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EXCHANGE AGREEMENT
 

This Exchange of Shares Agreement (the Agreement) is effective [DATE],

BETWEEN:  [FIRST PARTY NAME] (the "Shareholder"), an individual with his main address located at:

      [YOUR COMPLETE ADDRESS]

AND:  [SECOND PARTY NAME] (the "Company"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at:

      [COMPLETE ADDRESS]


HEREAS the authorized share capital of the Corporation consists of an unlimited number of Class [SPECIFY] common shares, an unlimited number of Class [SPECIFY] common shares, an unlimited number of Class [SPECIFY] preferred shares, an unlimited number of Class [SPECIFY] preferred shares and an unlimited number of Class [SPECIFY] preferred shares;

WHEREAS the Shareholder represents that he is the owner of [NUMBER] Class [SPECIFY] common shares in the capital stock of the Corporation (the Common Shares);

WHEREAS the [COMPANY NAME] have determined that the fair market value of the Common Shares is [AMOUNT];

WHEREAS the Common Shares have an aggregate stated capital of [AMOUNT];

WHEREAS the Shareholder wishes to exchange the Common Shares for [NUMBER] Class [SPECIFY] preferred share in the capital stock of the Corporation and the Corporation is willing to permit such exchange;

NOW THEREFORE, IT IS AGREED AS FOLLOWS:


SHARES EXCHANGED AND EXCHANGE PRICE

Subject to the terms and conditions set forth in this Agreement, the Shareholder hereby tenders the Common Shares to the Corporation, hereto present and accepting, and delivers to the Corporation one or more certificates representing the Common Shares duly endorsed to the Corporation for transfer.

The aggregate exchange price for the Common Shares is [AMOUNT], which the parties consider to be the fair market value of the Common Shares (the Exchange Price) payable as set forth at Article [NUMBER] hereof.







PAYMENT OF THE EXCHANGE PRICE

The Shareholder acknowledges that he has received a certificate representing [NUMBER] Class [SPECIFY] preferred share of the Corporation (the Preferred Share) in full payment of the Exchange Price. The [COMPANY NAME] hereto determine that the Preferred Share has a fair market value of and is, in all circumstances of the transaction, the fair equivalent of a consideration payable in cash of [AMOUNT] for the Preferred Share issued and allotted hereunder.


SHAREHOLDERS REPRESENTATIONS AND WARRANTIES

The Shareholder represents and warrants to the Corporation that:

the Common Shares are owned by the Shareholder by good and marketable title;

the Common Shares have been duly issued and are outstanding as fully paid and non-assessable shares;

the Shareholder is a resident of [COUNTRY] for the purposes of the Income Tax [ACT/LAW/RULE] ([COUNTRY]) (the Federal Act) and the Taxation [ACT/LAW/RULE] ([STATE/PROVINCE]) (the [STATE/PROVINCE] Act);

the exchange and delivery of the Common Shares as provided for in this Agreement shall not conflict with or result in or cause the occurrence of an event or condition which, immediately or after notice or lapse of time or both, constitutes a breach of or default under any agreement, instrument, order, judgment or decree to which the Shareholder is subject;

this Agreement constitutes a valid and binding obligation of the Shareholder enforceable against the Shareholder in accordance with its terms, provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar [YOUR COUNTRY LAW] generally affecting enforceability of creditors rights.


CORPORATIONS REPRESENTATIONS AND WARRANTIES

The Corporation represents and warrants to the Shareholder that:

the Corporation is a corporation incorporated under the [YOUR COUNTRY LAW] of [COUNTRY] and is duly organized and validly existing thereunder;

all necessary corporate action and proceedings have been taken to permit the execution of this Agreement. No approval or consent of any public or private authority is required to enter into this Agreement or to consummate the transaction provided for herein;

the aforementioned actions do not conflict with or result in or cause the occurrence of an event or condition which, immediately or after notice or lapse of time or both constitutes a breach of or default under the articles or by-laws of the Corporation or under any agreement, instrument, order, judgment or decree to which the Corporation is subject;

the Preferred Share has been validly allotted and issued and is registered in the name of the Shareholder;

the Corporation is a taxable [COUNTRY] corporation within the meaning of the Federal [ACT/LAW/RULE] and the [STATE/PROVINCE] [ACT/LAW/RULE]; and


this Agreement constitutes a valid and binding obligation of the Corporation enforceable against it in accordance with its terms, provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws generally affecting enforceability of creditors rights.


STATED CAPITAL ACCOUNT AND PRICE ADJUSTMENT CLAUSE

The Shareholder and the Corporation agree that the Corporation shall, in accordance with Subsection [SPECIFY] of the [COMPANY NAME], add [AMOUNT] to its stated capital account in respect of the Preferred Share, being an amount equal to the paid-up capital of the Common Shares.

The [COMPANY NAME] hereto confirm that it is their intention that the Exchange Price shall represent the fair market value of the Common Shares. The [COMPANY NAME] hereto agree that in the event the Minister shall assert, directly or indirectly, assess or reassess either or both of the [COMPANY NAME] hereto or otherwise make a final determination (collectively referred to herein as the Final Determination) on the basis that the fair market value (the Ministerial Fair Market Value) of the Common Shares as of their date of disposition is greater or less than the Exchange Price, the Exchange Price shall be adjusted by an amount equal to the difference between the Exchange Price and the Ministerial Fair Market Value (the Price Difference) and an amount equal to the Price Difference shall be added or subtracted, as the case may be, to or from the Exchange Price and the proper adjustment shall be made to the redemption price of the Preferred Share as provided for in the articles of the Corporation.

In the event that the Shareholder and the Corporation do not agree with the Ministerial Fair Market Value, the Exchange Price shall be adjusted to equal the amount determined by final judgment of a competent court (the Judicial Fair Market Value) and the provisions of paragraph 5.2 apply mutatis mutandis to such adjustment.


ELECTIONS

After the Closing Date (as hereinafter defined), the Shareholder and the Corporation may, if advisable, within the prescribed time period, execute and deliver elections in the forms prescribed by the Federal [ACT/LAW/RULE] and the [STATE/PROVINCE] [ACT/LAW/RULE] and prepared and filed by [NAME] of Roll, [COMPANY NAME], Chartered Accountants, to have the provisions of Section [SPECIFY] of the Federal [ACT/LAW/RULE] and any other relevant provisions thereof and the provisions of Section [SPECIFY] of the [STATE/PROVINCE] [ACT/LAW/RULE] and any other relevant provisions thereof apply to the exchange and transfer of the Common Shares to the Corporation and for the purposes of such elections the parties shall elect the Shareholders Cost Amount of the Common Shares for tax purposes, as defined in Subsection [SPECIFY] of the Federal Act and Section [NUMBER] of the [STATE/PROVINCE] [ACT/LAW/RULE] as the Shareholders proceeds of disposition of the Common Shares. 

In the event that the Shareholders Cost Amount of the Common Shares is determined by the Minister of [SPECIFY] [STATE/PROVINCE] to be greater or less than the amount elected by the parties hereto, amended elections will be filed by the [COMPANY NAME], if necessary, so as to reflect the Shareholders Cost Amount of the Common Shares as determined by the Minister of [SPECIFY] [STATE/PROVINCE].


MISCELLANEOUS

This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, legatees, executors, legal representatives, successors and assigns.

This Agreement contains the entire agreement between the parties with respect to the transactions contemplated herein and supercedes all prior negotiations, agreements and understandings, if any.

The representations and warranties set forth in Articles 3 and 4 hereof shall survive the exchange of the Common Shares hereunder.

Each of the [COMPANY NAME] hereto covenants and agrees that it will from time to time hereafter execute and deliver such additional documents and instruments and do such acts and things as may be reasonably necessary fully and effectually to assign and transfer the Common Shares to the Corporation pursuant to this Agreement and to otherwise carry out the intent and purpose of this Agreement.

This Agreement shall be governed by and construed in accordance with the [YOUR COUNTRY LAW] of the Province of [STATE/PROVINCE] and the applicable [YOUR COUNTRY LAW] of [COUNTRY]. The courts of [STATE/PROVINCE] shall have non-exclusive jurisdiction with respect to any matter arising hereunder or related hereto.

All notices, requests, demands and other communications in connection herewith shall be in writing with specific reference to this Agreement and shall be deemed to have been duly delivered when

personally delivered to a responsible officer of such party; or

except during a period of strike, lockout or other postal disruption, sent by registered mail, postage prepaid; or

sent by telex, telegraph, telecopier or other form of recorded communication, charges prepaid, confirmed by prepaid registered mail;

as follows:

If to the Shareholder:

[NAME]
[FULL ADDRESS]
[COUNTRY], [STATE/PROVINCE]

If to the Corporation:

[COMPANY NAME]
[FULL ADDRESS]
[COUNTRY], [STATE/PROVINCE]
Attn: [NAME]

or such other address as either party may from time to time specify by notice to be given to the other party for such purpose in writing at least [NUMBER] days in advance.

The effective date and closing date for the exchange of the Common Shares herein provided for shall be at l hours on the [DATE] day of, (the Closing Date).


IN WITNESS WHEREOF, each party to this agreement has caused it to be executed at [PLACE OF EXECUTION] on the date indicated above.



SHAREHOLDER           COMPANY

                          
Authorized Signature          Authorized Signature

                          
Print Name and Title          Print Name and Title

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