Arrangement Agreement dated September 11. 2006



 





Exhibit 4.40




ARRANGEMENT AGREEMENT




THIS ARRANGEMENT AGREEMENT is dated as of September 11, 2006,




BETWEEN:





	 	 	 	CADE STRUKTUR CORPORATION, a corporation existing under the Yukon
Business Corporations Act
	 
	 	 	 	(“Cade”)





AND:





	 	 	 	KHD HUMBOLDT WEDAG INTERNATIONAL LTD., a corporation existing under
the British Columbia Business Corporations Act
	 
	 	 	 	(“KHD”)
	 
	 	 	 	(Each a “Party” and collectively the “Parties”)




WHEREAS Cade and KHD intend to carry out certain transactions contemplated in this Agreement by way
of an arrangement between KHD, Cade and the Cade shareholders under the provisions of the Yukon
Business Corporations Act pursuant to the terms of this Agreement.



NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the premises and the respective
covenants and agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the Parties, the Parties
covenant and agree as follows:




ARTICLE 1



DEFINITIONS AND INTERPRETATION




1.1 DEFINITIONS




     In this Arrangement Agreement, including the recitals and the schedules hereto, unless there is
something in the subject matter or context inconsistent therewith, the following words and terms
shall have the following meanings:




	(a)	 	“Arrangement” means the arrangement pursuant to the provisions of Section 195 of the YBCA to
be undertaken on the terms and conditions set forth in the Plan of Arrangement and any
amendment or variation thereto made in accordance with Section 5 thereof;
	 
	(b)	 	“Arrangement Agreement” or “Agreement” means this agreement, including the schedules hereto,
between Cade and KHD, as the same may be supplemented or amended from time to time;










 



 







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	(c)	 	“Arrangement Resolution” means the special resolution approving the Arrangement and the
transactions contemplated thereunder, to be approved at the Meeting by Cade Shareholders;
	 
	(d)	 	“Business Day” means any day other than a Saturday, Sunday, a federal holiday in Canada or a
day on which banks are not open for business in Vancouver, British Columbia;
	 
	(e)	 	“Cade” means Cade Struktur Corporation, a corporation existing under the YBCA;
	 
	(f)	 	“Cade Disclosure Documents” means all documents filed by Cade on SEDAR from September 1, 2005
up to the date of this Agreement, and in the case of applicable representations and warranties
brought forward to the Effective Date, up to the Effective Date;
	 
	(g)	 	“Cade Preferred Shares” means the Series B Preferred Shares in the capital of Cade;
	 
	(h)	 	“Cade Shareholders” means, at any relevant time, the registered holders of the issued and
outstanding Cade Shares;
	 
	(i)	 	“Cade Shares” means the common shares without par value in the capital of Cade;
	 
	(j)	 	“Charter Documents” means the articles and by-laws or other constating documents of a
corporation;
	 
	(k)	 	“Circular” means the management proxy circular of Cade to be sent to the Cade Shareholders in
connection with the Meeting on or about September 18, 2006, which shall be substantially in
the form as provided for in the Interim Order;
	 
	(l)	 	“Court” means the Supreme Court of the Yukon Territory;
	 
	(m)	 	“EDGAR” means Electronic Data Gathering, Analysis, and Retrieval system, established by the
U.S. Securities and Exchange Commission;
	 
	(n)	 	“Effective Date” means the date shown in the certificate of arrangement giving effect to the
Arrangement which is issued under the YBCA by the Registrar;
	 
	(o)	 	“Final Order” means the final order of the Court approving the Arrangement;
	 
	(p)	 	“GAAP” means generally accepted accounting principles in effect in Canada, including the
accounting recommendations published in the Handbook of the Canadian Institute of Chartered
Accountants;
	 
	(q)	 	“Interim Order” means the interim order of the Court providing for, among other things, the
calling and holding of the Meeting, as the same may be amended, supplemented or varied by the
Court;











 



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	(r)	 	“KHD” means KHD Humboldt Wedag International Ltd., a corporation existing under the British
Columbia Business Corporations Act;
	 
	(s)	 	“KHD Disclosure Documents” means all documents filed by KHD on SEDAR and EDGAR from September
1, 2005 up to the date of this Agreement, and in the case of applicable representations and
warranties brought forward to the Effective Date, up to the Effective Date;
	 
	(t)	 	“KHD Shares” means the common shares without par value in the capital of KHD;
	 
	(u)	 	“Material Adverse Change” or “Material Adverse Effect” means, when used in connection with
Cade or KHD, any change (including a decision to implement a change made by the directors or
senior management of Cade or KHD or any of KHD’s subsidiaries), effect, event, occurrence or
change in state of facts that is, or would reasonably be expected to be, material and adverse
to the business, operations, financial condition or results, assets, rights, liabilities or
prospects of Cade or KHD and KHD’s subsidiaries taken as a whole, on a consolidated basis,
other than any change, effect, event, occurrence or change in state of facts arising from the
Arrangement and all transactions related to the Arrangement or contemplated by the Arrangement
Agreement or relating to: (1) the economies of British Columbia, Canada or the United States
or securities markets in general; (2) the mining and industrial and engineering services
industries in general, and not specifically relating to KHD and its subsidiaries or Cade,
respectively; or (3) GAAP;
	 
	(v)	 	“Meeting” means the meeting of Cade Shareholders, and any adjournment thereof, to be held to
consider and, if deemed advisable, approve the Arrangement;
	 
	(w)	 	“NASDAQ” means the National Association of Securities Dealers Automated Quotation System;
	 
	(x)	 	“Newco” means 39858 Yukon Inc., a corporation existing under the YBCA and a wholly-owned
subsidiary of KHD formed for the purposes of completing the Arrangement;
	 
	(y)	 	“Notice of Dissent” means a notice given in respect of the dissent rights of Cade
Shareholders as contemplated in the Interim Order and as described in the Plan;
	 
	(z)	 	“Person” means an individual, a body corporate (wherever incorporated), an unincorporated
association, syndicate or organization, partnership, trust, trustee, executor, administrator
or other legal representative;
	 
	(aa)	 	“Plan of Arrangement” or “Plan” means the Plan of Arrangement attached as Schedule A hereto;
	 
	(bb)	 	“Registrar” means the registrar of corporations or a deputy registrar of corporations
appointed under section 263 of the YBCA;










 



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	(cc)	 	“SEDAR” means the System for Electronic Document Analysis and Retrieval, established by the
Canadian Securities Administrators;
	 
	(dd)	 	“Termination Date” means November 30, 2006;






	(ee)	 	“Valuation and Fairness Opinion” means the valuation and fairness opinion relating to the
Arrangement prepared by Stephen W. Semeniuk, CFA;
	 
	(ff)	 	“VSM Transaction” means the transaction pursuant to which Cade will sell its principal asset,
an interest in certain mining leases, for certain common and preferred shares in the capital
of VSM MedTech Devices Inc.; and
	 
	(gg)	 	“YBCA” means the Yukon Business Corporations Act, R.S.C. 1985, c. C-44, and the regulations
made under that enactment, as amended.





1.2 CURRENCY



Except as expressly indicated otherwise, all sums of money referred to in this Agreement are
expressed and shall be payable in lawful money of Canada.




1.3 INTERPRETATION NOT AFFECTED BY HEADINGS



The division of this Agreement into articles, sections, subsections, paragraphs and sub-paragraphs
and the insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of the provisions of this Agreement. The terms “this Agreement”,
“hereof”, “herein”, “hereunder” and similar expressions refer to this Agreement and the schedules
hereto as a whole and not to any particular article, section, subsection, paragraph or
sub-paragraph hereof and include any agreement or instrument supplementary or ancillary hereto.




1.4 NUMBER AND GENDER



Unless the context otherwise requires, words importing the singular number only shall include the
plural and vice versa and words importing the use of either gender shall include both genders and
neuter.




1.5 DATE FOR ANY ACTION



In the event that any day on which any action is required to be taken hereunder by any person is
not a Business Day in the place where the action is required to be taken, such action shall be
required to be taken on the next succeeding day which is a Business Day in such place.




1.6 TIME



Time shall be of the essence in each matter or thing herein provided. Unless otherwise indicated,
all times expressed herein are local time, Vancouver, British Columbia.










 



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1.7 SCHEDULES



The following is the Schedule to this Agreement, which forms an integral part hereof:




Schedule A — Plan of Arrangement.




ARTICLE 2



ARRANGEMENT




2.1 ARRANGEMENT



Subject to the terms and conditions of this Agreement:





	(a)	 	if not already done prior to the execution of this Agreement, and in any event, on or before
September 15, 2006, Cade shall:






	 	(i)	 	prepare jointly with KHD an application to the Court pursuant to Section 195 of
the YBCA for an Interim Order on terms acceptable to both Cade and KHD, each acting
reasonably, providing for, among other things, the calling and holding of the Meeting;
and
	 
	 	(ii)	 	apply to the Court pursuant to Section 195 of the YBCA for the Interim Order;






	(b)	 	Cade shall call and hold the Meeting as soon as practicable after obtaining the Interim Order
and, in any event, shall hold the Meeting by no later than October 20, 2006;
	 
	(c)	 	in connection with the Meeting, Cade shall:






	 	(i)	 	in consultation with KHD, prepare the Circular and such other documents as may
be necessary or desirable to permit the Cade Shareholders to vote on whether to approve
the Arrangement Resolution;
	 
	 	(ii)	 	jointly prepare with KHD such other documents as may be necessary or desirable
to give effect to the Arrangement; and
	 
	 	(iii)	 	cause the Circular and such other documents as may be necessary or desirable
to give effect to the Arrangement to be sent to each Cade Shareholder as soon as
reasonably practicable following receipt of the Interim Order and filed as required by
the Interim Order and applicable law;






	(d)	 	if the Arrangement Resolution is approved at the Meeting as set out in the Interim Order (or
any variation thereof), as soon as reasonably practicable thereafter, Cade shall take the
necessary steps to submit the Arrangement to the Court and apply for the Final Order in such
manner as the Court may direct and KHD and Cade may agree; and
	 
	(e)	 	if the Final Order is obtained, as soon as reasonably practicable thereafter and subject to
the fulfilment or the waiver of each of the conditions set out herein, and completion of all
steps required by the Plan of Arrangement to be completed prior to the Effective Date,










 



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	 	 	Cade shall file a certified copy of the Final Order with the Plan of Arrangement, and such
other documents as are required to be filed under the YBCA, with the Registrar to give
effect to the Arrangement pursuant to Section 195 of the YBCA.




As part of its application for the Interim Order and the Final Order, Cade shall, prior to the
hearing in relation to the Final Order, advise the Court that KHD intends to rely on the exemption
from the registration requirements of the United States Securities Act of 1933 provided by Section
3(a)(10) of that enactment based on the Court’s approval of the Arrangement.




2.2 CIRCULAR



Each of the Parties shall, in a timely and expeditious manner, furnish to Cade all such information
regarding itself as may be reasonably required to be included in the Circular. Each Party shall
ensure that the information relating to it contained in the Circular does not contain any material
misrepresentation.




2.3 PUBLIC ANNOUNCEMENT





	(a)	 	Each Party shall consult with the other Party before issuing any news releases or otherwise
making public statements with respect to this Agreement or the Arrangement and before making
any filing with any governmental or regulatory agency or with any stock exchange relating to
this Agreement or the Arrangement.
	 
	(b)	 	Before releasing a news release, making any other public statement, making a public filing or
making a filing with any governmental entity, stock exchange or securities quotation system
with respect to this Agreement or the Arrangement, each Party shall use all reasonable
commercial efforts to allow the other Party to review and comment on, and shall adopt the
other Party’s reasonable comments on, the news release, other public statement or filing.





2.4 EFFECTIVE DATE OF ARRANGEMENT



Subject to the terms and conditions of this Agreement and the Plan, the Arrangement shall become
effective on the Effective Date.




ARTICLE 3



REPRESENTATIONS AND WARRANTIES




3.1 REPRESENTATIONS AND WARRANTIES OF CADE



Cade hereby represents and warrants to and in favour of KHD that:





	(a)	 	Cade was duly continued and is a valid and subsisting corporation under the provisions of the
YBCA. Cade has all requisite corporate power and authority to carry on its business as now
being carried on by it and to own or lease and operate its properties and assets and is duly
licensed or otherwise qualified to carry on business in each jurisdiction in which a material
amount of its business is conducted or wherein the character of the properties










 



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	 	 	and assets now owned by it makes such qualification necessary, except where such failure to
be duly licensed or otherwise qualified would not have a Material Adverse Effect;






	(b)	 	as of the date hereof, the authorized capital of Cade consists of: (i) an unlimited number
of Cade Shares; (ii) an unlimited number of voting preferred shares; (iii) an unlimited number
of preferred shares; (iv) 187,500 Series A preferred shares; and (v) an unlimited number of
Series B preferred shares. As of September 11, 2006, 8,696,928 Cade Shares and 49,000 Series
B preferred shares are validly issued and outstanding as fully paid and non-assessable, and no
other shares are issued and outstanding. Except as set out herein and in the Cade Disclosure
Documents, there are no other options, warrants, conversions, privileges, calls or other
rights, agreements, arrangements, commitments or obligations of Cade to issue or sell any
            shares of any capital stock of Cade or securities or obligations of any kind convertible into
or exchangeable for any shares of capital stock of Cade or any other person, nor are there
outstanding any stock appreciation rights, phantom equity or similar rights, agreements,
arrangements, or commitments based upon the book value, income or any other attribute of Cade;
	 
	(c)	 	Cade has no subsidiaries;
	 
	(d)	 	Cade has no outstanding agreements, subscriptions, warrants, options or commitments, nor has
it granted any rights or privileges capable of becoming an agreement, subscription, warrant,
option or commitment, obligating it to issue any additional securities convertible into debt
securities or evidence of indebtedness whatsoever except as otherwise disclosed in the Cade
Disclosure Documents;
	 
	(e)	 	Cade has the requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of this
Arrangement Agreement and the agreements, documents and transactions contemplated herein are
within the corporate power and authority of Cade and have been duly authorized by all
necessary corporate action by Cade and this Arrangement Agreement constitutes a valid and
binding obligation of Cade, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws affecting the
rights of creditors generally and subject to the general principles of equity;
	 
	(f)	 	the audited consolidated financial statements of Cade for the financial year ended December
31, 2005 present fairly the consolidated financial condition and results of operations of Cade
for the respective periods indicated in such consolidated financial statements and have been
prepared in accordance with GAAP;
	 
	(g)	 	except as disclosed in the Cade Disclosure Documents since December 31, 2005, there has been
no material adverse change in the business, operations, properties, assets or condition,
financial or otherwise, of Cade from that shown in the audited consolidated financial
statements of Cade for the financial year ended December 31, 2005;










 



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	(h)	 	the Cade Disclosure Documents were, as of their respective dates, in compliance in all
material respects with all applicable legislation and did not, when filed, contain any
material misrepresentation;
	 
	(i)	 	Cade is the beneficial owner of its properties and assets, with good and marketable title
thereto free and clear of material encumbrances, except as otherwise disclosed in the Cade
Disclosure Documents;
	 
	(j)	 	except as otherwise disclosed in the Cade Disclosure Documents or to KHD, there are no
actions, suits, proceedings, investigations or outstanding claims or demands, whether or not
purportedly on behalf of Cade, instituted, pending, or to the knowledge of Cade, threatened
against or affecting Cade at law or in equity or before or by any governmental department,
commission, board, bureau, agency or institution, domestic or foreign, or before any
arbitrator, nor is there any judgment, order, decree or award of any court or other
governmental authority having jurisdiction, obtained, pending, or to the knowledge of Cade,
threatened against Cade, which could prevent or materially hinder the consummation of the
Arrangement or the other transactions contemplated by this Agreement or which could result in
a material adverse change in respect of Cade;
	 
	(k)	 	the business of Cade is being conducted in all material respects in compliance with all
applicable laws, regulations and ordinances of all authorities having jurisdiction; and
	 
	(l)	 	the execution and delivery of this Arrangement Agreement, the consummation of the
transactions contemplated hereby and the fulfilment of or compliance with the terms and
provisions hereof do not or will not, nor will they with the giving of notice or the lapse of
time or both:






	 	(i)	 	violate any provision of any law or provisions of the Charter Documents of
Cade;
	 
	 	(ii)	 	conflict with, result in a breach of, constitute default under, or accelerate
or permit the acceleration of the performance required by any material agreement,
covenant, undertaking, commitment, instrument, judgment, order, decree or award to
which Cade is a party or by which Cade is bound or to which the property of Cade is
subject, all as of the Effective Date; or
	 
	 	(iii)	 	result in the cancellation, suspension or material alteration in the terms of
any material licence, permit or authority held by Cade or in the creation of any lien,
charge, security interest or encumbrance upon any of the material assets of Cade under
such material agreement, covenant, undertaking, commitment, instrument, judgment,
order, decree or award or give to any other person any material interest or rights,
including rights of purchase, termination, cancellation or acceleration under any such
material agreement, covenant, undertaking, commitment, instrument, judgment, order,
decree or award.





3.2 REPRESENTATIONS AND WARRANTIES OF KHD



KHD hereby represents and warrants to and in favour of Cade that:










 



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	(a)	 	KHD was duly continued and is a valid and subsisting corporation under the British Columbia
Business Corporations Act. KHD has all the requisite corporate power and authority to carry
on its business as now being carried on by it and to own or lease and operate its properties
and assets and to issue KHD Shares pursuant to the terms of the Plan of Arrangement, and is
duly licensed or otherwise qualified to carry on business in each jurisdiction in which a
material amount of its business is conducted or wherein the character of the properties and
assets now owned by it makes such qualification necessary, except where such failure to be
duly licensed or otherwise qualified would not have a Material Adverse Effect;
	 
	(b)	 	other than pursuant to the terms of this Agreement or as set out in the KHD Disclosure
Documents, KHD has no outstanding agreements, subscriptions, warrants, options or commitments,
nor has it granted any rights or privileges capable of becoming an agreement, subscription,
warrant, option or commitment obligating KHD to issue KHD Shares;
	 
	(c)	 	as of the date hereof, the authorized share capital of KHD consists of an unlimited number of
KHD Shares and an unlimited number of class A preferred shares. As of September 11, 2006,
15,263,913 KHD Shares (excluding 939,749 KHD Shares held by subsidiaries of KHD) are validly
issued and outstanding as fully paid and non-assessable and no class A preferred shares are
issued and outstanding;
	 
	(d)	 	as of the date hereof, 2,762,000 KHD Shares are authorized for issuance under KHD’s stock
option plan, of which 834,165 remain available for granting. No options to acquire KHD Shares
pursuant to KHD’s stock option plan are currently outstanding;
	 
	(e)	 	KHD has the requisite corporate power and authority to enter into this Agreement and perform
its obligations hereunder. The execution, delivery and performance of this Agreement and the
agreements, documents and transactions contemplated herein are within the corporate power and
authority of KHD and have been duly authorized by all necessary corporate action, and this
Agreement constitutes a valid and binding obligation of KHD, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization
or similar laws affecting the rights of creditors generally and subject to the general
principles of equity;
	 
	(f)	 	the audited consolidated financial statements of KHD for the financial year ended December
31, 2005 present fairly the consolidated financial condition and results of operations of KHD
for the respective periods indicated in such consolidated financial statements and have been
prepared in accordance with GAAP;
	 
	(g)	 	except as disclosed in the KHD Disclosure Documents since December 31, 2005, there has been
no material adverse change in the business, operations, properties, assets or condition,
financial or otherwise, of KHD, on a consolidated basis, from that shown in the audited
consolidated financial statements of KHD for the financial year ended December 31, 2005;










 



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	(h)	 	the KHD Disclosure Documents were, as of their respective dates, in compliance in all
material respects with all applicable legislation and did not, when filed, contain any
material misrepresentations;
	 
	(i)	 	KHD is the beneficial owner of its properties and assets, with good and marketable title
thereto free and clear of material encumbrances, except as otherwise disclosed in the KHD
Disclosure Documents;
	 
	(j)	 	the KHD Shares issued pursuant to the terms of the Plan of Arrangement shall be duly and
validly issued and constitute fully paid and non-assessable shares of KHD;
	 
	(k)	 	except as otherwise disclosed in the KHD Disclosure Documents or to Cade, there are no
actions, suits, proceedings, investigations or outstanding claims or demands, whether or not
purportedly on behalf of KHD or its subsidiaries, instituted, pending, or to the knowledge of
KHD, threatened against or affecting KHD or its subsidiaries at law or in equity or before or
by any governmental department, commission, board, bureau, agency or institution, domestic or
foreign, or before any arbitrator, nor is there any judgment, order, decree or award of any
court or other governmental authority having jurisdiction, obtained, pending, or to the
knowledge of KHD, threatened against KHD or its subsidiaries which could prevent or materially
hinder the consummation of the Arrangement or the other transactions contemplated by this
Agreement or which could result in a material adverse change in respect of KHD;
	 
	(l)	 	each of the subsidiaries of KHD that carries on a material portion of the business of KHD or
which owns a material portion of the assets of KHD on a consolidated basis is duly
incorporated and is a valid and subsisting corporation under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to carry on its business as
now carried on by it and to own or lease and to operate its properties and assets and is duly
licensed or otherwise qualified in each jurisdiction in which a material amount of its
business is conducted or wherein the character of the properties and assets now owned by it
makes such qualification necessary, except where such failure to be duly licensed or otherwise
qualified would not have a Material Adverse Effect;
	 
	(m)	 	the business of KHD and its subsidiaries is being conducted in all material respects in
compliance with all applicable laws, regulations and ordinances of all authorities having
jurisdiction; and
	 
	(n)	 	the execution and delivery of this Arrangement Agreement, the consummation of the
transactions contemplated hereby and the fulfilment of or compliance with the terms and
provisions hereof do not or will not, nor will they with the giving of notice or the lapse of
time or both:






	 	(i)	 	violate any provision of any law or provisions of the Charter Documents of KHD;
	 
	 	(ii)	 	conflict with, result in a breach of, constitute default under, or accelerate
or permit the acceleration of the performance required by any material agreement,
covenant, undertaking, commitment, instrument, judgment, order, decree or award to
which










 



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	 	 	 	KHD or any subsidiaries of KHD is a party or by which any of them is bound or to
which the property of any of them is subject, all as of the Effective Date; or






	 	(iii)	 	result in the cancellation, suspension or material alteration in the terms of
any material licence, permit or authority held by KHD or any subsidiaries of KHD or in
the creation of any lien, charge, security interest or encumbrance upon any of the
material assets of KHD or any subsidiaries of KHD under such material agreement,
covenant, undertaking, commitment, instrument, judgment, order, decree or award or give
to any other person any material interest or rights, including rights of purchase,
termination, cancellation or acceleration under any such material agreement, covenant,
undertaking, commitment, instrument, judgment, order, decree or award.





ARTICLE 4



COVENANTS




4.1 COVENANTS OF CADE



Cade hereby covenants and agrees with KHD as follows:





	(a)	 	subject to subsection (b):






	 	(i)	 	prior to the Effective Date, Cade will carry on business in the ordinary course
and will not enter into any transaction or incur any obligation or liability out of the
ordinary course of business prior to the Effective Date, except as contemplated herein
or otherwise approved by KHD;
	 
	 	(ii)	 	Cade will not merge into or with or amalgamate or consolidate with or enter
into any other corporate reorganization with any other person or perform any act or
enter into any transaction or negotiation which interferes or is inconsistent with the
completion of the transactions contemplated hereby or would render inaccurate in any
material way any of the representations and warranties set forth in Section 3.1 hereof
if such representations and warranties were made at a date subsequent to such act,
negotiation or transaction and all references to the date of this Agreement were deemed
to be such later date, except as contemplated in this Agreement or as otherwise
approved by KHD;
	 
	 	(iii)	 	prior to the Effective Date, Cade will not sell, pledge, encumber, lease or
otherwise dispose of any material assets, without the prior approval of KHD; and
	 
	 	(iv)	 	prior to the Effective Date, Cade will not engage in any business, enterprise
or activity materially different from that carried on by it at the date of this
Agreement or enter into any transaction or incur any obligation if the same would have
a material adverse effect on Cade or the Arrangement, other than in the ordinary course
of business, without the prior approval of KHD;






	(b)	 	notwithstanding subsection (a), Cade may, prior to the Effective Date, enter into the VSM
Transaction on materially the same terms as set out in the Circular;










 



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	(c)	 	prior to the Effective Date, Cade will not split, combine or reclassify any of the
outstanding Cade Shares nor declare, set aside or pay any dividends on or make any other
distributions on or in respect of the outstanding Cade Shares, without the prior approval of
KHD;
	 
	(d)	 	prior to the Effective Date, Cade will not sell, pledge, encumber, allot, reserve, set aside
or issue, authorize or propose the sale, pledge, encumbrance, allotment, reservation, setting
aside or issuance of, or purchase or redeem or propose the purchase or redemption of, any Cade
Shares or any shares in its capital stock or any class of securities convertible or
exchangeable into, or rights, warrants or options to acquire, any shares or other convertible
or exchangeable securities, without the prior approval of KHD;
	 
	(e)	 	prior to the Effective Date, Cade will not guarantee the payment of any material indebtedness
or incur any material indebtedness for money borrowed or issue or sell any debt securities,
without the prior approval of KHD;
	 
	(f)	 	subject to obtaining the Interim Order, Cade will convene the Meeting for the approval of the
Arrangement and other matters incidental to the Arrangement;
	 
	(g)	 	Cade will perform all such other acts and do such things as may be necessary or desirable in
order to give effect to the Arrangement and, without limiting the generality of the foregoing,
Cade will use its best efforts to apply for and obtain:






	 	(i)	 	the Interim Order;
	 
	 	(ii)	 	the Final Order; and
	 
	 	(iii)	 	such other consents, orders and approvals as counsel may advise are necessary
or desirable for the implementation of the Arrangement;






	(h)	 	Cade will use all reasonable efforts to cause each of the conditions precedent set forth in
Article 5 hereof to be complied with, on or before the Effective Date; and
	 
	(i)	 	Cade will ensure that the Circular will not contain an untrue statement of a material fact
concerning Cade and will not omit to state a material fact concerning Cade that is required to
be stated or that is necessary in order to render a statement contained therein not misleading
in the light of the circumstances in which it was made.





4.2 COVENANTS OF KHD



KHD hereby covenants and agrees with Cade as follows:





	(a)	 	KHD will not, and will not permit any of its subsidiaries to, perform any act or enter into
any transaction or negotiation which interferes or is inconsistent with the completion of the
transactions contemplated hereby or would render inaccurate in any material way any of the
representations and warranties set forth in Section 3.2 hereof if such representations and
warranties were made at a date subsequent to such act, negotiation or










 



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	 	 	transaction and all references to the date of this Agreement were deemed to be such later
date, except as contemplated in this Agreement or otherwise approved by Cade;






	(b)	 	prior to the Effective Date, KHD will not engage in any business, enterprise or activity
materially different from that carried on by it at the date of this Agreement or enter into
any transaction or incur any obligation if the same would have a material adverse effect on
KHD or the Arrangement, other than in the ordinary course of business, without the prior
approval of Cade;
	 
	(c)	 	KHD will, in a timely manner, use reasonable efforts to have the KHD Shares to be issued
pursuant to the Plan of Arrangement approved for listing on the NASDAQ Global Select Market,
if and to the extent NASDAQ approval is necessary for such listing;
	 
	(d)	 	KHD will perform all such other acts and things as may be necessary or desirable in order to
give effect to the Arrangement;
	 
	(e)	 	prior to the Effective Date and except as previously disclosed in the KHD Disclosure
Documents, KHD will not subdivide, combine or reclassify any of the outstanding KHD Shares nor
declare, set aside or pay any dividends or make any other distributions on or in respect of
the outstanding KHD Shares, without the prior approval of Cade;
	 
	(f)	 	KHD will use all reasonable efforts to cause each of the conditions precedent set forth in
Article 5 hereof to be complied with, on or before the Effective Date;
	 
	(g)	 	KHD will ensure that the Circular will not contain an untrue statement of a material fact
concerning KHD and will not omit to state a material fact concerning KHD that is required to
be stated or that is necessary in order to render a statement contained therein not misleading
in the light of the circumstances in which it is made; and
	 
	(h)	 	prior to the Effective Date, KHD will transfer to Newco all of the Cade Shares and the Cade
Preferred Shares owned by KHD in exchange for common shares of Newco.





ARTICLE 5



CONDITIONS




5.1 MUTUAL CONDITIONS PRECEDENT



The respective obligations of Cade and KHD to complete the transactions contemplated by this
Agreement pursuant to Section 195 of the YBCA to give effect to the Arrangement shall be subject to
the satisfaction of the following conditions:





	(a)	 	at the Meeting the Arrangement Resolution, with or without amendment, shall have been
approved by the Cade Shareholders entitled to vote thereon, in accordance with the Interim
Order and in accordance with the YBCA;
	 
	(b)	 	at the Meeting the special resolution approving the VSM Transaction, with or without
amendment, shall have been approved by the Cade Shareholders entitled to vote thereon, in
accordance with the YBCA;










 



 - 14 - 








	(c)	 	the Interim Order and the Final Order shall have been obtained in form and substance
satisfactory to Cade and KHD, acting reasonably, and shall not have been set aside or modified
in a manner unacceptable to the Parties, acting reasonably, on appeal or otherwise;
	 
	(d)	 	all consents, orders, regulations and approvals, including regulatory and judicial approvals
and orders required, necessary or desirable for the completion of the transactions provided
for in this Agreement and contemplated by the Arrangement shall have been obtained or received
from the persons, authorities or bodies having jurisdiction in the circumstances;
	 
	(e)	 	the KHD Shares to be issued pursuant to the Arrangement shall have been conditionally
approved for listing on the NASDAQ Global Select Market, if and to the extent NASDAQ approval
is necessary for such listing, subject only to such conditions, including the filing of
documentation, as are acceptable to KHD and Cade, acting reasonably;
	 
	(f)	 	the distribution of the KHD Shares in the United States pursuant to the Arrangement shall be
exempt from registration requirements under the United States Securities Act of 1933 and
except with respect to persons deemed “affiliates” under such enactment, the KHD Shares to be
distributed in the United States pursuant to the Arrangement shall not be subject to resale
restrictions in the United States under such enactment;
	 
	(g)	 	the distribution of the KHD Shares in Canada pursuant to the Arrangement shall be exempt from
registration and prospectus requirements of applicable Canadian securities legislation and
except with respect to persons deemed to be “control persons” or the equivalent under
applicable Canadian securities legislation the KHD Shares to be distributed in Canada pursuant
to the Arrangement shall not be subject to any resale restrictions under applicable Canadian
securities legislation;
	 
	(h)	 	there shall not be in force any law, ruling, order or decree that makes it illegal or
restrains, or enjoins or prohibits the consummation of the transactions contemplated by this
Agreement and the Arrangement;
	 
	(i)	 	none of the consents, orders, regulations or approvals contemplated herein shall contain
terms or conditions or require undertakings or security deemed unsatisfactory or unacceptable
by any of the Parties, acting reasonably;
	 
	(j)	 	there shall not have occurred, developed or come into effect or existence any event, action,
state, condition or financial occurrence of national or international consequence or any law,
regulation, action, government regulation, inquiry or other occurrence of any nature
whatsoever that has had or could reasonably be expected to have a material adverse effect in
connection with any of the Parties;
	 
	(k)	 	no judgment or order shall have been issued by any agency, no actions, suits or proceedings
shall have been threatened or taken by any agency, and no law, regulation or policy shall have
been proposed, enacted, or promulgated or applied:










 



 - 15 - 








	 	(i)	 	to cease trade, enjoin, prohibit or impose material limitations or conditions
on the completion of the Arrangement or the right of KHD to own or exercise full rights
of ownership of the Cade Shares; or
	 
	 	(ii)	 	that, if the Arrangement were completed, could reasonably be expected to have a
material adverse effect on any of the Parties; and






	(l)	 	this Agreement shall not have been terminated under Article 6.





5.2 CONDITIONS IN FAVOUR OF KHD



The obligations of KHD to complete the transactions contemplated by this Agreement pursuant to
Section 195 of the YBCA to give effect to the Arrangement shall be subject to the satisfaction of
the following conditions, unless otherwise waived by KHD:





	(a)	 	the representations and warranties of Cade contained in this Agreement shall be true as of
the Effective Date (except to the extent that the representations and warranties speak as of
an earlier date, in which event they shall be true as of such earlier date) as if made on and
as of that date except for any failures or breaches of representations and warranties that
have not had, or would not have, individually or in the aggregate, a Material Adverse Effect
on Cade or prevent or delay the completion of the Arrangement or the transactions contemplated
by this Agreement to be completed on the Effective Date;
	 
	(b)	 	Cade shall have complied with its obligations under this Agreement, except to the extent the
failure to comply with those obligations has not had, or would not have, individually or in
the aggregate, a Material Adverse Effect on Cade or prevent or delay the completion of the
Arrangement or the transactions contemplated by this Agreement to be completed on the
Effective Date; and
	 
	(c)	 	the aggregate number of Cade Shares in respect of which Cade Shareholders shall have
exercised, and not withdrawn the exercise of, rights of dissent provided pursuant to the terms
of the Plan of Arrangement and the Interim Order shall not be in excess of 10% of the Cade
Shares issued and outstanding on the date of the Meeting. exclusive of those Cade Shares owned
or controlled directly or indirectly by KHD.





5.3 CONDITIONS IN FAVOUR OF CADE



The obligations of Cade to complete the transactions contemplated by this Agreement pursuant to
Section 195 of the YBCA to give effect to the Arrangement shall be subject to the satisfaction of
the following conditions:





	(a)	 	the representations and warranties of KHD contained in this Agreement shall be true as of the
Effective Date (except to the extent that the representations and warranties speak as of an
earlier date, in which event they shall be true as of such earlier date) as if made on and as
of that date except for any failures or breaches of representations and warranties that have
not had, or would not have, individually or in the aggregate, a Material Adverse Effect on KHD
or prevent or delay the completion of the Arrangement or the transactions contemplated by this
Agreement to be completed on the Effective Date;






 








 




- 16 -




	(b)	 	KHD shall have complied with its obligations under this Agreement, except to the extent the
failure to comply with those obligations has not had, or would not have, individually or in
the aggregate, a Material Adverse Effect on KHD or prevent or delay the completion of the
Arrangement or the transactions contemplated by this Agreement to be completed on the
Effective Date; and






	(c)	 	Cade shall have received the Valuation and Fairness Opinion in form and substance
satisfactory to Cade.






	5.4	 	MERGER OF CONDITIONS




The conditions set out in Sections 5.1, 5.2 and 5.3 shall be conclusively deemed to have been
satisfied, waived or released on the issuance of the certificate of arrangement by the Registrar.




ARTICLE 6

AMENDMENT AND TERMINATION





	6.1	 	AMENDMENT AND VARIATION




Subject to Sections 6.2 and 6.5 hereof, this Agreement may, at any time and from time to time,
before and after the holding of the Meeting, but not later than the Effective Date, be amended or
varied by written agreement of Cade and KHD, subject to applicable law, without further notice to
or authorization on the part of the Cade Shareholders. Without limiting the generality of the
foregoing, any such amendment may:





	(a)	 	change the time for the performance of any of the obligations or acts of the Parties;
	 
	(b)	 	waive any inaccuracies or modify any representation or warranty contained herein or in any
document to be delivered pursuant hereto; or
	 
	(c)	 	waive compliance with or modify any of the covenants contained herein or waive or modify the
performance of any of the obligations of the Parties contained herein.
	 
	6.2	 	AMENDMENT OF PLAN




The Plan of Arrangement may be amended, modified or supplemented in accordance with Section 5 of
the Plan of Arrangement.





	6.3	 	RIGHTS OF TERMINATION




If any of the conditions contained in Sections 5.1, 5.2 or 5.3 shall not be fulfilled or performed
on or before the Effective Date, the Party not responsible hereunder to fulfill or perform any such
condition may terminate this Agreement by notice to the other Party, as the case may be, in
writing, and in such event, Cade or KHD, as the case may be, shall be released from all obligations
under this Agreement, all rights of specific performance by the Parties shall terminate and the
other Party shall also be released from all obligations hereunder.










 



- 17 -





	6.4	 	NOTICE OF UNFULFILLED CONDITIONS




If any Party shall determine at any time prior to the Effective Date that it intends to refuse to
consummate the Arrangement or any of the transactions contemplated thereby because of any
unfulfilled or unperformed condition precedent contained in this Arrangement Agreement on the part
of another Party to be fulfilled or performed, such Party, as the case may be, shall so notify the
other Party forthwith upon making such determination in order that the other Party shall have the
right and opportunity to take such steps, at its own expense, as may be necessary for the purpose
of fulfilling or performing such condition precedent within a reasonable period of time.





	6.5	 	MUTUAL TERMINATION




This Agreement may, at any time before or after the holding of the Meeting, but no later than the
Effective Date, be terminated by agreement in writing executed by Cade and KHD without further
action on the part of the Cade Shareholders, and if the Effective Date does not occur on or before
the Termination Date, each Party may unilaterally terminate this Agreement without further action
on the part of the Cade Shareholders, which termination shall be effective upon notice thereof
being given to the other Party.




ARTICLE 7

INDEMNIFICATION





	7.1	 	INDEMNIFICATION




Each of the Parties hereto (the “Indemnifying Party”) hereby undertakes with the other Party to
this Arrangement Agreement (the “Indemnified Party”) to indemnify and hold harmless the Indemnified
Party from and against all losses, claims, damages, liabilities, actions or demands including,
without limiting the generality of the foregoing, amounts paid in any settlement approved by the
Indemnifying Party of any action, suit, proceeding or claim but excluding lost profits and
consequential damages of the Indemnified Party, to which the Indemnified Party may become subject
insofar as such losses, claims, damages, liabilities, actions or demands arise out of or are based
upon any breach of a representation, warranty, covenant or obligation of the Indemnifying Party
contained in this Agreement or any certificate or notice delivered by it in connection herewith,
and will reimburse the Indemnified Party for any legal or other expenses reasonably incurred by the
Indemnified Party in connection with investigating or defending any such loss, claim, damage,
liability, action or demand.





	7.2	 	DEFENCE




Promptly after receipt by the Indemnified Party of notice of a possible action, suit, proceeding or
claim referred to in Section 7.1 hereof, the Indemnified Party, if a claim in respect thereof is to
be made against the Indemnifying Party under such section, shall provide the Indemnifying Party
with written particulars thereof; provided that the failure to so provide the Indemnifying Party
with such particulars shall not relieve such Indemnifying Party from any liability which it might
have on account of the indemnity provided for in this Article 7, except insofar as such failure
shall prejudice such Indemnifying Party. The Indemnified Party shall also provide the Indemnifying
Party with copies of all relevant documentation, and unless the Indemnifying Party assumes the
defence thereof, shall keep such Indemnifying Party advised of the progress thereof










 



- 18 -



and shall keep such Indemnifying Party advised of all significant actions proposed. An
Indemnifying Party shall be entitled, at its own expense, to participate in and, to the extent that
it may wish, to assume the defence of any such action, suit, proceeding or claim but such defence
shall be conducted by counsel of good standing approved by the Indemnified Party, such approval not
to be unreasonably withheld. Upon the Indemnifying Party notifying the Indemnified Party of its
election so to assume the defence and retaining such counsel, the Indemnifying Party shall not be
liable to the Indemnified Party for any legal or other expenses subsequently incurred by it in
connection with such defence other than for reasonable costs of investigation. If such defence is
assumed by the Indemnifying Party, it shall, throughout the course thereof, provide copies of all
relevant documentation to the Indemnified Party, keep such Indemnified Party advised of the
progress thereof and shall discuss with the Indemnified Party all significant actions proposed. No
Indemnifying Party shall enter into any settlement without the consent of the Indemnified Party,
but such consent shall not be unreasonably withheld. Notwithstanding the foregoing, the
Indemnified Party shall have the right, at the Indemnifying Party’s expense, to employ counsel of
their own choice in respect of the defence of any such action, suit, proceeding or claim if:





	(a)	 	the employment of such counsel has been authorized by the Indemnifying Party in connection
with such defence;






	(b)	 	counsel retained by the Indemnifying Party or the Indemnified Party shall have advised the
Indemnified Party that there may be legal defences available to it which are different from or
in addition to those available to the Indemnifying Party (in which event, and to that extent,
the Indemnifying Party shall not have the right to assume or direct the defence on behalf of
the Indemnified Party) or that there may be a conflict of interest between the Indemnifying
Party and the Indemnified Party; or






	(c)	 	the Indemnifying Party shall not have assumed such defence and employed counsel therefor
within a reasonable time after receiving notice of such action, suit, proceeding or claim.






	7.3	 	TERM




The obligations of the Parties under this Article 7 shall terminate when the Arrangement is
consummated, failing which they shall survive and continue with respect to all losses, claims,
damages, liabilities, actions or demands, notice of which is given to the Indemnifying Party by the
Indemnified Party, on or before 12 months from the date hereof in compliance with Section 7.2
hereof.




ARTICLE 8

GENERAL





	8.1	 	FURTHER ASSURANCES




Each Party shall, at the request of the other Party, do all such further acts and execute and
deliver all such further documents and instruments as the other Party may reasonably require in
order to fully implement the terms and intent of this Agreement and the Arrangement.










 



- 19 -





	8.2	 	NOTICES




All notices which may or are required to be given pursuant to any provision of this Arrangement
Agreement shall be given or made in writing and shall be served personally or by facsimile, in each
case addressed to the attention of the President, at the administrative offices of Cade and KHD as
follows:




     To Cade:


Suite 1620

400 Burrard Street

Vancouver, British Columbia V6C 3A6

Attention: The President

Facsimile No. (604) 683-3205




     To KHD:


Unit 803 — 8th Floor, Dina House, Ruttonjee Centre

11 Duddell Street, Central

Hong Kong SAR

China



Attention: The President

Facsimile No. 011-852-2537-3689





	8.3	 	BINDING EFFECT




This Agreement shall be binding upon and shall enure to the benefit of each of Cade and KHD and
their respective successors and assigns.





	8.4	 	WAIVER




Any waiver or release of any of the provisions of this Arrangement Agreement, to be effective, must
be in writing and executed by the Party granting such waiver or release.





	8.5	 	GOVERNING LAW




This Agreement shall be governed by and construed in accordance with the laws of the Province of
British Columbia and the laws of Canada applicable therein (excluding any conflict of laws, rule or
principle which might refer such construction to the laws of another jurisdiction) and shall be
treated in all respects as a British Columbia contract. The Parties hereto irrevocably attorn to
the non-exclusive jurisdiction of the Courts of British Columbia with respect to any matter arising
hereunder or related thereto.










 



- 20 -





	8.6	 	ENTIRE AGREEMENT




This Agreement, together with the agreements and other documents herein or therein referred to,
constitute the entire agreement between the Parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions, whether oral or
written, between the Parties.





	8.7	 	EXPENSES




Unless otherwise provided herein, all expenses incurred in connection with this Arrangement
Agreement and the transactions contemplated hereby and thereby shall be paid by the Party incurring
such expenses.





	8.8	 	SEVERABILITY




If any provision of this Agreement is determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable, then:





	(a)	 	That provision shall (to the extent of the invalidity, illegality or unenforceability) be
given no effect and shall be deemed not to be part of this Agreement; and






	(b)	 	The Parties shall use all reasonable commercial efforts to replace each invalid, illegal or
unenforceable provision with a valid, legal and enforceable substitute provision, the effect
of which is as close as possible to the intended effect of the invalid, illegal or
unenforceable provision.






	8.9	 	PARTIES IN INTEREST




This Agreement will be binding upon and inure solely to the benefit of each Party, and, other than
pursuant to Article 7 hereof, nothing in this Agreement, express or implied, is intended to or will
confer upon any other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.










 



- 21 -





	8.10	 	COUNTERPARTS




This Agreement may be executed in counterparts and by facsimile and each counterpart shall be
deemed to be an original and all of which shall be deemed to be one instrument.



IN WITNESS WHEREOF the Parties have executed this Arrangement Agreement, as of the day, month and
year first above written.




CADE STRUKTUR CORPORATION




	 	 	 	 	 
	By:
	 	/S/ Slobodan Andjic	 	 
	 

	 	 

Slobodan Andjic
	 	 
	 

	 	President	 	 
	 
	 	 	 	 
	KHD HUMBOLDT WEDAG INTERNATIONAL LTD.	 	 
	 
	 	 	 	 
	By:
	 	/S/ Michael J. Smith	 	 
	 

	 	 

Michael J. Smith
	 	 
	 

	 	Chairman of the Board	 	 












 



-   -


SCHEDULE A

PLAN OF ARRANGEMENT

CADE STRUKTUR CORPORATION

PLAN OF ARRANGEMENT

UNDER SECTION 195 OF THE

YUKON BUSINESS CORPORATIONS ACT





	1.	 	SECTION 1 — DEFINITIONS AND INTERPRETATION






	1.1	 	DEFINITIONS. In this Plan of Arrangement:






“Amalco” means the corporation resulting from the Amalgamation;




“Amalco Shares” means the common shares in the capital of Amalco;




“Amalgamating Corporations” means Cade and Newco, collectively, and “Amalgamating
Corporation” means either one of them;




“Amalgamation” means the amalgamation of the Amalgamating Corporations as contemplated and
pursuant to this Plan of Arrangement;




“Arrangement” means the arrangement to be undertaken in accordance with this Plan of
Arrangement, subject to any amendment or variation made in accordance with this Plan of
Arrangement;




“Arrangement Agreement” means the arrangement agreement, dated as of




September 11, 2006, between KHD and Cade, to which this Plan of Arrangement is attached as
Schedule A;




“Arrangement Resolution” means the special resolution of the Cade Shareholders approving the
Arrangement;




“Articles of Arrangement” means the articles of arrangement in respect of the Arrangement
that are required by the YBCA to be sent to the Registrar after the Final Order is made in
order to give effect to the Arrangement;




“Business Day” means any day other than a Saturday, Sunday, a federal holiday in Canada or a
day on which banks are not open for business in Vancouver, British Columbia;




“Cade” means Cade Struktur Corporation, a corporation existing under the YBCA;









 



- 2 -



“Cade Shareholders” means the registered holders at the relevant time of the issued and
outstanding Cade Shares;




“Cade Shares” means the common shares without par value in the capital of Cade;




“Certificate” means the certificate giving effect to the Arrangement, issued by the
Registrar pursuant to Subsection 195(11) of the YBCA after the Articles of Arrangement have
been filed;




“Court” means the Supreme Court of the Yukon Territory;




“Depositary” means Pacific Corporate Trust Company;




“Dissenting Shareholder” means a Cade Shareholder who dissents in respect of the Arrangement
pursuant to Section 4 hereof;




“Effective Date” means the date on which the Arrangement becomes effective, as shown on the
Certificate;




“Effective Time” means the time on the Effective Date that the Arrangement becomes effective
in accordance with its terms;




“Final Order” means the order of the Court, as the same may be amended, approving the
Arrangement in respect of Cade under the YBCA;




“Interim Order” means the order of the Court, as the same may be amended, providing for,
among other things, the calling and holding of the Meeting under the YBCA;




“KHD” means KHD Humboldt Wedag International Ltd., a corporation existing under the British
Columbia Business Corporations Act;




“KHD Shares” means the common shares without par value in the capital of KHD;




“Letter of Transmittal” means the letter of transmittal to be forwarded to the Cade
Shareholders and used by the Non-Dissenting Shareholders to tender the certificates
representing their Cade Shares in exchange for the certificates representing their KHD
Shares;




“Meeting” means the meeting of Cade Shareholders, and any adjournment thereof, to be held to
consider and, if deemed advisable, approve the Arrangement;




“Newco” means 39858 Yukon Inc., a corporation existing under the YBCA and a wholly-owned
subsidiary of KHD formed for the purposes of completing the Arrangement;




“Newco Shares” means the common shares in the capital of Newco;




“Non-Dissenting Shareholder” means a Cade Shareholder that is neither a Dissenting
Shareholder nor Newco;









 



- 3 -



“person” means an individual, a body corporate (wherever incorporated), an unincorporated
association, syndicate or organization, partnership, trust, trustee, executor, administrator
or other legal representative;




“Plan of Arrangement” means this plan of arrangement;




“Registrar” means the registrar of corporations or a deputy registrar of corporations
appointed under section 263 of the YBCA;




“Share Exchange Ratio” means 0.0029163, subject to adjustment pursuant to Section 2.3; and




“YBCA” means the Yukon Business Corporations Act, and the regulations issued thereunder, as
amended.




	1.2	 	HEADINGS AND REFERENCES. The headings in this Plan of Arrangement are for convenience of
reference only and shall not affect the construction of this Plan of Arrangement. Unless
otherwise specified, references to an article, section, subsection, paragraph or subparagraph
by any number or letter, or both, refer to the article, section, subsection, paragraph or
subparagraph bearing a designation in this Plan of Arrangement.






	1.3	 	CURRENCY. Except as expressly indicated otherwise, all sums of money referred to in this
Plan of Arrangement are expressed and shall be payable in lawful money of Canada.






	1.4	 	GENDER AND NUMBER. Unless the context otherwise requires, in this Plan of Arrangement words
importing the singular number only shall include the plural and vice versa and words importing
the use of either gender shall include both genders and neuter.






	1.5	 	TIME AND DATE FOR ACTION. Time shall be of the essence in each matter or thing herein
provided. Unless otherwise indicated, all times expressed herein are local time, Vancouver,
British Columbia. In the event that the date on or by which any action is required to be
taken hereunder is not a Business Day in the place where the action is required to be taken,
such action shall be required to be taken on or by the next succeeding day which is a Business
Day in such place.






	1.6	 	DEEMING PROVISIONS. In this Plan of Arrangement, the deeming provisions are not rebutable
and are conclusive and irrevocable.






	1.7	 	SUCCESSORS, ASSIGNS, ETC. At the Effective Time, this Plan of Arrangement will be binding
upon KHD, Cade, Newco and the Cade Shareholders and their respective heirs, executors,
administrators, legal representatives, successors and assigns.






	1.8	 	LEGISLATION. References in this Plan of Arrangement to any statute or sections thereof shall
include any statute as amended or substituted, and any regulations promulgated thereunder,
from time to time in effect.










 



- 4 -








	2.	 	SECTION 2 — THE ARRANGEMENT






	2.1	 	EFFECTIVENESS. This Plan of Arrangement will become effective at, and be binding at and
after, the Effective Time upon KHD, Cade, Newco and the Cade Shareholders.






	2.2	 	THE ARRANGEMENT. At the Effective Time, the following shall occur and shall be deemed to
occur in the following order without any further act or formality:






	 	(a)	 	the Amalgamating Corporations shall amalgamate pursuant to the YBCA and
continue as one corporation on the terms prescribed in this Plan of Arrangement and:






	 	(i)	 	the Amalgamating Corporations will continue as one corporation;
	 
	 	(ii)	 	Amalco will possess all of the property, rights and privileges
of each of the Amalgamating Corporations immediately before the Effective Date;
	 
	 	(iii)	 	Amalco will possess all of the liabilities, including civil,
criminal and quasi-criminal, and all contracts, disabilities and debts
obligations of each of the Amalgamating Corporations immediately before the
Effective Date;
	 
	 	(iv)	 	Amalco will be deemed to be the party plaintiff or the party
defendant, as the case may be, in any civil action commenced by or against a
Amalgamating Corporation immediately before the Effective Date;
	 
	 	(v)	 	the Articles of Arrangement will be deemed to be the articles
of incorporation of Amalco and the Certificate will be deemed to be the
certificate of incorporation of Amalco;






	 	(b)	 	on the Amalgamation:






	 	(i)	 	all issued and outstanding Cade Shares held by Non-Dissenting
Shareholders shall be exchanged for fully paid and non-assessable KHD Shares
such that each Non-Dissenting Shareholder shall receive in exchange for the
aggregate number of Cade Shares held by the Non-Dissenting Shareholder such
number of fully paid KHD Shares equal to the Share Exchange Ratio multiplied by
the aggregate number of Cade Shares held by the Non-Dissenting Shareholder,
rounded down to the nearest whole number, and a cheque payable to the
Non-Dissenting Shareholder equal to the closing price of the KHD Shares on the
last trading day before the Effective Date multiplied by, and in lieu of, the
fraction of a KHD Share that would otherwise be issuable to the Non-Dissenting
Shareholder if the number of KHD Shares was not rounded down to the nearest
whole number, provided that any Non-Dissenting Shareholder who is entitled to
receive in the aggregate less than one (1) KHD Share shall receive one (1) KHD
Share and no other consideration; and










 



- 5 -








	 	(ii)	 	all issued and outstanding Newco Shares shall be converted on a
share for share basis into fully paid and non-assessable Amalco Shares on the
basis of one Amalco Share for each one Newco Share;






	 	(c)	 	all Cade Shares and Class B preferred shares of Cade held by Newco shall be
cancelled without any repayment of capital in respect thereof;
	 
	 	(d)	 	the name of Amalco shall be “Cade Struktur Corporation”;
	 
	 	(e)	 	the registered office of Amalco shall be in the city of Whitehorse in the Yukon
Territory;
	 
	 	(f)	 	the authorized capital of Amalco shall consist of an unlimited number of Amalco
Shares;
	 
	 	(g)	 	no shares of Amalco may be sold, transferred or otherwise disposed of without
the consent of the directors of Amalco expressed by a resolution of the directors and
the directors of Amalco are not required to give any reason for refusing to consent to
any such sale, transfer or other disposition;
	 
	 	(h)	 	there shall be no restrictions on the business which Amalco is authorized to
carry on or the powers which Amalco may exercise;
	 
	 	(i)	 	the by-laws of Newco shall be the by-laws of Amalco until repealed, amended,
altered or added to;
	 
	 	(j)	 	without limit to the powers of the board of directors of Amalco as set out in
the YBCA, the board of directors of Amalco may from time to time on behalf of Amalco:






	 	(i)	 	borrow money upon the credit of Amalco;
	 
	 	(ii)	 	issue, re-issue, sell or pledge debt obligations of Amalco;
	 
	 	(iii)	 	to the extent permitted by the YBCA, give, directly or
indirectly, financial assistance to any person by means of a loan, a guarantee
to secure the performance of an obligation or otherwise; and
	 
	 	(iv)	 	mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of Amalco owned or subsequently acquired, to
secure any obligation of Amalco; and






the board of directors may from time to time delegate to such one or more of the
directors and officers of Amalco as may be designated by the board of directors all
or any of the powers conferred on the board of directors in relation to the
foregoing by this Section or by the YBCA to such extent and in such manner as the
board of directors shall determine at the time of each such delegation; and nothing
in this Section limits or restricts the borrowing of money by Amalco on









 



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bills of exchange or promissory notes made, drawn, accepted or endorsed by or on
behalf of Amalco;




	 	(k)	 	the number of directors of Amalco shall be such number not less than one (1)
and not more than ten (10) as the Amalco directors may from time to time determine;
	 
	 	(l)	 	the directors of Amalco may appoint one or more directors who shall hold office
for a term expiring not later than the close of the next annual meeting of Amalco, but
the total number of directors so appointed may not exceed one third of the number of
directors elected at the previous annual meeting of Amalco; and
	 
	 	(m)	 	the number of first directors of Amalco shall be two (2) and the first
directors of Amalco shall be James M. Carter, a resident Canadian, having an address at
12532 — 23rd Avenue, White Rock, British Columbia, V4A 2C4 and Michael J. Smith, a
non-resident Canadian, having an address at Unit 803 — 8th Floor, Dina House, Ruttonjee
Centre, 11 Duddell Street, Central, Hong Kong SAR, China, each of whom shall hold
office until the first annual meeting of Amalco or until his successor is elected or
appointed.






	2.3	 	ADJUSTMENT OF SHARE EXCHANGE RATIO. The Share Exchange Ratio shall be subject to equitable
adjustment in the event of any stock split, stock dividend, reverse stock split or similar
event affecting the KHD Shares between the date of the Arrangement Agreement and the Effective
Date. The Share Exchange Ratio will further be subject to equitable adjustment if the market
value of the KHD Shares has changed more than 2% from the closing price of the KHD Shares on
September 8, 2006 to the closing price of the KHD Shares on the day prior to the Effective
Date. For greater certainty, this equitable adjustment may increase or decrease the Share
Exchange Ratio, depending upon the event for which the equitable adjustment is made. The
equitable adjustment, if any, will be made on the Effective Date upon the agreement of KHD
Humboldt and the Company, acting reasonably, and will be made in order to provide
Non-Dissenting Shareholders with an equivalent purchase price per Common Share as the purchase
price reflected in the Share Exchange Ratio based on the closing price of the KHD Shares on
September 8, 2006. Notwithstanding the foregoing, the Share Exchange Ratio shall not be
adjusted, downward or upward, by more than 20% of the Share Exchange Ratio as a result of the
change in the market value of the KHD Shares.






	2.4	 	FRACTIONAL SHARES. Notwithstanding any other provision of this Plan of Arrangement, no
fractional KHD Shares shall be issued.






	3.	 	SECTION 3 — SHARE EXCHANGE PROCEDURE






	3.1	 	INSTRUCTIONS TO CADE SHAREHOLDERS. Cade will deliver to each Cade Shareholder the Meeting
materials, including a management information circular, which will call the Meeting and will
describe the procedure necessary for each Cade Shareholder to obtain the KHD Shares or
exercise the Dissent Rights pursuant to the Arrangement. The procedure for the exchange of
Cade Shares for KHD Shares will include a requirement for Non-Dissenting Shareholders to
deliver a Letter of Transmittal










 



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and certificates representing Cade Shares to the Depositary. Cade
will deliver to each Shareholder after the VSM Transaction and the
Arrangement have been approved the form of the Letter of
Transmittal. The procedure for exercise of Dissent Rights will
include the requirements set forth in Section 4 of this Plan of
Arrangement.




	3.2	 	RIGHTS TO SHARE CERTIFICATES AND CHEQUES:






	 	(a)	 	Upon the written request of the Depositary, KHD shall deliver or arrange to be
delivered to the Depositary certificates representing the KHD Shares and cheques
payable in lieu of fractional KHD Shares required to be issued to Non-Dissenting
Shareholders who are entitled to receive KHD Shares and cheques payable in lieu of
fractional KHD Shares in connection with the Arrangement in accordance with Section
2.2(b), which certificates and cheques shall be distributed by the Depositary
distribution to such Non-Dissenting Shareholders in accordance with the provisions of
this Section 3.
	 
	 	(b)	 	As soon as practicable following the Effective Date, where a Non-Dissenting
Shareholder has delivered to the Depositary a duly completed Letter of Transmittal and
the certificates representing such holder’s Cade Shares, the Depositary will either:






	 	(i)	 	forward or cause to be forwarded by mail to the Non-Dissenting
Shareholder at the address specified in the Letter of Transmittal;
	 
	 	(ii)	 	if requested by the Non-Dissenting Shareholder in the Letter of
Transmittal, make available at the offices of the Depositary for pick-up by the
Non-Dissenting Shareholder; or
	 
	 	(iii)	 	if the Letter of Transmittal neither specifies an address nor
contains a request as described in (ii), forward or cause to be forwarded to
the Non-Dissenting Shareholder at the address of the holder as shown on the
share register maintained by Cade,






	 	 	 	certificates representing the KHD Shares and cheques payable in lieu of fractional
KHD Shares required to be delivered to such person pursuant to the Plan of
Arrangement.
	 
	 	(c)	 	In order to receive certificates representing the KHD Shares and cheques
payable in lieu of fractional KHD Shares pursuant to the Plan of Arrangement,
Non-Dissenting Shareholders must deliver both a Letter of Transmittal and
certificates contemplated by paragraph 3.2(b). No delivery of certificates
representing Cade shares will be recognized without a duly completed Letter of
Transmittal.






	3.3	 	REGISTRATION. Unless otherwise directed by the Letter of Transmittal, certificates
representing KHD Shares referred to in Section 3.2 will be issued in the name of the
registered holder of the Cade Shares acquired.










 



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	3.4	 	EXTINGUISHMENT OF RIGHTS. Subject to Section 4, at and after the Effective Date, any
certificate formerly representing Cade Shares will represent only the right to receive KHD
Shares in accordance with this Plan of Arrangement. On the sixth anniversary of the Effective
Date, any and all such rights which have not been exercised by a Non-Dissenting Shareholder
collecting a KHD Share certificate in accordance herewith will be extinguished and the
certificates will be deemed to be surrendered to KHD for no consideration.






	3.5	 	DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No dividends or other
distributions declared or made after the Effective Time with respect to KHD Shares with a
record date after the Effective Time shall be paid to the holder of any unsurrendered
certificate which immediately prior to the Effective Time represented outstanding Cade Shares
that were transferred pursuant to section 3.2. Any such dividends or other distributions
shall be delivered to the Depositary and held in trust for such holder of unsurrendered
certificates, unless and until the holder shall surrender such certificate in accordance with
this Plan of Arrangement. Subject to applicable laws, at the time of such surrender of any
such certificate representing Cade Shares, there shall be paid to the former holder of the
certificates representing Cade Shares, without interest, the dividend or other distribution of
KHD with a record date after the Effective Time theretofore paid on the KHD Shares and the
certificates representing KHD Shares to which such holder is entitled pursuant to section 3.2.






	3.6	 	ILLEGALITY OF DELIVERY OF KHD SHARES. Notwithstanding the foregoing, if it appears to KHD,
acting reasonably, that it would be contrary to applicable law to issue KHD Shares pursuant to
the Arrangement to a person that is not a resident of Canada or the United States, the KHD
Shares that otherwise would be issued to that person shall be issued and delivered to the
Depositary for sale by the Depositary on behalf of that person.






	3.7	 	SALES BY DEPOSITARY. All KHD Shares to be sold pursuant to Section 3.6 shall be pooled and
sold as soon as practicable after the Effective Date, on such dates and at such prices as the
Depositary determines in its sole discretion. The Depositary shall not be obligated to seek
or obtain a minimum price for any of the KHD Shares sold by it. Each person that otherwise
would have received a KHD Share pursuant to this Arrangement shall receive a pro rata share of
the cash proceeds from the sale of the KHD Shares sold by the Depositary, less any amount
withheld in respect of Canadian taxes, in lieu thereof in consideration for the Cade Shares.
No payments will be made to persons that otherwise would receive less than $1.00. Any monies
remaining as a result of the preceding sentence shall be applied to any expenses incurred in
connection with sales pursuant to this Section 3.7. Neither KHD nor the Depositary shall be
liable for any shortfall or loss resulting from any such sales.






	3.8	 	LOST OR DESTROYED CERTIFICATES. In the event any certificate which immediately prior to the
Effective Time represented one or more outstanding Cade Shares that were exchanged pursuant to
Section 2.1 shall have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed, the Depositary
will issue in exchange for such lost, stolen or destroyed certificate, a certificate
representing the KHD Shares and/or the










 



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	 	 	cash payment to which such person claims to be entitled in the Letter of Transmittal. When
requesting such delivery of such certificate representing KHD Shares and/or payment in
exchange for such lost, stolen or destroyed certificate, the person to whom such certificate
and/or cash is to be delivered shall as a condition precedent to the delivery of such
certificate and/or cash, give a bond satisfactory to KHD and the Depositary in such sum as
KHD may direct, or otherwise indemnify KHD in a manner satisfactory to KHD, against any
claim that may be made against KHD with respect to the certificate alleged to have been
lost, stolen or destroyed.






	4.	 	SECTION 4 — CADE DISSENT RIGHTS






	4.1	 	RIGHTS OF DISSENT.






	 	(a)	 	Cade Shareholders may exercise rights of dissent in connection with the
Arrangement with respect to their Cade Shares pursuant to and in the manner set forth
in section 193 of the YBCA as modified by the Interim Order, the Final Order and this
Section 4.1 (the “Dissent Rights”), provided that, notwithstanding subsection 193(5) of
the YBCA, the written objection to the Arrangement Resolution contemplated by
subsection 193(5) of the YBCA must be received by Cade not later than 4:00 p.m.
(Vancouver time) on the date which is two Business Days immediately preceding the
Meeting.
	 
	 	(b)	 	Cade Shareholders who duly exercise Dissent Rights and who are ultimately
entitled to be paid fair value for their Cade Shares will be paid by Amalco (as
successor corporation to Cade following the Amalgamation) and shall be deemed to have
irrevocably transferred their Cade Shares to Cade at the Effective Time and prior to
any of the steps referred to in Section 2.2 without any further authorization, act or
formality and free and clear of all liens, charges, claims and encumbrances and
immediately thereafter such Cade Shares will be, and will be deemed to be, cancelled
and the former holders of such Cade Shares shall cease to have any rights as former
holders of Cade Shares other than their right to be paid fair value for their Cade
Shares.
	 
	 	(c)	 	Cade Shareholders who exercise, or purport to exercise, Dissent Rights, and who
are ultimately determined not to be entitled, for any reason, to be paid fair value for
their Cade Shares, shall be deemed to have participated in the Arrangement on the same
basis as any Non-Dissenting Shareholder as at and from the Effective Time. For greater
certainty, and without restricting the generality of the foregoing, a Dissenting
Shareholder shall be deemed to be a Non-Dissenting Shareholder and to have participated
in the Arrangement and to not have exercised its Dissent Right in any of the following
situations: (i) the Dissenting Shareholder withdraws that Dissenting Shareholder’s
demand for payment under Section 193 of the YBCA before Cade and such Dissenting
Shareholder make an agreement for the purchase of the Dissenting Shareholder’s Cade
Shares; and (ii) the Dissenting Shareholder fails to comply with the strict
requirements of Section 193 of the YBCA, as modified by the Interim Order and the Final
Order.










 



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	4.2	 	HOLDERS. In no circumstances shall Cade, KHD or any other person be required to recognize a
person exercising Dissent Rights unless such person is a registered holder of the Cade Shares
in respect of which such Dissent Rights are sought to be exercised.






	4.3	 	RECOGNITION OF DISSENTING SHAREHOLDERS. Neither Cade, KHD nor any other person shall be
required to recognize a Dissenting Shareholder as a registered or beneficial owner of Cade
Shares at or after the Effective Time, and at the Effective Time the names of such Dissenting
Shareholders shall be deleted from the register of holders of Cade Shares maintained by or on
behalf of Cade.






	4.4	 	DISSENT RIGHT AVAILABILITY. A Cade Shareholder is not entitled to exercise Dissent Rights
with respect to Cade Shares if such holder votes (or instructs, or is deemed, by submission of
any incomplete proxy, to have instructed his, her or its proxyholder to vote) in favour of the
Arrangement Resolution.






	5.	 	SECTION 5 — AMENDMENT AND TERMINATION






	5.1	 	AMENDMENT.






	 	(a)	 	KHD and Cade reserve the right to amend, modify and/or supplement this Plan of
Arrangement at any time and from time to time, provided that any such amendment,
modification or supplement is to be contained in a written document which is filed with
the Court and approved by the Court and communicated to the Cade Shareholders in the
manner required by the Court, if so required.
	 
	 	(b)	 	Any amendment, modification or supplement to this Plan of Arrangement may be
proposed by KHD and Cade at any time prior to or at the Meeting with or without any
other prior notice or communication and, if so proposed and accepted by the persons
voting at the Meeting, shall become part of this Plan of Arrangement for all purposes.
	 
	 	(c)	 	Any amendment, modification or supplement to this Plan of Arrangement that is
approved or directed by the Court following the Meeting shall be effective only if it
is consented to by KHD and Cade.






	5.2	 	TERMINATION. At any time up until the time the Final Order is made, KHD and Cade may mutually
determine not to proceed with this Plan of Arrangement, or to terminate this Plan of
Arrangement, notwithstanding any prior approvals given at the Meeting. In addition to the
foregoing, this Plan of Arrangement shall automatically and without notice, terminate
immediately and be of no further force or effect, upon the termination of the Arrangement
Agreement in accordance with its terms.