of such registered holder as reflected on the books and records of the Corporation.

4.4 From and after the time of conversion on the Conversion Effective Date, the Series B Preferred Shares shall be deemed cancelled and shall cease to entitle the former holder(s) thereof to exercise any of the rights of holders of Series B Preferred Shares other than the right to receive that number of Common Shares (or Successor Securities, if applicable) into which such Series B Preferred Shares have been converted and to which such holder is entitled in accordance with the terms hereof.

5. Fractions

5.1 No fractional Common Shares will be issued pursuant to conversion of a holder's Series B Preferred Shares. Any fractional interest in a Common Share arising on conversion of a holder's Series B Preferred Share that is less than 0.5 of a Common Share, will be rounded down to the nearest whole Common Share. Any fractional interest in a Common Share arising on conversion of a holder's Series B Preferred Share that is 0.5, or greater, of a Common Share will be rounded up to the nearest whole Common Share.

6. Adjustments on Occurrence of an Adjustment Event

6.1 In the event that the Corporation undertakes any of the actions or events described in paragraphs 6.2 (a) through (d) below (each an "Adjustment Event"), the board of directors of the Corporation shall, in its sole discretion, acting reasonably, make such adjustments to the provisions hereof so as to prevent substantial dilution or enlargement of the rights of holders of Series B Preferred Shares (referred to herein as "Equivalent Treatment").

6.2 Without limiting the generality of the foregoing paragraph, in the event:

  1. of any change in the Common Shares through subdivision, consolidation, reclassification, amalgamation, merger or otherwise;

  2. of any issuance, dividend or distribution to all or substantially all the holders of Common Shares of any shares, securities, property or assets of the Corporation other than in the ordinary course;

  3. that any rights are granted to holders of Common Shares to purchase Common Shares at prices materially below fair market value; or

  4. that as a result of any recapitalization, merger, consolidation or otherwise the Common Shares are converted into or exchangeable for any other shares or securities.

Then in any such case the board of directors of the Corporation shall proportionately adjust the number of Common Shares to be issued pursuant to the conversion of Series B Preferred Shares, the securities or other property that may be acquired upon conversion of the Series B Preferred Shares, and the Conversion Value, or one or more of the foregoing, to ensure Equivalent Treatment.

6.3 Adjustments shall be made successively whenever any Adjustment Event shall occur.

6.4 If the Corporation sets a record date to determine the holders of the Common Shares for the purpose of any Adjustment Event and shall thereafter and before the completion of such event, legally abandon its plan to do so, then no adjustment to the Conversion Value and/or the number of Common Shares issuable upon conversion of the Series B Preferred Shares shall be required by reason only of the setting of such record date.

6.5 Notwithstanding anything contained herein, no adjustment in the Conversion Value and/or the number of Common Shares issuable upon conversion of the Series B Preferred Shares shall be made in respect of any event or circumstance described in this Section 6 if the holders of Series B Preferred Shares are entitled to participate in such event on the same terms, mutatis mutandis, as if such holders had converted their Series B Preferred Shares on or before the effective date or record date of such event or circumstance.

6.6 Notwithstanding anything contained herein, the Conversion Value and/or number of Common Shares issuable upon the conversion of Series B Preferred Shares shall not be adjusted or be subject to adjustment as a result of:

  1. the granting by the Corporation of warrants, options or other rights under any stock option plan, stock purchase plan, phantom stock plan, stock appreciation rights plan, or other deferred, share or incentive compensation plan or arrangement to officers, directors, employees or consultants of the Corporation or its affiliates;

  2. the issue by the Corporation of any Common Shares or other securities of the Corporation for valuable consideration to any persons other than as specifically provided for in this Section 6 (including without limitation the issue of Common Shares upon the exercise or conversion of warrants, options or any other securities of the Corporation that are exercisable or convertible into Common Shares); or

  3. the declaration or payment of any dividends on the Common Shares other than as specifically provided for in this Section 6.

6.7 If at any time after the date hereof the Corporation shall take any action affecting its Common Shares, and in the opinion of the board of directors of the Corporation acting reasonably, the adjustment provisions of this Section 6 are not strictly applicable or, if strictly applicable would not fairly protect the rights of a holder of Series B Preferred Shares, or the Corporation in accordance with the intent and purposes hereof, the provisions of this Section 6 shall be adjusted in such manner, if any, and at such time, as the board of directors of the Corporation in its sole discretion may reasonably determine to be equitable to the holders of Series B Preferred Shares and the Corporation in such circumstances. Failure of the board of directors of the Corporation to make an adjustment in accordance with this Section 6.7 shall be conclusive evidence that the board of directors of the Corporation determined that it is equitable to make no adjustment in the circumstances.

6.8 At least ten (10) days prior to the effective date or record date, as the case may be, of any Adjustment Event, the Corporation shall give notice to the holders of Series B Preferred Shares of the particulars of such event and, if determinable, the required adjustment. In the event that any adjustment for which the notice of adjustment referred to in the preceding sentence has been given is not then determinable, the Corporation will give notice to the holders of Series B Preferred Shares of the required adjustment promptly after such adjustment is determinable.

7. Dividends

7.1 Subject to the rights of the holders of any class of shares ranking in priority to the Series B Preferred Shares, the holders of Series B Preferred Shares shall be entitled to receive dividends if, as and when declared by the board of directors of the Corporation out of the assets of the Corporation properly applicable to the payment of dividends, in such amounts and payable in such manner as the board of directors of the Corporation may from time to time determine, in priority over the holders of Common Shares and all other shares of the Corporation ranking junior to the Series B Preferred Shares with respect to the payment of dividends.

8. Liquidation, Dissolution or Winding-Up

8.1 Subject to the rights of the holders of any class of shares in the capital of the Corporation ranking in priority to the Series B Preferred Shares, in the event of the liquidation, dissolution or winding- up of the Corporation, whether voluntary or involuntary, or any other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, each holder of Series B Preferred Shares shall be entitled to receive for each Series B Preferred Share held, an amount equal to the Liquidation Amount, in priority over the holders of Common Shares and all other shares of the Corporation ranking junior to the Series B Preferred Shares. After payment to the holders of the Series B Preferred Shares of the Liquidation Amount, the holders of the Series B Preferred Shares will not be entitled to share in any further distribution of the assets of the Corporation upon the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in respect of any other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs.

9. Notices

9.1 Any notice, request or other communication to be given to the Corporation by a holder of the Series B Preferred Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the registered office of the Corporation. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Corporation.

9.2 Any presentation and surrender by a holder of the Series B Preferred Shares to the Corporation of certificates representing Series B Preferred Shares in connection with the liquidation, dissolution or winding-up of the Corporation or other distribution of the assets of the Corporation for the purpose of winding up its affairs or the conversion of Series B Preferred Shares may be made by registered mail (postage prepaid) or by delivery to the registered office of the Corporation, addressed to the attention of the Executive Vice President, Finance of the Corporation.

9.3 Any notice, request or other communication to be given to a holder of Series B Preferred Shares by or on behalf of the Corporation shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder of Series B Preferred Shares recorded in the register of shareholders of the Corporation or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the sixth business day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holder of the Series B Preferred Shares shall not invalidate or otherwise alter or affect any action or proceeding to be taken by the Corporation pursuant thereto.

10. Withholding Taxes

10.1 Notwithstanding any other provision of these share provisions, the Corporation may deduct or withhold from any payment, distribution, issuance or delivery (whether in cash or in shares) to be made pursuant to these share provisions any amounts required or permitted by law to be deducted or withheld from any such payment, distribution, issuance or delivery and shall remit any such amounts to the relevant tax authority as required. If the cash component of any payment, distribution, issuance or delivery to be made pursuant to these share provisions is less than the amount that the Corporation is so required or permitted to deduct or withhold, the Corporation shall be permitted to deduct and withhold from any non-cash payment, distribution, issuance or delivery to be made pursuant to these share provisions any amounts required or permitted by law to be deducted or withheld from any such payment, distribution, issuance or delivery and to dispose of such property in order to remit any amount required to be remitted to any relevant tax authority. Notwithstanding the foregoing, the amount of any payment, distribution, issuance or delivery made to a holder of Series B Preferred Shares pursuant to these share provisions shall be considered to be the amount of the payment, distribution, issuance or delivery received by such holder plus any amount deducted or withheld pursuant to this Section 10.1. Holders of Series B Convertible Preferred Shares shall be responsible for all withholding taxes under the Income Tax Act (Canada) in respect of any payment, distribution, issuance or delivery made or credited to them pursuant to these share provisions and shall indemnify and hold harmless the Corporation on an after-tax basis for any such taxes imposed on any payment, distribution, issuance or delivery made or credited to them pursuant to these share provisions.

SERIES A CONVERTIBLE PREFERRED SHARE PROVISIONS

The Corporation hereby creates an unlimited number of Series A Convertible Preferred Shares ("Series A Preferred Shares") having the following rights, privileges, restrictions and conditions:

1. Definitions

1.1 The following terms shall have the respective meanings ascribed to them below:

"Act" means the Business Corporations Act (Alberta) and the regulations promulgated thereunder, as the same may be amended or replaced from time to time.

"Adjustment Event" has the meaning ascribed to such term in Section 6.1.

"business day" means any day, other than a Saturday, a Sunday or a day generally observed as a holiday under applicable laws, on which the principal commercial banks in Calgary, Alberta are open for commercial banking business during normal banking hours.

"Conversion Value" means $2.25.

"Conversion Value Adjustment" means an adjustment to the Conversion Value whereby each Series A Preferred Share will be convertible into that number of Common Shares that is equal to the Conversion Value divided by the price per equity security of the lowest priced Private Offering or Public Financing completed by the Corporation prior to the conversion of the Series A Preferred Shares, subject to each Series A Preferred Share being convertible into a minimum of one (1) Common Share of the Corporation.

"Equivalent Treatment" has the meaning ascribed to such term in Section 6.1.

"Liquidation Amount" means $2.25 per Series A Preferred Share plus the amount of any accrued but unpaid dividends declared thereon less any amounts previously distributed in respect of the Series A Preferred Shares by way of a return of capital or analogous event.

"Liquidity Event" means the occurrence of any one or more of the following events or circumstances:

  1. the Common Shares listed on any of the Toronto Stock Exchange, the TSX Venture Exchange, the New York Stock Exchange, the Nasdaq National Market, the Australian Stock Exchange, the London Stock Exchange or AIM market, the Hong Kong Stock Exchange or the Singapore Stock Exchange;

  2. all of the issued and outstanding Common Shares (other than Common Shares in respect of which dissent, appraisal or similar rights have been exercised) having been sold for cash pursuant to a take-over bid, arrangement, amalgamation or other transaction;

  3. all of the issued and outstanding Common Shares (other than Common Shares in respect of which dissent, appraisal or similar rights have been exercised) having been exchanged, pursuant to a take-over bid, arrangement, amalgamation or other transaction for securities of an entity that has a minimum of $10 million of assets (as determined by the board of directors of the Corporation in its sole discretion), for Successor Securities that are listed on any of the exchanges referred to in (a); or

  4. any combination of the events or circumstances described in the preceding clauses (a) through (c) such that at least one of such events or circumstances applies with respect to all of the Common Shares.

"Private Offering" means the completion of a financing of equity securities of the Corporation on a private placement basis prior to the Public Financing or a Liquidity Event at less than $2.25 per equity security.

"Public Financing" means:

  1. completion of an initial public offering of Common Shares or Successor Securities; or

  2. completion of a private placement or prospectus offering of Common Shares, Successor Securities or securities convertible into either of the foregoing where it is a term of such offering that the Common Shares or Successor Securities, as applicable, be listed and posted for trading on one of the exchanges listed in part (a) of the Liquidity Event definition within 60 days following the completion of such offering.

"Successor Securities" means securities issued to holders of Common Shares in exchange for such Common Shares upon the completion of a take-over bid, reverse take-over bid, arrangement, amalgamation, reorganization or analogous transaction.

2. Voting Rights

2.1 Holders of Series A Preferred Shares shall be entitled to receive notice of and to attend and vote at all meetings of voting shareholders of the Corporation, except meetings of holders of another class or series of shares of the Corporation required pursuant to the provisions of the Act. At any such meeting, holders of Series A Preferred Shares shall vote together with all other holders of voting shares of the Corporation as a single class, and each holder of Series A Preferred Shares shall be entitled to exercise that number of votes that is equal to the aggregate number of Common Shares into which the holders of Series A Preferred Shares are then convertible up to the nearest whole share.

3. Voluntary Conversion

3.1 Prior to a Liquidity Event, each holder of Series A Preferred Shares may, at its option, and from time to time, convert all or any part of its Series A Preferred Shares into Common Shares, with each Series A Preferred Share convertible into one (1) Common Share or, if applicable, convertible into such number of Common Shares as determined by application of the Conversion Value Adjustment.

3.2 Upon the closing of a Private Offering, each Series A Preferred Share will become convertible into that number of Common Shares as determined by application of the Conversion Value Adjustment. If the Corporation completes multiple Private Offerings prior to the closing of the Public Financing or the occurrence of a Liquidity Event, the Conversion Value Adjustment will be calculated using the lowest price per equity security upon which any Private Offering was consummated, until, and for greater certainty including, the Public Financing or Liquidity Event.

3.3 In order to exercise the conversion right attaching to the Series A Preferred Shares, a holder wishing to exercise such right shall:

  1. give written notice to the Corporation at its principal office or the office of any transfer agent for the Series A Preferred Shares:

    1. stating that such holder elects to convert such shares; and

    2. providing the name or names (with address or addresses) in which the certificate or certificates for Common Shares issuable upon such conversion are to be issued;

  2. surrender the certificate or certificates representing the Series A Preferred Shares being converted to the Corporation at its principal office or the office of any transfer agent for the Common Shares; and

  3. where the Common Shares are to be registered in the name of a person other than the holder of the Series A Preferred Shares to be converted, provide satisfactory evidence to the Corporation of proper assignment and transfer of the surrendered certificates, including evidence of compliance with applicable securities laws.

As soon as reasonably practicable after the receipt of a such written notice, but in any event, not more than ten business days after such receipt, the Corporation shall issue and deliver, or cause to be issued and delivered, at the expense of the Corporation, a certificate or certificates representing the Common Shares issuable in respect of such conversion registered in the manner directed by the converting holder in the written notice. Such conversion shall be deemed to have been made at the close of business on the date such Common Shares are issued so that the rights of the holder of the Series A Preferred Shares being converted, as the holder thereof, shall cease at that time and the person(s) entitled to receive Common Shares upon such conversion shall be treated for all purposes as having become the holder(s) of record of such Common Shares at such time.

3.4 If less than all of the Series A Preferred Shares represented by the certificate or certificates presented and surrendered as aforesaid are to be converted into Common Shares, the holder of the Series A Preferred Shares shall be entitled to receive, at the expense of the Corporation, a new certificate or certificates representing the balance of the Series A Preferred Shares represented by the certificate or certificates presented and surrendered as aforesaid which are not converted.

4. Forced Conversion

4.1 Effective the earlier of the date upon which a Public Financing and item (b) or (c) of the definition of Liquidity Event occurs, each Series A Preferred Share will be converted into one Common Share of the Corporation (or Successor Securities of the resulting issuer of such Liquidity Event, as applicable) or into such number of Common Shares of the Corporation (or Successor Securities of the resulting issuer of such Liquidity Event, as applicable) as determined by application of the Conversion Value Adjustment.

4.2 Upon a Liquidity Event described in Section 4.1 or Public Financing, the Corporation shall promptly give written notice to the holders of the Series A Preferred Shares advising of the completion of such Liquidity Event or Public Financing, the effective date of the conversion of their Series A Preferred Shares and the number of Common Shares (or Successor Securities, if applicable) to which they are entitled. Upon receipt of such written notice, each holder of Series A Preferred Shares must surrender the certificate(s) formerly representing that holder's Series A Preferred Shares at the principal office of the Corporation or the office of any transfer agent for the Common Shares.

4.3 Upon receipt by the Corporation of such certificate(s), the Corporation will issue and deliver to such former holder of Series A Preferred Shares, promptly, and in any event, within not more than ten business days after receipt of such certificate(s), at the office and in the name shown on the surrendered certificate or certificates, a certificate or certificates for the number of Common Shares (or Successor Securities, if applicable) into which such Series A Preferred Shares are converted.

4.4 The Corporation is not required to issue certificates evidencing the Common Shares (or Successor Securities, if applicable) issuable upon conversion until certificates formerly evidencing the converted Series A Preferred Shares are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or such transfer agent that such certificates have been lost, stolen or destroyed, and executes and delivers an agreement, in a form acceptable to the Corporation, acting reasonably, to indemnify the Corporation from any loss incurred by the Corporation in connection with the loss, theft or destruction.

4.5 From and after the effective time of the Public Financing (other than in the circumstance described in item (b) of the definition of Public Financing, in which case from and after the effective time the relevant securities referenced therein are listed and posted for trading on one of the exchanges referenced therein) or the Liquidity Event described in Section 4.1, as applicable, the Series A Preferred Shares shall, notwithstanding not having been returned to the Corporation in accordance with Section 4.2, be deemed cancelled and shall cease to entitle the former holder(s) thereof to exercise any of the rights of holders of Series A Preferred Shares in respect thereof other than the right to receive that number of Common Shares (or Successor Securities, if applicable) into which such Series A Preferred Shares have been converted and to which such holder is entitled in accordance with the terms hereof.

5. Fractions

5.1 No fractional Common Shares will be issued pursuant to conversion of Series A Preferred Shares. Any fractional interest in Common Shares that is less than 0.5 of a Common Share resulting from the conversion of Series A Preferred Shares will be rounded down to the nearest whole Common Share. Any fractional interest in Common Shares that is 0.5, or greater of a Common Share resulting from the conversion of Series A Preferred Shares will be rounded up to the nearest whole Common Share.

6. Adjustments on Occurrence of an Adjustment Event

6.1 In the event that the Corporation undertakes any of the actions or events described in paragraphs 6.2 (a) through (d) below (each an "Adjustment Event"), the board of directors of the Corporation shall, in its sole discretion, acting reasonably, make such adjustments to the provisions hereof so as to prevent substantial dilution or enlargement of the rights of holders of Series A Preferred Shares (referred to herein as "Equivalent Treatment").

6.2 Without limiting the generality of the foregoing paragraph, in the event: (a) of any change in the Common Shares through subdivision, consolidation, reclassification, amalgamation, merger or otherwise; (b) of any issuance, dividend or distribution to all or substantially all the holders of Common Shares of any shares, securities, property or assets of the Corporation other than in the ordinary course; (c) that any rights are granted to holders of Common Shares to purchase Common Shares at prices materially below fair market value; or (d) that as a result of any recapitalization, merger, consolidation or otherwise the Common Shares are converted into or exchangeable for any other shares or securities, then in any such case the board of directors of the Corporation shall proportionately adjust the number of Common Shares to be issued pursuant to the conversion of Series A Preferred Shares, the securities or other property that may be acquired upon conversion of the Series A Preferred Shares, and the Conversion Value, or one or more of the foregoing, to ensure Equivalent Treatment.

6.3 Adjustments shall be made successively whenever any Adjustment Event shall occur.

6.4 If the Corporation sets a record date to determine the holders of the Common Shares for the purpose of any Adjustment Event and shall thereafter and before the completion of such event, legally abandon its plan to do so, then no adjustment to the Conversion Value and/or the number of Common Shares issuable upon conversion of the Series A Preferred Shares shall be required by reason only of the setting of such record date.

6.5 Notwithstanding anything contained herein, no adjustment in the Conversion Value and/or the number of Common Shares issuable upon conversion of the Series A Preferred Shares shall be made in respect of any event or circumstance described in this Section 6 if the holders of Series A Preferred Shares are entitled to participate in such event on the same terms, mutatis mutandis, as if such holders had converted their Series A Preferred Shares on or before the effective date or record date of such event or circumstance.

6.6 Notwithstanding anything contained herein, the Conversion Value and/or number of Common Shares issuable upon the conversion of Series A Preferred Shares shall not be adjusted or be subject to adjustment as a result of:

  1. the granting by the Corporation of warrants, options or other rights under any stock option plan, stock purchase plan, phantom stock plan, stock appreciation rights plan, or other deferred, share or incentive compensation plan or arrangement to officers, directors, employees or consultants of the Corporation or its affiliates;

  2. the issue by the Corporation of any Common Shares or other securities of the Corporation for valuable consideration to any persons other than as specifically provided for in this Section 6 (including without limitation the issue of Common Shares upon the exercise or conversion of warrants, options or any other securities of the Corporation that are exercisable or convertible into Common Shares); or

  3. the declaration or payment of any dividends on the Common Shares other than as specifically provided for in this Section 6.

6.7 If at any time after the date hereof the Corporation shall take any action affecting its Common Shares, and in the opinion of the board of directors of the Corporation acting reasonably, the adjustment provisions of this Section 6 are not strictly applicable or, if strictly applicable would not fairly protect the rights of a holder of Series A Preferred Shares, or the Corporation in accordance with the intent and purposes hereof, the provisions of this Section 6 shall be adjusted in such manner, if any, and at such time, as the board of directors of the Corporation in its sole discretion may reasonably determine to be equitable to the holders of Series A Preferred Shares and the Corporation in such circumstances. Failure of the board of directors of the Corporation to make an adjustment in accordance with this Section 6.7 shall be conclusive evidence that the board of directors of the Corporation determined that it is equitable to make no adjustment in the circumstances.

6.8 At least ten (10) days prior to the effective date or record date, as the case may be, of any Adjustment Event, the Corporation shall give notice to the holders of Series A Preferred Shares of the particulars of such event and, if determinable, the required adjustment. In the event that any adjustment for which the notice of adjustment referred to in the preceding sentence has been given is not then determinable, the Corporation will give notice to the holders of Series A Preferred Shares of the required adjustment promptly after such adjustment is determinable.

7. Dividends

7.1 Subject to the rights of the holders of any class of shares ranking in priority to the Series A Preferred Shares, the holders of Series A Preferred Shares shall be entitled to receive dividends if, as and when declared by the board of directors of the Corporation out of the assets of the Corporation properly applicable to the payment of dividends, in such amounts and payable in such manner as the board of directors may from time to time determine, in priority over the holders of Common Shares and all other shares of the Corporation ranking junior to the Series A Preferred Shares with respect to the payment of dividends.

8. Liquidation, Dissolution or Winding-Up

8.1 Notwithstanding Section 2.1 of the terms of the Preferred Shares set forth herein, subject to the rights of the holders of any class of shares ranking in priority to the Series A Preferred Shares, in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, each holder of Series A Preferred Shares shall be entitled to receive for each Series A Preferred Share held, an amount equal to the Liquidation Amount in priority over the holders of Common Shares and all other shares of the Corporation ranking junior to the Series A Preferred Shares. After payment to the holders of the Series A Preferred Shares of the Liquidation Amount, the holders of the Series A Preferred Shares will not be entitled to share in any further distribution of the assets of the Corporation upon the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or in respect of any other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs.

9. Notices

9.1 Any notice, request or other communication to be given to the Corporation by a holder of the Series A Preferred Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the registered office of the Corporation. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Corporation.

9.2 Any presentation and surrender by a holder of the Series A Preferred Shares to the Corporation of certificates representing Series A Preferred Shares in connection with the liquidation, dissolution or winding-up of the Corporation or other distribution of the assets of the Corporation for the purpose of winding up its affairs or the conversion of Series A Preferred Shares may be made by registered mail (postage prepaid) or by delivery to the registered office of the Corporation, addressed to the attention of the Executive Vice President, Finance of the Corporation.

9.3 Any notice, request or other communication to be given to a holder of Series A Preferred Shares by or on behalf of the Corporation shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder of Series A Preferred Shares recorded in the register of shareholders of the Corporation or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the sixth business day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holder of the Series A Preferred Shares shall not invalidate or otherwise alter or affect any action or proceeding to be taken by the Corporation pursuant thereto.

Contact Information

  • Golden Sun Capital Inc.
    Christopher M. Wolfenberg
    President and Chief Executive Officer
    (403) 267-8222
    wolfenberg@hotmail.com