Document:

EX10-2

EXCHANGE AND VOTING TRUST AGREEMENT

THIS EXCHANGE AND VOTING TRUST AGREEMENT made as of the 15th day of December, 2006.

AMONG:
PATCH INTERNATIONAL INC. a corporation subsisting under the laws of the State of Nevada; having its principal office at 1220, 666 Burrard Street, Vancouver, British Columbia, Canada V6C 2X8, 

 

("Patch");

 

AND:
PATCH ENERGY INC., a corporation incorporated under the federal laws of Canada; with its principal office at 1220, 666 Burrard Street, Vancouver, British Columbia, Canada V6C 2X8,

("Exchangeco");

AND:
1286664 ALBERTA LTD., a corporation incorporated pursuant to the laws of the Province of Alberta, Canada with its principal office at 22 Barclay Walk S.W., Calgary, Alberta T2P 4V9,

(the "Trustee");

AND:
EACH OF THOSE PERSONS holding shares of the Exchangeco, as listed in Appendix A hereto;

(individually a "Shareholder" and collectively the "Shareholders");

WHEREAS the Exchangeco is a wholly-owned subsidiary of Patch;

WHEREAS pursuant to a share exchange agreement dated as of December 15, 2006 (the "Purchase Agreement") by and among Patch, Exchangeco, the Shareholders and Damascus Energy Inc. (the "Company"), Exchangeco agreed to acquire all of the issued and outstanding common shares of the Company from the Shareholders in consideration of: Exchangeco issuing to the Shareholders a total of 9,426,489 Exchangeable Shares (as herein defined); 

AND WHEREAS in accordance with the Purchase Agreement, this Agreement stipulates the means by which: (i) the Shareholders have voting rights in Patch; (ii) the Trustee holds the Patch Preferred Share; and (iii) the Shareholders exercise their rights of conversion of the Exchangeable Shares;

NOW THEREFORE in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows:

Article 1

DEFINITIONS AND INTERPRETATION
1.1           DEFINITIONS

In this Agreement, the following terms shall have the following meanings:
"Affiliate" of any person means any other person directly or indirectly controlled by, or under common control of, that person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control of"), as applied to any person, means the possession by another person, directly or indirectly, of the power to direct or cause the direction of the management and policies of that first mentioned person, whether through the ownership of voting securities, by contract or otherwise, provided that for the purpose of this Agreement, a Shareholder shall not be deemed to be an Affiliate of Patch solely as a result of the ownership of Exchangeable Shares by such Shareholder, the rights of Shareholders under the Exchangeable Share Provisions, the Support Agreement and the Purchase Agreement, and the Shareholder being a beneficiary of the rights granted to the Trustee under this Agreement.

"Automatic Exchange Rights" means the benefit of the obligation of Patch to effect the automatic exchange of Exchangeable Shares for Patch Shares pursuant to section 4.11 hereof.

"Board of Directors" means the Board of Directors of Exchangeco.

"Business Day" means a day other than a Saturday, Sunday or a day when banks are not open for business in Calgary, Alberta.

"Current Market Price" shall have the meaning attributed to such term in the Exchangeable Share Provisions.

"Exchangeable Shares" means the Series A Preferred shares in the capital of Exchangeco, including the Exchangeable Shares issuable under the Purchase Agreement.

"Exchangeable Share Provisions" means the rights, privileges, restrictions and conditions attached to the Exchangeable Shares, substantially in the form set out in Schedule "A" to the Support Agreement.

"Insolvency Event" means the institution by Exchangeco of any proceeding to be adjudicated bankrupt or insolvent or to be dissolved or wound up, or the consent of Exchangeco to the institution of bankruptcy, insolvency, dissolution or winding up proceedings against it, or the filing of a petition, answer or consent seeking dissolution or winding up under any bankruptcy, insolvency or analogous laws, including without limitation the Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the failure by Exchangeco to contest in good faith any such proceedings commenced in respect of Exchangeco within fifteen (15) days of becoming aware thereof, or the consent by Exchangeco to the filing of any such petition or to the appointment of a receiver, or the making by Exchangeco of a general assignment for the benefit of creditors, or the admission in writing by Exchangeco of its inability to pay its debts generally as they become due, or Exchangeco not being permitted, pursuant to solvency requirements of applicable law, to redeem any Retracted Shares pursuant to section 6.6 of the Exchangeable Share Provisions.

"Insolvency Exchange Right" has the meaning ascribed thereto in section 4.1.

"Liquidation Call Right" has the meaning ascribed thereto in the Exchangeable Share Provisions.

"Liquidation Event" has the meaning ascribed thereto in section 4.11(a).

"Liquidation Event Effective Date" has the meaning ascribed thereto in section 4.11(c).

"List" has the meaning ascribed thereto in section 3.8.

"Officer's Certificate" means, with respect to Patch or Exchangeco, as the case may be, a certificate signed by any one of the Chairman of the Board, the Chief Executive Officer, the President or the Chief Financial Officer of Patch or Exchangeco, as the case may be.

"Patch Shares" means the shares of common stock of Patch, par value of U.S.$0.00001, having voting rights of one vote per share, and any other securities into which such shares may be changed.

"Patch Consent" has the meaning ascribed thereto in section 3.2. "Patch Meeting" has the meaning ascribed in section 3.2. "Patch Successor" has the meaning ascribed thereto in section 11.1(a).

"Patch Preferred Share" means the Class A preferred voting share of Patch, par value of U.S.$0.01, having voting rights of 9,426,489 votes per share, and any other securities into which such shares may be changed.

"Patch Preferred Share Provisions" means the rights, privileges, restrictions and conditions attached to the Patch Preferred Share, substantially in the form set out in Schedule "B" to the Support Agreement.

"Purchase Agreement" means the Purchase Agreement between Patch, Exchangeco, the Company and the Shareholders named therein, dated as of the same date hereof.

"Person" shall have the meaning attributed to such term in the Exchangeable Share Provisions.

"Redemption Call Right" has the meaning ascribed thereto in the Exchangeable Share Provisions.

"Retracted Shares" has the meaning ascribed thereto in section 4.6.

"Retraction Call Right" has the meaning ascribed thereto in the Exchangeable Share Provisions.

"Shareholders" means the registered holders from time to time of Exchangeable Shares, other than Patch and its Affiliates, as listed in Appendix A hereto.

"Shareholder Votes" has the meaning ascribed thereto in section 3.2.

"Support Agreement" means that certain Support Agreement made as of the same date hereof between Exchangeco, Patch and the Trustee.

"Trust" means the trust created by this Agreement.

"Trust Estate" means the Trust Shares, the Insolvency Exchange Right, the Automatic Exchange Rights and any other securities, money or other property which may be held by the Trustee from time to time pursuant to this Agreement.

"Trust Shares" has the meaning ascribed thereto in section 2.2.

"Trustee" means 1286664 Alberta Ltd., and subject to the provisions of Article 10, includes any successor Trustee.

"Voting Rights" has the meaning ascribed thereto in section 3.1.

1.2       INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.

The division of this Agreement into articles, sections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.
1.3      NUMBER, GENDER, ETC.

Words importing the singular number only shall include the plural and vice versa. Words importing the use of any gender shall include all genders.
1.4      DATE FOR ANY ACTION

If any date on which any action is required to be taken under this Agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.

 

Article 2

TRUST SHARES
2.1       ESTABLISHMENT OF TRUST

The purpose of this Agreement is to create the Trust for the benefit of the Shareholders, as herein provided.  The Trustee will hold the Patch Preferred Share issued pursuant to the requirements of the Purchase Agreement, Exchangeable Share Provisions and Support Agreement to enable the Trustee to exercise the Voting Rights and will hold the Insolvency Exchange Right and Automatic Exchange Rights to enable the Trustee to exercise such rights, in each case as Trustee for and on behalf of the Shareholders as provided in this Agreement.
2.2       ISSUE AND OWNERSHIP OF PATCH SHARES

Upon execution of this Agreement, Patch shall issue to and deposit with the Trustee the Patch Preferred Share, such shares to be hereafter held of record by the Trustee as Trustee for and on behalf of, and for the use and benefit of, the Shareholders and in accordance with the provisions of this Agreement.  The Patch Preferred Share so issued and deposited by Patch with the Trustee pursuant to this section 2.2 shall hereafter be referred to as the "Trust Shares".  Patch hereby acknowledges receipt from the Trustee as Trustee for and on behalf of the Shareholders of good and valuable consideration (and the adequacy thereof) for the issuance of the Trust Shares by Patch to the Trustee.  During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Trust Shares and, subject to the terms hereof, shall be entitled to exercise all of the rights and powers of an owner with respect to the Trust Shares, provided that the Trustee shall:
(a)       hold the Trust Shares and the legal title thereto as Trustee solely for the use and benefit of the Shareholders in accordance with the provisions of this Agreement; and

(b)       except as specifically authorized by this Agreement, have no power or authority to sell, transfer, vote or otherwise deal in or with the Trust Shares and the Trust Shares shall not be used or disposed of by the Trustee for any purpose other than the purposes for which this Trust is created pursuant to this Agreement.

Article 3

VOTING
3.1           VOTING RIGHTS

The Trustee, as the holder of record of Trust Shares, shall be entitled to all of the voting rights, including the right to vote in person or by proxy the Trust Shares on any matters, questions, proposals or propositions whatsoever that may properly come before the stockholders of Patch at a Patch Meeting or in connection with a Patch Consent (in each case as hereinafter defined) (the "Voting Rights").  The Voting Rights shall be and remain vested in and exercised by the Trustee.  Subject to section 7.14:
(a)      the Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this Article 3 from Shareholders entitled to instruct the Trustee as to the voting thereof at the time at which the Patch Meeting is held or a Patch Consent is sought; and

(b)      to the extent that no instructions are received from a Shareholder with respect to the Voting Rights to which such Shareholder is entitled, the Trustee shall not exercise or permit the exercise of such Voting Rights.

3.2      NUMBER OF VOTES

With respect to all meetings of stockholders of Patch at which holders of shares of Patch are entitled to vote (a "Patch Meeting") and with respect to all written consents sought by Patch from its stockholders including the holders of shares of Trust Shares (a "Patch Consent"), each Shareholder shall be entitled to instruct the Trustee to cast and exercise one of the votes comprised in the Voting Rights for each Exchangeable Share owned of record by such Shareholder on the record date established by Patch or by applicable law for such Patch Meeting or Patch Consent, as the case may be (the "Shareholder Votes") in respect of each matter, question, proposal or proposition to be voted on at such Patch Meeting or to be consented to in connection with such Patch Consent.
3.3      LEGENDED SHARES CERTIFICATES

Exchangeco will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Shareholders of their right to instruct the Trustee with respect to the exercise of the Voting Rights in respect of the Exchangeable Shares of the Shareholders.
3.4       SAFEKEEPING OF CERTIFICATES

The certificate(s) representing the Trust Shares shall at all times be held in safe keeping by the Trustee or its agent.

 
3.5       MAILINGS TO SHAREHOLDERS OF EXCHANGEABLE SHARES

With respect to each Patch Meeting and Patch Consent, Patch will mail or cause to be mailed (or otherwise communicate in the same manner as Patch utilizes in communications to holders of Patch Shares) to each of the Shareholders named in the List (as defined below) on the same day as the initial mailing or notice (or other communication) with respect thereto is commenced by Patch to its stockholders: (a) a copy of such notice, together with any proxy or information statement and related materials to be provided to stockholders of Patch;
(a)      a statement that such Shareholder is entitled to instruct the Trustee as to the exercise of the Shareholder Votes with respect to such Patch Meeting or Patch Consent, as the case may be, or pursuant to section 3.9, to attend such Patch Meeting and to exercise personally the Shareholder Votes thereat as the proxy of the Trustee;

(b)      a statement as to the manner in which such instructions may be given to the Trustee, including an express indication that instructions may be given to the Trustee to give:
(i)      a proxy to such Shareholder or his designee to exercise personally the Shareholder Votes; or

(ii)      a proxy to a designated agent or other representative of the management of Patch to exercise such Shareholder Votes;

(c)      a statement that if no such instructions are received from the Shareholder, the Shareholder Votes to which such Shareholder is entitled will not be exercised;

(d)      a form of direction whereby the Shareholder may so direct and instruct the Trustee as contemplated herein; and;

(e)      a statement of: (i) the time and date by which such instructions must be received by the Trustee in order to be binding upon it, which in the case of a Patch Meeting shall not be earlier than the close of business on the second Business Day prior to such meeting; and (ii) the method for revoking or amending such instructions.

For the purpose of determining Shareholder Votes to which a Shareholder is entitled in respect of any Patch Meeting or Patch Consent, the number of Exchangeable Shares owned of record by the Shareholder shall be determined at the close of business on the record date established by Patch or by applicable law for purposes of determining stockholders entitled to vote at such Patch Meeting or to give written consent in connection with such Patch Consent.
3.6      COPIES OF STOCKHOLDER INFORMATION

Patch will deliver to the Shareholders copies of all proxy materials (including notices of Patch Meetings), information statements, reports (including without limitation all interim and annual financial statements) and other written communications that are to be distributed from time to time to holders of Patch Shares.
3.7      OTHER MATERIALS

Immediately after receipt by Patch or any stockholder of Patch of any material sent or given generally to the holders of Patch Shares by or on behalf of a third party, including without limitation dissident proxy and information circulars (and related information and material) and tender and exchange offer circulars (and related information and material), Patch shall use its best efforts to obtain and deliver copies thereof to each Shareholder as soon as possible thereafter.
3.8      LIST OF PERSONS ENTITLED TO VOTE

Exchangeco shall (a) prior to each annual, general and special Patch Meeting or the seeking of any Patch Consent and (b) forthwith upon each request made at any time by the Trustee or Patch in writing, prepare or cause to be prepared a list (a "List") of the names and addresses of the Shareholders arranged in alphabetical order and showing the number of Exchangeable Shares held of record by each such Shareholder, in each case at the close of business on the date specified by the Trustee or Patch in such request or, in the case of a List prepared in connection with a Patch Meeting or a Patch Consent, at the close of business on the record date established by Patch or pursuant to applicable law for determining the holders of Patch Shares entitled to receive notice of and/or to vote at such Patch Meeting or to give consent in connection with such Patch Consent. Each such List shall be delivered to the Trustee or Patch promptly after receipt by Exchangeco of such request or the record date for such meeting or seeking of consent, as the case may be, and in any event within sufficient time as to enable Patch to perform its obligations under this Agreement. Patch agrees to give Exchangeco written notice (with a copy to the Trustee) of the calling of any Patch Meeting or the seeking of any Patch Consent, together with the record dates therefor, sufficiently prior to the date of the calling of such meeting or seeking of such consent so as to enable Exchangeco to perform its obligations under this section 3.8.
3.9      ENTITLEMENT TO DIRECT VOTES

Any Shareholder named in a List prepared in connection with any Patch Meeting or Patch Consent will be entitled (a) to instruct the Trustee in the manner described in section 3.5 with respect to the exercise of the Shareholder Votes to which such Shareholder is entitled or (b) to attend such meeting and personally exercise thereat, as the proxy of the Trustee, the Shareholder Votes to which such Shareholder is entitled.

3.10      VOTING BY Trustee, AND ATTENDANCE OF Trustee REPRESENTATIVE AT MEETING

(a)      In connection with each Patch Meeting and Patch Consent, the Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Shareholder pursuant to section 3.5, the Shareholder Votes as to which such Shareholder is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that such written instructions are received by the Trustee from the Shareholder prior to the time and date fixed by the Trustee for receipt of such instructions in the notice given by Patch to the Shareholder pursuant to section 3.5.

(b)     The Trustee shall cause a representative who is empowered by it to sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend each Patch Meeting, Upon submission by a Shareholder (or its designee) of identification satisfactory to the Trustee's representative, and at the Shareholder's request, such representative shall sign and deliver to such Shareholder (or its designee) a proxy to exercise personally the Shareholder Votes as to which such Shareholder is otherwise entitled hereunder to direct the vote, if such Shareholder either (i) has not previously given the Trustee instructions pursuant to section 3.5 in respect of such meeting or (ii) submits to such representative written revocation of any such previous instructions. At such meeting, the Shareholder exercising such Shareholder Votes shall have the same rights as the Trustee to speak at the meeting in favour of any matter, question, proposal or proposition, to vote by way of ballot at the meeting in respect of any matter, question, proposal or proposition, and to vote at such meeting by way of a show of hands in respect of any matter, question or proposition.

3.11      DISTRIBUTION OF WRITTEN MATERIALS

Any written materials to be distributed by Patch to the Shareholders pursuant to this Agreement shall be delivered or sent by mail (or otherwise communicated in the same manner as Patch utilizes in communications to holders of Patch Shares) to each Shareholder at its address as shown on the books of Exchangeco.  Exchangeco shall provide or cause to be provided to Patch for this purpose, on a timely basis and without charge or other expense a current List of the Shareholders.

3.12      TERMINATION OF VOTING RIGHTS

All of the rights of a Shareholder with respect to the Shareholder Votes exercisable in respect of each Exchangeable Share held by such Shareholder shall be deemed to be surrendered by the Shareholder to Patch and such Shareholder Votes and the Voting Rights represented thereby shall cease immediately upon the delivery by such holder to the Trustee of the certificates representing such Exchangeable Shares in connection with the exercise by the Shareholder of the Insolvency Exchange Right or the occurrence of the automatic exchange of Exchangeable Shares for Patch Shares, as specified in Article 4 (unless and until, in either case, the Trustee shall not have transferred and delivered to the Shareholder the requisite Patch Shares required to be transferred and delivered by the Trustee to the Shareholder), or upon the retraction or redemption of Exchangeable Shares pursuant to Article 6 or 7 of the Exchangeable Share Provisions, or upon the effective date of the liquidation, dissolution or winding-up of Exchangeco pursuant to Article 5 of the Exchangeable Share Provisions, or upon the purchase of Exchangeable Shares from the holder thereof by Patch pursuant to the exercise by Patch of the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right.

Article 4

EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
4.1      GRANT AND OWNERSHIP OF THE EXCHANGE RIGHTS

Patch hereby grants to the Trustee as Trustee for and on behalf of, and for the use and benefit of, the Shareholders the right (the "Insolvency Exchange Right"), upon the occurrence and during the continuance of an Insolvency Event, to require Patch to purchase from each or any Shareholder all or any part of the Exchangeable Shares held by the Shareholder and the Automatic Exchange Rights all in accordance with the provisions of this Agreement. Patch hereby acknowledges receipt from the Trustee, as Trustee for and on behalf of the Shareholders, of good and valuable consideration (and the adequacy thereof) for the grant of the Insolvency Exchange Right, and the Automatic Exchange Rights, by Patch to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Insolvency Exchange Right and the Automatic Exchange Rights and shall be entitled to exercise all of the rights and powers of an owner with respect to the Insolvency Exchange Right and the Automatic Exchange Rights, provided that the Trustee shall:

 
(a)      hold the Insolvency Exchange Right and the Automatic Exchange Rights and the legal title thereto as Trustee solely for the use and benefit of the Shareholders in accordance with the provisions of this Agreement; and

(b)      except as specifically authorized by this Agreement, have no power or authority to exercise or otherwise deal in or with the Insolvency Exchange Right or the Automatic Exchange Rights, and the Trustee shall not exercise any such rights for any purpose other than the purposes for which the Trust is created pursuant to this Agreement, and shall not assign or transfer such rights except to a successor Trustee hereunder.

The Insolvency Exchange Right and the Automatic Exchange Rights shall be and remain vested in and exercisable by the Trustee.  Subject to section 7.14, the Trustee shall exercise the Insolvency Exchange Right only on the basis of instructions received pursuant to this Article 4 from Shareholders entitled to instruct the Trustee as to the exercise thereof.  To the extent that no instructions are received from a Shareholder with respect to the Insolvency Exchange Right, the Trustee shall not exercise or permit the exercise of the Insolvency Exchange Right.
4.2       LEGENDED SHARE CERTIFICATES

Exchangeco will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Shareholders of:
(a)      their right to instruct the Trustee with respect to the exercise of the Insolvency Exchange Right in respect of the Exchangeable Shares held by a Shareholder; and

(b)      the Automatic Exchange Rights.

4.3      PURCHASE PRICE

The purchase price payable by Patch for each Exchangeable Share to be purchased by Patch under the Insolvency Exchange Right shall be an amount per share equal to: (i) the Current Market Price of a Patch Share on the last Business Day prior to the day of closing of the purchase and sale of such Exchangeable Share under the Insolvency Exchange Right plus; (ii) an additional amount equivalent to the full amount of all dividends declared and unpaid on each such Exchangeable Share and all dividends declared on Patch Shares which have not been declared on such Exchangeable Shares in accordance with Article 3 of the Exchangeable Share Provisions (provided that if the record date for any such declared and unpaid dividends occurs on or after the day of closing of such purchase and sale the purchase price shall not include such additional amount equivalent to such declared and unpaid dividends).  In connection with each exercise of the Insolvency Exchange Right, Patch will provide to the Trustee, as Trustee for and on behalf of the Shareholders, an Officer's Certificate setting forth the calculation of the purchase price for each Exchangeable Share.  The purchase price for each such Exchangeable Share so purchased may be satisfied by Patch issuing and delivering to the Trustee for delivery by the 

Trustee to the Shareholders, one Patch Share and a cheque for the balance, if any, of the purchase price without interest.
4.4      EXERCISE INSTRUCTIONS

Subject to the terms and conditions set forth herein, a Shareholder shall be entitled, upon the occurrence and during the continuance of an Insolvency Event, to instruct the Trustee to exercise the Insolvency Exchange Right with respect to all or any part of the Exchangeable Shares registered in the name of such Shareholder on the books of Exchangeco. To cause the exercise of the Insolvency Exchange Right by the Trustee, the Shareholder shall deliver to the Trustee, in person or by certified or registered mail the certificates representing the Exchangeable Shares which such Shareholder desires Patch to purchase, duly endorsed in blank for transfer, and accompanied by such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the laws applicable to Exchangeco and the articles and by-laws of Exchangeco and such additional documents and instruments as the Trustee may reasonably require together with: (a) a duly completed form of notice of exercise of the Insolvency Exchange Right, contained on the reverse of or attached to the Exchangeable Share certificates, stating: (i) that the Shareholder thereby instructs the Trustee to exercise the Insolvency Exchange Right so as to require Patch to purchase from the Shareholder the number of Exchangeable Shares specified therein; (ii) 

that such Shareholder has good title to and owns all such Exchangeable Shares to be acquired by Patch free and clear of all liens, claims and encumbrances; (iii) the name in which the certificates representing Patch Shares to be issued in connection with the exercise of the Insolvency Exchange Right are to be issued; and (iv) the names and addresses of the persons to whom such new certificates should be delivered, and (b) payment (or evidence satisfactory to the Trustee, Exchangeco and Patch of payment) of the taxes (if any) payable as contemplated by section 4.7 of this Agreement. If only a part of the Exchangeable Shares represented by any certificate or certificates delivered to the Trustee are to be purchased by Patch under the Insolvency Exchange Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the Shareholder at the expense of Exchangeco.
4.5      DELIVERY OF PATCH SHARES; EFFECT OF EXERCISE

Promptly, and as soon as reasonably practicable after receipt of the certificates representing the Exchangeable Shares which the Shareholder desires Patch to purchase under the Insolvency Exchange Right, together with such documents and instruments of transfer and a duly completed form of notice of exercise of the Insolvency Exchange Right (and payment of taxes as contemplated by section 4.7 of this Agreement, if any, or evidence thereof), duly endorsed for transfer to Patch, Trustee shall notify Patch and Exchangeco of its receipt of the same, which notice to Patch and Exchangeco shall constitute exercise 

of the Insolvency Exchange Right by the Trustee on behalf of the holder of such Exchangeable Shares, and Patch shall immediately thereafter upon receipt of such notice deliver or cause to be delivered to the Shareholder of such Exchangeable Shares (or to such other persons, if any, properly designated by such Shareholder), certificates representing the number of Patch Shares deliverable in connection with the exercise of the Insolvency Exchange Right, which shares shall be, or shall have been, duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance, and cheques for the balance, if any, of the total purchase price therefor. Patch shall, immediately upon receipt of such certificates representing the Exchangeable Shares from the Shareholder, deliver the certificates to the registered office of Exchangeco for cancellation. Immediately upon the giving of notice by the Trustee to Patch and Exchangeco of the exercise of the Insolvency Exchange Right, as provided in this section 4.5, the closing of the transaction of purchase and sale contemplated by the Insolvency Exchange Right shall be deemed to have occurred, and the holder of such Exchangeable Shares shall be deemed to have transferred to Patch its right, title and interest in and to such Exchangeable Shares and the related interest in the Trust Estate and shall cease to be a holder of such Exchangeable Shares and shall not be entitled to exercise any of the rights of a Shareholder in respect thereof, other than the right to receive the purchase price therefor, unless the requisite number of Patch Shares (together with a cheque for the balance, if any, of the total purchase price therefor) is not issued and delivered by Patch to the Trustee and delivered by the Trustee to such Shareholder (or to such other persons, if any, properly designated by such Shareholder), within five (5) Business Days of the date of the giving of such notice by the Trustee, in which case the rights of the Shareholder shall remain unaffected until such Patch Shares are so issued and delivered by Patch, as the case may be, and any such cheque is so delivered and honoured. Concurrently with such Shareholder ceasing to be a Shareholder of Exchangeable Shares, the Shareholder shall be considered and deemed for all purposes to be the holder of Patch Shares delivered to it pursuant to the Insolvency Exchange Right.
4.6      EXERCISE OF INSOLVENCY EXCHANGE RIGHT SUBSEQUENT TO RETRACTION

In the event that a Shareholder has exercised its right under Article 6 of the Exchangeable Share Provisions to require Exchangeco to redeem any or all of the Exchangeable Shares held by the Shareholder (the "Retracted Shares") and is notified by Exchangeco pursuant to section 6.6 of the Exchangeable Share Provisions that Exchangeco will not be permitted as a result of solvency requirements of applicable law to redeem all such Retracted Shares, and provided that Patch shall not have exercised the Retraction Call Right with respect to the Retracted Shares and that the Shareholder has not revoked the retraction request delivered by the Shareholder to Exchangeco pursuant to section 6.1 of the Exchangeable Share Provisions, the retraction request will constitute and will be deemed to constitute notice from the Shareholder to the Trustee instructing the Trustee to exercise the Insolvency Exchange Right with respect to those Retracted Shares which Exchangeco is unable to redeem. In any such event, Exchangeco hereby agrees with the Trustee and in favour of the Shareholder promptly to forward or cause to be forwarded to the Trustee all relevant materials delivered by the Shareholder to Exchangeco (including without limitation a copy of the retraction request delivered pursuant to section 6.1 of the 

Exchangeable Share Provisions) in connection with such proposed redemption of the Retracted Shares and the Trustee will thereupon exercise the Insolvency Exchange Right with respect to the Retracted Shares that Exchangeco is not permitted to redeem and will require Patch to purchase such shares in accordance with the provisions of this Article 4.
4.7      STAMP OR OTHER TRANSFER TAXES

Upon any sale of Exchangeable Shares to Patch pursuant to the Insolvency Exchange Right or the Automatic Exchange Rights, the share certificate or certificates representing Patch Shares to be delivered in connection with the payment of the total purchase price therefor shall be issued in the name of, or transferred to, the Shareholder of the Exchangeable Shares so sold without charge to the Shareholder of the Exchangeable Shares so sold; provided, however that such Shareholder: (i) shall pay (and none of Patch, Exchangeco nor the Trustee shall be required to pay) any documentary, stamp, transfer or other similar taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Shareholder; or (ii) shall have established to the satisfaction of the Trustee, Patch and Exchangeco that such taxes, if any, have been paid.
4.8      NOTICE OF INSOLVENCY EVENT

Immediately upon the occurrence of an Insolvency Event or any event which with the giving of notice or the passage of time or both would be an Insolvency Event, Exchangeco and Patch shall give written notice thereof to the Trustee and the Shareholders, which notice shall contain a brief statement of the right of the Shareholders with respect to the Insolvency Exchange Right.
4.9      QUALIFICATION OF PATCH SHARES

Patch represents and warrants that it has taken all actions and done all things as are necessary under any United States and Canadian federal, provincial or state law or regulation or pursuant to the rules and regulations of any regulatory authority or the fulfilment of any other legal requirement (collectively, the "Applicable Laws") as they exist on the date hereof and will in good faith expeditiously take all such actions and do all such things as are necessary under Applicable Laws as they may exist in the future to cause the Patch Shares to be authorized, issued and delivered, pursuant to the Exchangeable Share Provisions, the Insolvency Exchange Right or the Automatic Exchange Rights. If any Patch Shares (or other shares or securities into which Patch Shares may be reclassified or changed as contemplated by section 2.7 of the Support Agreement) to be issued and delivered hereunder require registration or qualification with or approval of or the filing of any document, including any prospectus or similar document or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any Applicable Laws or pursuant to the rules and regulations of any securities or other regulatory authority or the fulfillment of any other United States or Canadian legal requirement before such shares (or such other shares or securities) may be issued by Patch and delivered by Patch to the holder of surrendered Exchangeable Shares, Patch will in good faith expeditiously take all such actions and do all such things as are necessary or desirable to cause such Patch Shares (or such other shares or securities) to be and remain duly authorized, issued, registered, qualified or approved under Applicable Laws. Patch 

will in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all Patch Shares (or such other shares or securities) to be delivered hereunder to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding Patch Shares (or such other shares or securities) have been listed by Patch and remain listed and are quoted or posted for trading at such time.
4.10      RESERVATION OF PATCH SHARES

Patch hereby represents, warrants and covenants that it will in good faith expeditiously take all actions and do all such actions and do all such things as are necessary or desirable to cause authorized Patch Shares and has irrevocably reserved for issuance and will at all times keep available, free from pre-emptive and other rights, out of its authorized and unissued capital stock such number of Patch Shares: (a) as is equal to the sum of: (i) the number of Exchangeable Shares issued and outstanding from time to time; and (ii) the number of Exchangeable Shares issuable upon the exercise of all rights to acquire Exchangeable Shares outstanding from time to time; and (b) as are now and may hereafter be required to enable and permit Exchangeco and Patch to meet their respective obligations hereunder, under the Support Agreement, under the Exchangeable Share Provisions and under any other security or commitment pursuant to which Patch may now or hereafter be required to issue Patch Shares. 
4.11      AUTOMATIC EXCHANGE ON LIQUIDATION OF PATCH

(a)      Patch will give the Trustee and the Shareholders notice of each of the following events (each a "Liquidation Event") at the time set forth below:
(i)      in the event of any determination by the board of directors of Patch to institute voluntary liquidation, dissolution or winding-up proceedings with respect to Patch or to effect any other distribution of assets of Patch among its shareholders for the purpose of winding up its affairs, at least sixty (60) days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; and

(ii)      immediately, upon the earlier of: (i) receipt by Patch of notice of; and (ii) Patch otherwise becoming aware of any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of Patch or to effect any other distribution of assets of Patch among its shareholders for the purpose of winding up its affairs.

(b)      Such notice shall include a brief description of the automatic exchange of Exchangeable Shares for Patch Shares provided for in section 4.11(c).

(c)      In order that the Shareholders will be able to participate on a pro rata basis with the holders of Patch Shares in the distribution of assets of Patch in connection with a Liquidation Event, on the fifth Business Day prior to the effective date of a Liquidation Event (the "Liquidation Event Effective Date") all of the then outstanding Exchangeable Shares shall be automatically exchanged for Patch Shares. To effect such automatic exchange, Patch shall purchase each Exchangeable Share outstanding 

on the fifth Business Day prior to the Liquidation Event Effective Date and held by Shareholders, and each Shareholder shall sell the Exchangeable Shares held by it at such time, for a purchase price per share equal to: (a) the Current Market Price of one (1) Patch Share on the fifth Business Day prior to the Liquidation Event Effective Date, which shall be satisfied in full by Patch delivering or causing to be delivered to the Shareholder one Patch Share; plus (b) an additional amount equivalent to the full amount of all dividends declared and unpaid on each such Exchangeable Share and all dividends declared on Patch Shares which have not been declared on such Exchangeable Shares in accordance with Article 3 of the Exchangeable Share Provisions (provided that if the record date for any such declared and unpaid dividends occurs on or after the day of closing of such purchase and sale the purchase price shall not include such additional amount equivalent to such declared and unpaid dividends).  In connection with such automatic exchange, Patch will provide to the Trustee and the Shareholders an Officer's Certificate setting forth the calculation of the purchase price for each Exchangeable Share, together with a notice of the anticipated Liquidation Event Effective Date.

(d)      On the fifth Business Day prior to the Liquidation Event Effective Date, the closing of the transaction of purchase and sale contemplated by the automatic exchange of Exchangeable Shares for Patch Shares shall be deemed to have occurred, and each Shareholder shall be deemed to have transferred to Patch all of the Shareholder's right, title and interest in and to its Exchangeable Shares and the related interest in the Trust Estate and shall cease to be a Shareholder of such Exchangeable Shares and Patch shall deliver or cause to be delivered to the Shareholder Patch Shares deliverable upon the automatic exchange of Exchangeable Shares for Patch Shares and shall deliver to the Shareholder a cheque for the balance, if any, of the total purchase price for such Exchangeable Shares. Concurrently with such Shareholder ceasing to be a Shareholder, the Shareholder shall be considered and deemed for all purposes to be the holder of Patch Shares issued or transferred to it pursuant to the automatic exchange of Exchangeable Shares for Patch Shares and the certificates held by the Shareholder previously representing the Exchangeable Shares exchanged by the Shareholder with Patch pursuant to such automatic exchange shall thereafter be deemed to represent Patch Shares issued, or caused to be transferred, by Patch to the Shareholder pursuant to such automatic exchange. Upon the request of a Shareholder and the surrender by the Shareholder of Exchangeable Share certificates deemed to represent Patch Shares, duly endorsed in blank and accompanied by such instruments of transfer as Patch may reasonably require, Patch shall deliver or cause to be delivered to the Shareholder certificates representing Patch Shares of which the Shareholder is the holder.

4.12      WITHHOLDING RIGHTS

Patch and the Trustee shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Shareholder such amounts as Patch or the Trustee is required or permitted to deduct and withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986 as amended (the "Code"), the Income Tax Act (Canada) or any provision of state, local, provincial or foreign tax law.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Shareholder of the shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority.  To the extent that the amount so required or permitted to be deducted or withheld from any payment to a Shareholder exceeds the cash portion of the consideration otherwise payable to the Shareholder, Patch or the Trustee is hereby authorized to sell or otherwise dispose of at fair market value such portion of the consideration as is necessary to provide sufficient funds to Patch or the Trustee, as the case may be, in order to enable it to comply with such deduction or withholding requirement and shall account to the relevant Shareholder for any balance of such sale proceeds.

 

Article 5

DIVIDENDS

5.1       The holders of Exchangeable Shares will be entitled to participate in all dividends declared by Exchangeco, in accordance with the provisions of the Exchangeable Share Provisions and the Support Agreement.

5.2        For clarity, the Voting Rights and exchange rights granted by Patch hereunder to the Trustee, as Trustee for and on behalf of, and for the use and benefit of, the Shareholders do not in any manner confer any additional rights to the Trustee or the Shareholders, including, but subject to the provisions of the Support Agreement, any rights to receive or participate in dividends declared or paid by Patch.

Article 6

CONCERNING THE Trustee
6.1        POWERS AND DUTIES OF THE TRUSTEE

The rights, powers and authorities of the Trustee under this Agreement, in its capacity as Trustee of the Trust, shall include:

 
(a)      receipt and deposit of the Trust Shares from Patch as Trustee for and on behalf of the Shareholders in accordance with the provisions of this Agreement;

(b)      granting proxies and distributing materials to Shareholders as provided in this Agreement;

(c)      voting the Shareholder Votes in accordance with the provisions of this Agreement;

(d)      receiving the grant of the Insolvency Exchange Right and the Automatic Exchange Rights from Patch as Trustee for and on behalf of the Shareholders in accordance with the provisions of this Agreement;

(e)      exercising the Insolvency Exchange Right and enforcing the benefit of the Automatic Exchange Rights, in each case in accordance with the provisions of this Agreement, and in connection therewith receiving from the Shareholders Exchangeable Shares and other requisite documents and     delivering to such Shareholders Patch Shares and cheques, if any, to which such Shareholders are entitled upon the exercise of the Insolvency Exchange Right or pursuant to the Automatic Exchange Rights, as the case may be;

(f)      holding title to the Trust Estate;

(g)      investing any moneys forming, from time to time, a part of the Trust Estate as provided in this Agreement;

(h)      taking action on its own initiative or at the direction of a Shareholder or Shareholders to enforce the obligations of Patch and Exchangeco under this Agreement; and

(i)      taking such other actions and doing such other things as are specifically provided in this Agreement.

In the exercise of such rights, powers and authorities the Trustee shall have (and is granted) such incidental and additional rights, powers and authority not in conflict with any of the provisions of this Agreement as the Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary or appropriate to effect the purpose of the Trust. Any exercise of such discretionary rights, powers and authorities by the Trustee shall be final, conclusive and binding upon all persons. Notwithstanding anything to the contrary herein, the Trustee shall have no obligation to exercise any discretion in the performance of its obligations hereunder and shall only be required to act upon the express written instructions of Patch, Exchangeco or the Shareholders. For greater certainty, the Trustee shall have only those duties as are set out specifically in this Agreement.

 

The Trustee in exercising its rights, powers, duties and authorities hereunder shall act honestly and in good faith and with a view to the best interests of the Shareholders and shall exercise the care, diligence and skill that a reasonably prudent Trustee would exercise in comparable circumstances. The Trustee shall not be required to take any notice of, or to do or to take any act, action or proceeding as a result of any default or breach of any provision hereunder, unless and until notified in writing of such default or breach, which notice shall distinctly specify the default or breach desired to be brought to the attention of the Trustee and, in the absence of such notice, the Trustee may for all purposes of this Agreement conclusively assume that no default or breach has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein.
6.2      NO CONFLICT OF INTEREST

The Trustee represents to Exchangeco and Patch that at the date of execution and delivery of this Agreement there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder and the role of the Trustee in any other capacity. The Trustee shall, within ninety (90) days after it becomes aware that such a material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Article 9.
6.3       DEALINGS WITH THIRD PARTIES

Exchangeco and Patch irrevocably authorize the Trustee, from time to time, to: (a) consult, communicate and otherwise deal with any respective registrars, transfer agents, payment agents or any other person or entity appointed from time to time by Patch or Exchangeco in connection with any matter relating to the Exchangeable Shares and the Patch Shares; and
(a)      requisition, from time to time: (i) from any such registrar, transfer agent, payment agent or other person or entity, appointed from time to time by Patch or Exchangeco, as applicable, any information readily available from the records maintained by it which the Trustee may reasonably require for the discharge of its duties and responsibilities under this Agreement; and (ii) from Patch or the transfer agent of Patch Shares, and any subsequent transfer agent of such shares, the share certificates issuable upon the exercise from time to time of the Insolvency Exchange Right and pursuant to the Automatic Exchange Rights in the manner specified in Article 4 hereof. Exchangeco and Patch irrevocably authorize their respective registrars, transfer agents and payment agents, or any other authorized agent appointed from time to time by Patch or Exchangeco to comply with all such requests.

6.4      BOOKS AND RECORDS

The Trustee shall keep available for inspection, during normal business hours, by Patch and Exchangeco, at the Trustee's principal office in Calgary, correct and complete books and records of account relating to the Trustee's actions under this Agreement, including without limitation all information relating to mailings and instructions to and from Shareholders and all transactions pursuant to the Insolvency Exchange Right and the Automatic Exchange Rights.
6.5      INCOME TAX RETURNS AND REPORTS

The Trustee will allocate and distribute all income and losses of the Trust to the Shareholders in each year such that the Trust is not in a position to pay any tax. Shareholders will be individually and personally responsible for all income and losses incurred by the Trust. In this regard, Patch will retain tax counsel on behalf of the Trust, and agrees to prepare and distribute to each Shareholder all necessary tax forms for them to complete their United States and Canadian tax returns. The Shareholders may obtain the advice and assistance of such experts as they may consider necessary or advisable.
6.6      INDEMNIFICATION PRIOR TO CERTAIN ACTIONS BY TRUSTEE

The Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this Agreement at the request, order or direction of any Shareholder upon such Shareholder furnishing to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred by the Trustee therein or thereby, provided that no Shareholder shall be obligated to furnish to the Trustee any such security or indemnity in connection with the exercise by the Trustee of any of its rights, duties, powers and authorities with respect to the voting of the Trust Shares pursuant to Article 3 and with respect to the Insolvency Exchange Right and Automatic Exchange Rights pursuant to Article 4.

The Trustee shall not be required to expend any of its own funds or otherwise incur any financial liability in the exercise of any of its rights, powers, duties or authorities, but instead shall be entitled to be fully funded, given security and indemnity in advance as aforesaid.
6.7      ACTIONS BY SHAREHOLDERS

Shareholders shall be entitled to take proceedings in any court of competent jurisdiction to enforce any of their rights hereunder as against Exchangeco and Patch.
6.8      RELIANCE UPON DECLARATIONS

The Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon statutory declarations, certificates, opinions, reports or other papers or documents furnished pursuant to the provisions hereof or required by the Trustee to be furnished to it in the exercise of its rights, powers, duties and authorities hereunder if such statutory declarations, certificates, opinions or reports comply with the provisions of section 7.9, if applicable, and with any other applicable provisions of this Agreement.

6.9      EVIDENCE AND AUTHORITY TO TRUSTEE

Exchangeco and/or Patch shall furnish to the Trustee evidence of compliance with the conditions provided for in this Agreement relating to any action or step required or permitted to be taken by Exchangeco and/or Patch or the Trustee under this Agreement or as a result of any obligation imposed under this Agreement including, without limitation, in respect of the Voting Rights, Insolvency Exchange Right or the Automatic Exchange Rights and the taking of any other action to be taken by the Trustee at the request of or on the application of Exchangeco and/or Patch forthwith if and when:
(a)      such evidence is required by any other section of this Agreement to be furnished to the Trustee in accordance with the terms of this section 7.9; or

(b)      the Trustee, in the exercise of its rights, powers, duties and authorities under this Agreement, gives Exchangeco and/or Patch written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice.

Such evidence shall consist of an Officer's Certificate of Exchangeco and/or Patch, a statutory declaration or a certificate made by persons entitled to sign an Officer's Certificate stating that any such condition has been complied with in accordance with the terms of this Agreement.

Whenever such evidence relates to a matter other than the Voting Rights, the Insolvency Exchange Right or the Automatic Exchange Rights or the taking of any other action to be taken by the Trustee at the request or on the application of Patch and/or Exchangeco, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, auditor, accountant, appraiser, valuer, engineer or other expert or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of Exchangeco and/or Patch shall be in the form of an Officer's Certificate or a statutory declaration.

Each statutory declaration, Officer's Certificate, opinion, report or other paper or document furnished to the Trustee as evidence of compliance with a condition provided for in this Agreement shall include a statement by the person giving the evidence:
(a)      declaring that he has read and understands the provisions of this Agreement relating to the condition in question;

(b)      describing the nature and scope of the examination or investigation upon which he based the statutory declaration, certificate, statement or opinion; and

(c)      declaring that he has made such examination or investigation as he believes is necessary to enable him to make the statements or give the opinions contained or expressed therein.

6.10      EXPERTS, ADVISORS AND AGENTS

The Trustee may:
(a)      in relation to these presents, act and rely on the opinion or advice of or information obtained from any solicitor, auditor, accountant, appraiser, valuer, engineer or other expert, whether retained by the Trustee or by Exchangeco and/or Patch or otherwise, and may employ such assistants as may be necessary to the proper discharge of its powers and duties and determination of its rights hereunder and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid without taxation for costs and fees; and

(b)      employ such agents and other assistants as it may  reasonably require for the proper discharge of its powers and duties hereunder, and may pay reasonable remuneration for all services performed for it,

(and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Trust without taxation for costs and fees, which compensation reimbursement may be requested to be received in advance prior to undertaking any actions hereunder.
6.11      INVESTMENT OF MONEYS HELD BY THE TRUSTEE

Unless otherwise provided in this Agreement, any moneys held by or on behalf of the Trustee which under the terms of this Agreement may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee may be invested and reinvested in the name or under the control of the Trustee in securities in which, under the laws of the Province of Alberta, Trustees are authorized to invest trust moneys, provided that such securities are stated to mature within two (2) years after their purchase by the Trustee, and the Trustee shall so invest such moneys on the written direction of Exchangeco. Pending the investment of any moneys as hereinbefore provided, such moneys may be deposited in the name of the Trustee in any bank, loan or trust company authorized to accept deposits under the laws of the United States, Canada or any state or province thereof, at the rate of interest then current on similar deposits.
6.12       TRUSTEE NOT REQUIRED TO GIVE SECURITY

The Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this Agreement or otherwise in respect of the premises.

6.13      TRUSTEE NOT BOUND TO ACT ON CORPORATION'S REQUEST

Except as in this Agreement or otherwise specifically provided, the Trustee shall not be bound to act in accordance with any direction or request of Exchangeco and/or Patch or the directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Trustee and the Trustee shall be empowered to act and rely upon any such copy purporting to be authenticated and believed by the Trustee to be genuine.
6.14     CONFLICTING CLAIMS

If conflicting claims or demands are made or asserted with respect to any interest of any Shareholder in any Exchangeable Shares, including any disagreement between the heirs, representatives, successors or assigns succeeding to all or any part of the interest of any Shareholder in any Exchangeable Shares resulting in conflicting claims or demands being made in connection with such interest, then the Trustee shall be entitled, at its sole discretion, to refuse to recognize or to comply with any such claim or demand. In so refusing, the Trustee may elect not to exercise any Voting Rights, Insolvency Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands and in so doing, the Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Trustee shall be entitled to continue to refrain from acting and to refuse to act until:
(a)      the rights of all adverse claimants with respect to the Voting Rights, Insolvency Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been adjudicated by a final judgment of a court of competent jurisdiction; or

(b)      all differences with respect to the Voting Rights, Insolvency Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Trustee shall have been furnished with an executed copy of such agreement.

If the Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to furnish such surety bond or other security satisfactory to the Trustee as it shall deem appropriate to fully indemnify it as between all conflicting claims or demands.
6.15      ACCEPTANCE OF TRUST

The Trustee hereby accepts the Trust created and provided for by and in this Agreement and agrees to perform the same upon the terms and conditions set forth herein and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Shareholders, subject to all the terms and conditions set forth herein.

 
6.16      VALIDITY OF CERTIFICATES

If at any time in the performance of its duties under this Agreement, it shall be necessary for the Trustee to receive, accept, act or rely upon any certificate, notice, request, waiver, consent, receipt, direction, affidavit or other paper, writing or document furnished to it and purporting to have been executed or issued by Exchangeco, Patch or the Shareholders or their authorized officers or attorneys, the Trustee shall be entitled to rely and act upon the genuineness and authenticity of any such writing submitted to it. It shall not be necessary for the Trustee to ascertain whether or not the persons who have executed, signed or otherwise issued, authenticated or receipted such papers, writings or documents have authority to do so or that they are the same persons named therein or otherwise to pass upon any requirement of such papers, writing or documents that may be essential for their validity or effectiveness or upon the truth and acceptability of any information contained therein which the Trustee in good faith believes to be genuine.

Article 7

COMPENSATION
7.1      FEES AND EXPENSES OF THE TRUSTEE

Patch and Exchangeco jointly and severally agree to pay to the Trustee reasonable compensation for all of the services rendered by it under this Agreement and will reimburse the Trustee for all reasonable expenses and disbursements, including, without limitation, legal fees and expenses and the reasonable compensation and disbursements of all other advisors, agents and assistants not regularly in its employ and the cost and expense of any suit or litigation of any character and any proceedings before any governmental agency reasonably incurred by the Trustee in connection with its rights and duties under this Agreement; provided that Patch and Exchangeco shall have no obligation to reimburse the Trustee for any expenses or disbursements paid, incurred or suffered by the Trustee in any suit or litigation in which the Trustee is determined to have acted fraudulently or in bad faith or with negligence or wilful misconduct. The Trustee shall be obliged to provide only one account or invoice to Patch from time to time during this Agreement in connection with any services rendered by it under this Agreement on behalf of any of the parties.

Article 8

INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1      INDEMNIFICATION OF THE TRUSTEE

Patch and Exchangeco jointly and severally agree to indemnify and hold harmless the Trustee and each of its directors, officers, partners, employees and agents appointed and acting in accordance with this Agreement (collectively, the "Indemnified Parties") against all claims, losses, damages, reasonable costs, penalties, fines and reasonable expenses (including reasonable expenses of the Trustee's legal counsel) which, without fraud, negligence, recklessness, wilful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason of or as a result of the Trustee's acceptance or administration of the Trust, its compliance with its duties set forth in this Agreement, or any written or oral instructions delivered to the Trustee by Patch or Exchangeco pursuant hereto. Subject to (ii), below, Patch and Exchangeco shall be entitled to participate at their own expense in the defence and, if Patch and Exchangeco so elect at any time after receipt of such notice, either of them may assume the defence of any suit brought to enforce any such claim. In the event Patch and/or Exchangeco assume the defence of the Trustee, no settlement of any claim shall be entered into without the prior approval of the Trustee; and the Trustee shall have the right to re-assume the defence of any suit if Patch or Exchangeco fail to actively continue such defence so assumed. The Trustee shall have the right to employ separate counsel in any such suit and participate in the defence thereof but the fees and expenses of such counsel shall be at the expense of the Trustee unless: (i) the employment of such counsel has been authorized by Patch or Exchangeco; or (ii) the named parties to any such suit include both the Trustee and Patch or Exchangeco, and the Trustee shall have been advised by counsel acceptable to Patch or Exchangeco that there may be one or more legal defences available to the Trustee which are different from or in addition to those available to Patch or Exchangeco and that in the judgment of such counsel, would present a conflict of interest were a joint representation to be undertaken (in which case Exchangeco and Patch shall not have the right to assume the defence of such suit on behalf of the Trustee but shall be liable to pay the reasonable fees and expenses of counsel for the Trustee) . Neither Patch nor Exchangeco shall be liable for any settlement of a matter in respect of which an Indemnified Party may seek indemnification under this section 9.1, unless Patch and Exchangeco have consented in writing to such settlement.
8.2      LIMITATION OF LIABILITY

The Trustee shall not be liable for any act or omission by it except where such act or omission occurs as a result of the Trustee's fraud, negligence, recklessness, bad faith or wilful misconduct. The Trustee shall not be liable for any losses or damages due to the acts or omissions of third parties, including without limitation, the failure by Patch and/or Exchangeco to comply with its obligations under this Agreement, as the case may be. The Trustee shall not be held liable for any loss which may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this Agreement except to the extent that such loss is attributable to the fraud, negligence, recklessness, wilful misconduct or bad faith on the part of the Trustee.

Article 9

CHANGE OF Trustee
9.1      RESIGNATION

The Trustee, or any Trustee hereafter appointed, may at any time resign by giving written notice of such resignation to Patch and Exchangeco specifying the date on which it desires to resign, provided that such notice shall never be given less than thirty (30) days before such desired resignation date unless the Trustee, Patch and Exchangeco otherwise agree, and provided further 

that such resignation shall not take effect until the date of the appointment of a successor Trustee and the acceptance of such appointment by the successor Trustee. Upon receiving such notice of resignation, Patch and Exchangeco shall promptly appoint a successor Trustee by written instrument in duplicate, one copy of which shall be delivered to the resigning Trustee and one copy to the successor Trustee. Failing the appointment by Patch and Exchangeco of a successor Trustee as aforesaid and the acceptance of such appointment by a successor Trustee, a successor Trustee may be appointed by order of a court of competent jurisdiction in the Province of Ontario upon application of one or more of the parties to this Agreement.
9.2      REMOVAL

The Trustee, or any Trustee hereafter appointed, may at any time on thirty (30) days' prior notice by written instrument executed by Patch and Exchangeco, in duplicate, one copy of which shall be delivered to the Trustee, be removed and one copy to the successor Trustee. Any successor Trustee to be appointed upon the removal of the Trustee shall be appointed in accordance with the provisions as provided under section 10.3 of this Agreement.
9.3      SUCCESSOR TRUSTEE

Any successor Trustee appointed as provided under this Agreement shall execute, acknowledge and deliver to Patch and Exchangeco and to its predecessor Trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this Agreement with like effect as if originally named as Trustee in this Agreement. However, on the written request of Patch and Exchangeco or of the successor Trustee, the Trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of this Agreement, execute and deliver an instrument transferring to such successor Trustee all of the rights and powers of the Trustee so ceasing to act. Upon the request of any such successor Trustee, Patch and Exchangeco and such predecessor Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers.
9.4      NOTICE OF SUCCESSOR TRUSTEE

Upon acceptance of appointment by a successor Trustee as provided herein Patch and Exchangeco shall cause to be mailed notice of the succession of such Trustee hereunder to each Shareholder at the address of such Shareholder shown on the register of Shareholders of Exchangeable Shares. If Patch or Exchangeco shall fail to cause such notice to be mailed within ten (10) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of Patch and Exchangeco.

Article 10

PATCH SUCCESSORS
10.1      CERTAIN REQUIREMENTS IN RESPECT OF COMBINATION, ETC.

Patch shall not enter into any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom unless:
(a)      uch other person or continuing corporation is a corporation (herein called the "Patch Successor") incorporated under the laws of any state of the United States or the laws of Canada or any province thereof; and

(b)      Patch Successor, by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction an agreement supplemental hereto and such other instruments (if any) as are satisfactory to the Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee are necessary or advisable to evidence the assumption by the Patch Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such Patch Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all of the covenants and obligations of Patch under this Agreement.

10.2       VESTING OF POWERS IN SUCCESSOR

Whenever the conditions of section 11.1 hereof have been duly observed and performed, the Trustee, if required by section 11.1 hereof, the Patch Successor and Exchangeco shall execute and deliver the supplemental Agreement provided for in Article 12 and thereupon the Patch Successor shall possess and from time to time and may exercise each and every right and power of Patch under this Agreement in the name of Patch or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the Board of Directors of Patch or any officers of Patch may be done and performed with like force and effect by the directors or officers of such the Patch Successor.
10.3      WHOLLY-OWNED SUBSIDIARIES

Nothing herein shall be construed as preventing (i) the amalgamation or merger or sale of any wholly-owned direct or indirect subsidiary of Patch with or into Patch, or (ii) the winding-up, liquidation or dissolution of any wholly-owned subsidiary of Patch, provided that all of the assets of such subsidiary are transferred to Patch or another wholly-owned subsidiary of Patch.

Article 11

AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1      AMENDMENTS, MODIFICATIONS, ETC.

This Agreement may not be amended or modified except by an agreement in writing executed by Exchangeco, Patch and the Trustee and approved by the Shareholders in accordance with section 11.2 of the Exchangeable Share Provisions.
11.2      MEETING TO CONSIDER AMENDMENTS

Exchangeco, at the request of Patch shall call a meeting or meetings of the Shareholders for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the by-laws of Exchangeco, the Exchangeable Share Provisions and all applicable laws.
11.3     CHANGES IN CAPITAL OF PATCH OR EXCHANGECO.

At all times after the occurrence of any event effected pursuant to section 2.7 or 2.8 of the Support Agreement, as a result of which either Patch Shares, Patch Preferred Shares or the Exchangeable Shares or any are in any way changed, this Agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which Patch Shares, Patch Preferred Shares or the Exchangeable Shares or any are so changed and the parties hereto shall execute and deliver a supplemental Agreement giving effect to and evidencing such necessary amendments and modifications.
11.4      EXECUTION OF SUPPLEMENTAL AGREEMENTS

No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto. From time to time the parties may, subject to the provisions of these presents, and they shall, when so directed by these presents, execute and deliver by their proper officers, trust agreements or other instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes:

 
(a)     evidencing the succession of Patch Successors to Patch and the covenants of and obligations assumed by each such Patch Successor in accordance with the provisions of Article 11 and the successor of any successor Trustee in accordance with the provisions of Article 10;

(b)     making any additions to, deletions from or alterations of the provisions of this Agreement or the Voting Rights, the Insolvency Exchange Right or the Automatic Exchange Rights which, in the opinion of the Trustee, will not be prejudicial to the interests of the Shareholders as a whole or are in the opinion of counsel to the Trustee 

necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to the parties or this Agreement; and

(c)     for any other purposes not inconsistent with the provisions of this Agreement, including without limitation to make or evidence any amendment or modification to this Agreement as contemplated hereby, provided that, in the opinion of the Trustee, the rights of the Trustee and the Shareholders as a whole will not be prejudiced thereby.

Article 12

TERMINATION
12.1     TERM

The Trust created by this Agreement shall continue until the earliest to occur of the following events:
(a)     no outstanding Exchangeable Shares are held by any Shareholder;

(b)     each of Exchangeco and Patch elects in writing to terminate the Trust and such termination is approved by the then holders of the Exchangeable Shares in accordance with section 11.2 of the Exchangeable Share Provisions; and

(c)     21 years after the death of the last survivor of the issue of Her Majesty Queen Elizabeth II of Canada living on the date of the creation of the Trust.

12.2     SURVIVAL OF AGREEMENT

This Agreement shall survive any termination of the Trust and shall continue until there are no Exchangeable Shares outstanding held by any Shareholder; provided however that the provisions of Article 9 and Article 10 shall survive any such termination of the Trust or this Agreement.

Article 13

GENERAL
13.1     SEVERABILITY

If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and the agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.
13.2     ENUREMENT

This Agreement shall be binding upon and endure to the benefit of the parties hereto and their respective successors and permitted assigns and to the benefit of the Shareholders.

13.3     NOTICES TO PARTIES

All notices and other communications between the parties hereunder shall be in writing and shall be deemed to have been given if delivered personally or by confirmed facsimile to the parties at the following addresses (or at such other address for such party as shall be specified in like notice):
(a)     if to Patch or Exchangeco:

c/o 1000 Canterra Tower

400 Third Avenue S.W.

Calgary Alberta

T2P 4H2,

Attention:     President

Fax:     (403) 266-1395

(b)     if to the Trustee at:

1286664 Alberta Ltd.

400 Third Avenue S.W.

Calgary Alberta

T2P 4H2,

Attention:     President

Fax::     (403) 266-1395

Any notice or other communication given personally shall be deemed to have been given and received upon delivery thereof and if given by telecopy shall be deemed to have been given and received on the date of receipt thereof unless such day is not a Business Day in which case it shall be deemed to have been given and received upon the immediately following Business Day.
13.4     NOTICE OF SHAREHOLDERS

Any and all notices to be given and any documents to be sent to any Shareholders may be given or sent to the address of such Shareholder shown on the register of Shareholders in any manner permitted by the by-laws of Exchangeco from time to time in force in respect of notices to shareholders and shall be deemed to be received (if given or sent in such manner) at the time specified in such by-laws, the provisions of which by-laws shall apply mutatis mutandis to notices or documents as aforesaid sent to such Shareholders.

 
13.5     RISK OF PAYMENTS BY MAIL

Whenever payments are to be made or documents are to be sent to any Shareholder by the Trustee, Patch or by Exchangeco, or by such Shareholder to the Trustee or to Patch or Exchangeco, the making of such payment or sending of such document through the mail shall be at the risk of Exchangeco and Patch, in the case of payments made or documents sent by the Trustee, Patch or Exchangeco, and the Shareholder, in the case of payments made or documents sent by the Shareholder.
13.6     COUNTERPARTS

This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
13.7     JURISDICTION

This Agreement shall be construed and enforced in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein.
13.8     ATTORNMENT

Patch and Exchangeco each agree that any action or proceeding arising out of or relating to this Agreement may be instituted in the courts of the Province of Alberta, each waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the non-exclusive jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgment of the said courts and not to seek, and hereby waives, any review of the merits of any such judgment by the courts of any other jurisdiction.
13.9     INDEPENDENT LEGAL ADVICE

All other parties have been advised to seek independent advice with respect to this Agreement and the tax or other consequences arising from it.

13.10     LANGUAGE

The parties acknowledge that they have required that this Agreement and all notices related hereto are and shall be drawn up in the English language. Les parties reconnaissent avoir exige que la convention ainsi que tous les documents y afferents soient et devront etre rediges en langue anglaise.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

THE SHAREHOLDERS OF THE CORPORATION:

	 	
PATCH INTERNATIONAL INC.

	 	 	 
	 	 	 
	 	
Per:
	
"John Thornton"

	 	 	 
	 	 	 
	 	
PATCH ENERGY INC.

	 	 	 
	 	 	 
	 	
Per:
	
"John Thornton"

	 	 	 
	 	 	 

	 	
1286664 ALBERTA LTD.

	 	 	 
	 	 	 
	 	
Per:
	
"Michael S. Vandale"

	 	 	
 

 

Michael S. Vandale"

	
Witness
	 	
MICHAEL S. VANDALE

	 	 	 
	 	 	 
	 	 	
"Curtis R. Stewart"

	
Witness
	 	
CURTIS R. STEWART

	 	 	 
	 	 	 
	 	 	
"Donald B. Edwards"

	
Witness 

 

 

 

 
	
 

 

 

 

 

 

 

per:
	
DONALD B. EDWARDS

 

 

ACCRETIVE FLOW-THROUGH (2005) LIMITED PARTNERSHIP

 

 

"Accretive Flow-Through (2005) Limited Partnership"

	 	
 

 

 

 

 

 

per:
	
(Authorized signatory)

 

 

POWERONE CAPITAL CORP

 

 

"Powerone Capital Corp"

	
	
	
(Authorized signatory)

	 	 	 
	 	 	
"Sheldon Inwentash"

	
Witness
	 	
SHELDON INWENTASH

 

 

"Kenneth A. Hobday"

	
Witness

	 	
KENNETH A. HOBDAY

 

 

"Ron Rochon"

	
Witness
	 	
RON ROCHON

 

 

 

	 	 	
"Aaron Serhan"

	
Witness
	 	
AARON SERHAN

 

 

"Ronald H. Homes"

	
Witness 

 

 

 

 
	
 

 

 

 

 

 

 

 

per:
	
RONALD H. HOLMES

 

 

 

C.M. RYER PROFESSIONAL CORPORATION

 

 

"C.M.Ryer Professional Corporation"

	
 

 

 
	
 

 

 

 

 

 

per:
	
(Authorized signatory)

 

 

ACCRETIVE LIMITED PARTNERSHIP

 

 

"Accretive Limited Partnership"

	 	 	
(Authorized signatory)

 

 

 

	 	 	
"Dean L. Ehrmantraut"

	
Witness
	 	
DEAN L. EHRMANTRAUT

 

 

 

 

	 	 	
"Troy Nagy"

	
Witness 

 

 

 

 
	
 

 

 

 

 

 

 

per:
	
TROY NAGY

 

 

 

D. ALAN ROSS PROFESSIONAL CORP.

 

 

"D. Alan Ross Professional Corp".

	 	 	
(Authorized signatory)

 

 

 

	 	 	
"Trent McCleary"

	
Witness
	 	
TRENT MCCLEARY

 

 

 

	 	 	
"Vern Armitage"

	
Witness
	 	
VERN ARMITAGE

	 	 	 
	 	 	
ACCRETIVE LIMITED PARTNERSHIP I

	 	 	 
	 	 	 
	 	
per:
	
"Accretive Limited Partnership I"

	 	 	
(Authorized signatory)

	 	 	 
	 	 	 
	 	 	
"Paul Moynihan"

	
Witness
	 	
PAUL MOYNIHAN

	 	 	 
	 	 	 
	 	 	
"Theoren Fleury"

	
Witness
	 	
THEOREN FLEURY

	 	 	 
	 	 	 
	 	 	
1284810 ALBERTA LTD.

	 	 	 
	 	 	 
	 	
per:
	
"Michael S. Vandale"

	 	 	
(Authorized signatory)

	 	 	 
	 	 	
BOUNTY DEVELOPMENTS LTD.

	 	 	 
	 	 	 
	 	
per:
	
"Bounty Developments Ltd."

	 	 	
(Authorized signatory)

 

APPENDIX A

LIST OF EXCHANGEABLE SHARE HOLDERS

	
Shareholder Name
	
Number of Company Shares Held
	
Number of Exchangeable Shares

	 	 	 
	 	 	 
	
MICHAEL S. VANDALE
	
4,650,000
	
2,325,000

	 	 	 
	 	 	 
	
CURTIS R. STEWART
	
400,000
	
200,000

	 	 	 
	 	 	 
	
DONALD B. EDWARDS

 

 
	
300,000
	
150,000

	
ACCRETIVE FLOW-THROUGH (2005) LIMITED PARTNERSHIP

 

 
	
600,000
	
300,000

	
SHELDON INWENTASH

 

 
	
300,000
	
150,000

	
POWERONE CAPITAL CORP.

 

 
	
300,000
	
150,000

	
RON ROCHON

 

 
	
200,000
	
100,000

	
AARON SERHAN

 

 
	
100,000
	
50,000

	
RONALD H. HOLMES

 

 
	
100,000
	
50,000

	
C.M. RYER PROFESSIONAL CORPORATION

 

 
	
100,000
	
50,000

	
VERN ARMITAGE

 

 
	
50,000
	
25,000

	
DEAN L. EHRMANTRAUT

 

 
	
50,000
	
25,000

	
TROY NAGY

 

 

 
	
50,000
	
25,000

	
D. ALAN ROSS PROFESSIONAL CORP.

 

 
	
40,000
	
20,000

	
KENNETH A. HOBDAY

 

 
	
40,000
	
20,000

	
TRENT MCCLEARY

 

 
	
40,000
	
20,000

	
ACCRETIVE LIMITED PARTNERSHIP I

 

 
	
600,000
	
300,000

	
Bounty Developments Ltd.

	
8,682,979
	
4,341,489

	
Paul Moynihan

	
100,000
	
50,000

	
THEOREN FLEURY

	
150,000
	
75,000

	
1284810 Alberta Ltd.

	
2,000,000
	
1,000,000

	 	
18,852,978
	
9,426,489EX10-3

SUPPORT AGREEMENT

THIS AGREEMENT is made effective the 15th day of December, 2006,

BETWEEN:
PATCH INTERNATIONAL INC., a corporation incorporated under the laws of Nevada and having its corporate office at 1220, 666 Burrard Street, Vancouver, British Columbia, Canada V6C 2X8,

("Patch")

- and -
PATCH ENERGY INC., a corporation incorporated under the Canada Business Corporations Act and having its principal office at 1220, 666 Burrard Street, Vancouver, British Columbia, Canada V6C 2X8,

("Exchangeco")

- and -
1286664 ALBERTA LTD., a corporation incorporated under the laws of the Province of Alberta and having its registered office at 1000, 400 = 3rd Avenue SW, Calgary, Alberta T2P 4H2,

(the "Trustee")

WHEREAS pursuant to a share exchange agreement dated as of December 15, 2006 (the "Share Exchange Agreement"), Exchangeco has agreed to acquire all of the common shares (the "Common Shares") of Damascus Energy Inc. (the "Company") held by those persons defined as Vendors in the Share Exchange Agreement (the "Vendors") in exchange for the issuance to the Vendors of Series A Preferred Series A Special Shares in the capital of Exchangeco (the "Exchangeable Shares");

AND WHEREAS in accordance with the Share Exchange Agreement, Patch and Exchangeco have agreed to enter into this Support Agreement (the "Agreement");

AND WHEREAS in accordance with the Share Exchange Agreement, Patch and Exchangeco have agreed to enter into an Exchange and Voting Trust Agreement (the "Exchange and Voting Trust Agreement") with the Trustee;

NOW THEREFORE in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged) the Parties hereto covenant and agree as follows:

Article 1

DEFINITIONS AND INTERPRETATION
1.1     Defined Terms

Each term denoted herein by initial capital letters and not otherwise defined herein shall have the meaning ascribed thereto in the share provisions of the Exchangeable Shares (the "Share Provisions"), a copy of which are attached hereto as Schedule "A".
1.2     Interpretation Not Affected by Headings

The division of this Agreement into Articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. Unless otherwise indicated, all references to an "Article" or "section" followed by a number and/or a letter refer to the specified Article or section of this Agreement. The terms "this Agreement", "hereof", "herein" and "hereunder" and similar expressions refer to this Agreement and not to any particular Article, section or other portion hereof and include any agreement or instrument supplementary or ancillary hereto.
1.3     Number, Gender

Words in the singular number only shall include the plural and vice versa. Words in one gender shall include all genders.
1.4     Date for any Action

If any date on which any action is required to be taken under this Agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.

Article 2

COVENANTS OF PATCH AND EXCHANGECO
2.1     Covenants Regarding Exchangeable Shares

So long as any Exchangeable Shares not owned by Patch or its Affiliates are outstanding, Patch shall:
(a)     not declare or pay any dividend on Patch Shares unless (i) Exchangeco shall simultaneously declare or pay, as the case may be, an equivalent dividend (as provided for in the Share Provisions) on the Exchangeable Shares, and (ii) Exchangeco shall have sufficient money or other assets or authorized but unissued securities available to enable the due declaration and the due and punctual payment, in accordance with the applicable law, of any such dividend on the Exchangeable Shares:

(b)     advise Exchangeco sufficiently in advance of the declaration by Patch of any dividend on Patch Shares and take all such other actions, including payment or 

transfer of monies, as are necessary, in co-operation with Exchangeco, to ensure that the respective declaration date, record date and payment date for a dividend on the Exchangeable Shares shall be the same as the declaration date, record date and payment date for the corresponding dividend on Patch Shares;

(c)     ensure that the record date for any dividend declared on Patch Shares is not less than ten (10) Business Days after the declaration date of such dividend;

(d)     take all such actions, including payment or transfer of monies, and do all such things as are reasonably necessary or desirable to      enable and permit Exchangeco, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Amount, the Retraction Price or the Redemption Price in respect of each issued and outstanding Exchangeable Share upon a Liquidation Distribution, the delivery of a Retraction Request by a holder of Exchangeable Shares or a redemption of Exchangeable Shares by Exchangeco, as the case may be, including, without limitation, all such actions and all such things as are necessary or desirable to enable and permit Exchangeco to instruct the Trustee to cause the Patch Shares to be delivered directly to the holders of Exchangeable Shares by the Trustee in accordance with the provisions of Section 5, 6 or 7, as the case may be, of the Share Provisions;

(e)     take all such actions and do all such things as are necessary or desirable to enable and permit it, in accordance with applicable law, to perform its obligations arising upon the exercise by it of the Liquidation Call Right, the Retraction Call Right or the Redemption Call Right including, without limitation, all such actions and all such things as are necessary or desirable to enable, permit and instruct Exchangeco to cause the Patch Shares to be delivered to the holders of Exchangeable Shares in accordance with the provisions of Section 8 of the Share Provisions; and

(f)     not exercise its vote as a direct or indirect shareholder to initiate the voluntary liquidation, dissolution or winding-up of Exchangeco nor take any action or omit to take any action that is designed to result in the liquidation, dissolution or winding-up of Exchangeco.

2.2     Segregation of Funds

Patch will cause Exchangeco (and shall fund Exchangeco to the extent necessary) to deposit a sufficient amount of funds in a separate account of Exchangeco and segregate a sufficient amount of such other assets and property as is necessary to enable Exchangeco to pay dividends when due and to pay or otherwise satisfy its respective obligations under Sections 5, 6 or 7 of the Share Provisions, as applicable, and Exchangeco will use such funds or other assets exclusively to pay such dividends or satisfy its obligations under Sections 3, 5, 6 or 7 of the Share Provisions.

 
2.3     Notification of Certain Events

In order to assist and permit Patch to exercise the Liquidation Call Right, Retraction Call Right and Redemption Call Right, Exchangeco will notify Patch of each of the following events at the time set forth below:
(a)     in the event of any determination by the Board of Directors of Exchangeco to institute voluntary liquidation, dissolution or winding-up proceedings with respect to Exchangeco or to effect any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding up its affairs, at least sixty (60) days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution;

(b)     promptly, upon the earlier of receipt by Exchangeco of notice of and Exchangeco otherwise becoming aware of any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of Exchangeco or to effect any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding up its affairs;

(c)     immediately, upon receipt by Exchangeco of a Retraction Request;

(d)     on the same date on which notice of redemption is given to holders of Exchangeable Shares, upon the determination of a Redemption Date in accordance with the Share Provisions; and

(e)     as soon as practicable upon the issuance by Exchangeco of any Exchangeable Shares or rights to acquire Exchangeable Shares.

2.4     Delivery of Patch Shares

Upon any event that requires Exchangeco to deliver Patch Shares to any holder of Exchangeable Shares, and subject to Patch's exercise of the Liquidation Call Right, the Retraction Call Right or the Redemption Call Right, Exchangeco shall forthwith cause to be delivered the requisite number of Patch Shares to be received by, and transferred to or to the order of, the former holder of the surrendered Exchangeable Shares, as the respective Vendors shall direct. All such Patch Shares shall have been duly authorized and validly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance except with respect to restrictions and legends required for purposes of compliance with U.S. federal securities laws.

 
2.5     Qualification of Patch Shares

If any Patch Shares (or other shares or securities into which Patch Shares may be reclassified or changed as contemplated by section 2.7 hereof) to be issued or transferred and delivered hereunder require registration or qualification with or approval of or the filing of any document, including any prospectus or similar document or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any Canadian or United States federal, provincial or state securities or other law or regulation or pursuant to the rules and regulations of any securities or other regulatory authority or the fulfillment of any other United States or Canadian legal requirement before such shares (or such other shares or securities) may be issued by Patch or delivered by the Trustee at the direction of Patch or Exchangeco to the holder of surrendered Exchangeable Shares, Patch will in good faith expeditiously take all such actions and do all such things as are necessary or desirable to cause such Patch Shares (or such other shares or securities) to be and remain duly registered, qualified or approved under United States and/or Canadian law, as the case may be. Patch will in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all Patch Shares (or such other shares or securities) to be delivered hereunder to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding Patch Shares (or such other shares or securities) have been listed by Patch and remain listed and are quoted or posted for trading at such time. For clarity, this Section 2.6 shall not operate to require Patch or Exchangeco to prepare and file any prospectus or similar document or take any proceeding or obtain any order, ruling or consent from any governmental or regulatory authority in order to permit the subsequent resale of the Exchangeable Shares or the Trust Shares.
2.6     Economic Equivalence

(a)     Patch will not without the prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 11 of the Share Provisions:

 
(i)     issue or distribute Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares) to the holders of all or substantially all of the then outstanding Patch Shares by way of stock dividend or other distribution, other than an issue of Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares) to holders of Patch Shares who exercise an option to receive dividends in Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares) in lieu of receiving cash dividends; or

 
(ii)     issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding Patch Shares entitling them to subscribe for or to purchase Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares); or

(iii)     issue or distribute to the holders of all or substantially all of the then outstanding Patch Shares (A) shares or securities of Patch of any class other than Patch Shares (other than shares convertible into or exchangeable for or carrying rights to acquire Patch Shares), (B) rights, options or warrants other than those referred to in section 2.7(a) (ii) above, (C) evidences of indebtedness of Patch, or (D) assets of Patch;

unless (a) Patch is permitted under applicable law to undertake an action described in items (i), (ii) or (iii) above; and (b) the same or an economic equivalent change on a per share basis shall simultaneously be made to or in the rights of the holders of the Exchangeable Shares; provided that, for greater certainty, the above restrictions shall not apply to any securities issued or distributed by Patch in order to give effect to and to consummate the transactions contemplated by, and in accordance with, the Share Exchange Agreement, or as otherwise permitted by the parties to the Share Exchange Agreement.

(b)     Patch will not without the prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 11 of the Share Provisions:
(i)     subdivide, redivide or change the then outstanding Patch Shares into a greater number of Patch Shares;

(ii)     reduce, combine, consolidate or change the then outstanding Patch Shares into a lesser number of Patch Shares; or

(iii)     reclassify or otherwise change Patch Shares or effect an amalgamation, merger, reorganization or other transaction affecting Patch Shares,

unless (a) Patch is permitted under applicable law to undertake an action described in items (i), (ii) or (iii) above; and (b) the same or an economically equivalent change shall simultaneously be made to, or in the rights of the holders of, the Exchangeable Shares.

(c)     Patch will ensure that the record date for any event referred to in section 2.7(a) or 2.7 (b) above, (or, if no record date is applicable for such event), the effective date for any such event, is not less than ten (10) Business Days after the date on which such event is declared or announced by Patch (with contemporaneous notification thereof by Patch to Exchangeco)

 
(d)     The Board of Directors of Exchangeco shall determine, in good faith and in its sole discretion acting reasonably (with the assistance of such reputable and qualified independent financial advisors and/or other experts as the Board of Directors may determine necessary or desirable), economic equivalence for the purposes of any event referred to in section 2.7(a) or 2.7(b) above and each such determination shall be conclusive and binding on Patch. In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors to be relevant, be considered by the Board of Directors:
(i)     in the case of any stock dividend or other distribution payable in Patch Shares, the number of such shares issued in proportion to the number of Patch Shares previously outstanding;

(ii)     in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price;

(iii)     in the case of the issuance or distribution of any other form of property (including, without limitation, any shares or securities of Patch of any class other than Patch Shares), any rights, options or warrants other than those referred to in section 2.7(d) (ii) above, any evidences of indebtedness of Patch or any assets of Patch, the relationship between the fair market value (as determined by the Board of Directors in good faith acting reasonably) of such property to be issued or distributed with respect to each outstanding Patch Share and the Current Market Price;

(iv)     in the case of any subdivision, redivision or change of the then outstanding Patch Shares into a greater number of Patch Shares or the reduction, combination, consolidation or change of the then outstanding Patch Shares into a lesser number of Patch Shares or any amalgamation, merger, reorganization or other transaction affecting Patch Shares, the effect thereof upon the then outstanding Patch Shares; and

(v)     in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of Patch Shares as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares).

 
(e)     Exchangeco agrees that, to the extent required, upon due notice from Patch, Exchangeco will use its best efforts to take or cause to be taken such steps as may be necessary for the purposes of ensuring that appropriate dividends are paid or other distributions are made by Exchangeco, or subdivisions, redivisions or changes are made to the Exchangeable Shares, in order to implement the required economic equivalent with respect to Patch Shares and the Exchangeable Shares as provided for in this section 2.7.

2.7     Tender Offers

In the event that a tender offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to Patch Shares (an "Offer") is proposed by Patch or is proposed to Patch or its shareholders and is recommended by the Board of Directors of Patch, or is otherwise effected or to be effected with the consent or approval of the Board of Directors of Patch, and the Exchangeable Shares are not redeemed by Exchangeco or purchased by Patch as contemplated by and in compliance with the Share Provisions, then Patch will use its reasonable efforts expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit holders of the Exchangeable Shares to participate in such Offer to the same extent and on an economically equivalent basis as the holders of Patch Shares, without discrimination. Without limiting the generality of the foregoing, Patch will use its reasonable efforts expeditiously and in good faith (in the case of a transaction by Patch or where Patch is a participant in the negotiation thereof) to ensure that holders of the Exchangeable Shares may participate in all such Offers without being required to retract the Exchangeable Shares as against Exchangeco (or, if so required, to ensure that any such retraction, shall be effective only upon, and shall be conditional upon, the closing of the Offer and only to the extent necessary to tender or deposit to the Offer). Nothing herein shall affect the rights of Exchangeco under the Share Provisions to redeem (or Patch to purchase pursuant to the Redemption Call Right) the Exchangeable Shares, in the event of a Patch Control Transaction.
2.8     Ownership of Voting Outstanding Shares of Exchangeco

Unless otherwise agreed to by Exchangeco and unless the holders of the Exchangeable Shares have given their consent in accordance with Section 11 of the Share Provisions, Patch covenants and agrees in favour of Exchangeco that, as long as any of the Exchangeable Shares outstanding are owned by any person or entity other than Patch or any of its Affiliates, Patch will be and shall remain the direct or indirect beneficial owner of all issued and outstanding voting shares in the capital of Exchangeco.

 
2.9     Patch and Affiliates Not to Vote Exchangeable Shares

Patch covenants and agrees that it will appoint and cause to be appointed proxy holders with respect to all of the Exchangeable Shares held by it and its Affiliates for the sole purpose of attending each meeting of holders of the Exchangeable Shares in order to be counted as part of the quorum for each such meeting. Patch further covenants and agrees that it will not, and will cause its Affiliates not to, exercise any voting rights which may be exercisable by holders of the Exchangeable Shares from time to time pursuant to the Share Provisions or pursuant to the provisions of the Act (or any successor or other statute by which Exchangeco may in the future be governed) with respect to any of the Exchangeable Shares held by it or by its Affiliates in respect of any matter considered at any meeting of the holders of the Exchangeable Shares.
2.10     Rule 10b-18 Purchases

For certainty, nothing contained in this Agreement, including without limitation the obligations of Patch contained in section 2.8 hereof, shall limit the ability of Patch or Exchangeco to make a "Rule l0b-18 Purchase" of Common Shares pursuant to Rule 10b-18 of the U.S. Securities Exchange Act of 1934, as amended, or any successor provisions thereof.

2.11     Special Patch Representations and Covenants

 
(a)     Each of Patch and Exchangeco, jointly and severally, represent to the other such party and all other third party beneficiaries of this Agreement, that (i) the authorized capital of Exchangeco as of the date hereof is as set forth on Annex A attached hereto and no change has been made or occurred with respect to such authorized capital prior to closing of this Agreement; (ii) immediately prior to issuance of the Exchangeable Shares, Exchangeco has no issued or outstanding capital stock other than the Common       Shares, all of which are owned by Patch; (iii) there are no Claims pending or threatened against Patch or Exchangeco in regard to any prior transaction or any other matters; and (iv) there are no continuing, residual or future obligations required to be maintained or performed by Exchangeco with respect to any prior shareholders of Exchangeco or any prior transaction other than in regard to Patch in its capacity as the sole holder of all Common Shares of Exchangeco.

(b)     Patch undertakes, covenants and agrees that unless and until the first business day immediately following exchange of all of the Exchangeable Shares: (i) Patch shall be and remain the sole holder of record and beneficial owner of the Common Shares of Exchangeco; and (ii) Patch shall be and remain in sole control of Exchangeco.

(c)     Each of Patch and Exchangeco covenant and agree that Exchangeco will not be used for any future transaction, or carry on any business, unless and until all Exchangeable Shares have been exchanged and/or the rights of the holders of the Exchangeable Shares have otherwise terminated in accordance with the Share Provisions.

Article 3

PATCH SUCCESSORS
3.1     Certain Requirements in Respect of Combination, etc.

Except as contemplated in the Share Exchange Agreement, Patch shall not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom, unless:
(a)     such other person or continuing corporation (the "Patch Successor") by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement supplemental hereto and such other instruments (if any) as are reasonably necessary or advisable to evidence the assumption by the Patch Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such Patch Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of Patch under this Agreement; and

(b)     such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the other Parties hereunder.

 

3.2     Vesting of Powers in Successor

Whenever the conditions of section 3.1 have been duly observed and performed, the Parties, if required by section 3.1, shall execute and deliver a supplemental agreement hereto and thereupon the Patch Successor shall possess and from time to time may exercise each and every right and power of Patch under this Agreement in the name of Patch or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the Board of Directors of Patch or any officers of Patch may be done and performed with like force and effect by the directors or officers of such Patch Successor.

3.3     Wholly-Owned Subsidiaries

Nothing herein shall be construed as preventing the amalgamation or merger of any direct or indirect subsidiary of Patch, except for Exchangeco, with or into Patch or the winding-up, liquidation or dissolution of any direct or indirect subsidiary of Patch, except for Exchangeco, provided that all of the assets of such subsidiary are transferred to Patch or another wholly-owned direct or indirect subsidiary of Patch and any such transactions are expressly permitted by this Article 3.

Article 4

GENERAL
4.1     Term

This Agreement shall come into force and be effective as of the date hereof and shall terminate and be of no further force and effect at such time as no Exchangeable Shares (or securities or rights convertible into or exchangeable for or carrying rights to acquire Exchangeable Shares) are held by any person or entity other than Patch and any of its Affiliates.
4.2     Changes in Capital of Patch and Exchangeco

Notwithstanding the provisions of section 4.4, at all times after the occurrence of any event contemplated pursuant to sections 2.7 and 2.8 hereof or otherwise, as a result of which either Patch Shares or the Exchangeable Shares or both are in any way changed, this Agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, with the appropriate changes, to all new securities into which Patch Shares or the Exchangeable Shares or both are so changed and the Parties hereto shall execute and deliver an agreement in writing giving effect to and evidencing such necessary amendments and modifications.
4.3     Severability

If any provision of this Agreement is held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby and this Agreement shall be carried out as nearly as possible in accordance with its original terms and conditions.

4.4     Amendments and Modifications

This Agreement may not be amended or modified except by an agreement in writing executed by Patch and Exchangeco and, subject to section 4.5 hereof, with the approval of the holders of Exchangeable Shares (or their duly appointed attorney or agent) obtained in accordance with section 11 of the Share Provisions.
4.5     Administrative Amendments

Notwithstanding the provisions of section 4.4 hereof, the Parties to this Agreement may in writing at any time and from time to time, without the approval of the holders of the Exchangeable Shares, amend or modify this Agreement for the purposes of:
(a)     adding to the covenants of Patch and Exchangeco, provided that the board of directors of each of Patch and Exchangeco shall be of the good faith and reasonable opinion that such additions will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares;

(b)     making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the board of directors of each of Patch and Exchangeco, it may be expedient to make, provided that each such board of directors shall be of the good faith and reasonable opinion that such amendments or modifications will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares; or

(c)     making such changes or corrections which, on the advice of counsel to Patch and Exchangeco are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the board of directors of each of Patch and Exchangeco shall be of the good faith and reasonable opinion that such changes or corrections will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares.

4.6     Meeting to Consider Amendments

Exchangeco, at the request of Patch, shall call a meeting or meetings of the holders of the Exchangeable Shares for the purpose of considering any proposed amendment or modification requiring approval pursuant to section 4.4 hereof. Any such meeting or meetings shall be called and held in accordance with the bylaws of Exchangeco, the Share Provisions and all applicable laws.
4.7     Enforceability and Enurement

This Agreement shall be binding upon and enure to the benefit of the Parties hereto and their respective successors and assigns. This Agreement has been incorporated by reference into the Share Exchange Agreement and the Vendors, jointly and severally, are each an express third party beneficiary of this Agreement and as such have any and all rights of direct enforcement of this Agreement to the same and full extent as if a signatory party hereto.

4.8     Notices to Parties

All notices, requests, demands and other communications hereunder must be made in writing and will be deemed to have been duly given if delivered personally or by courier to the addressee at the address appearing on the first page hereof or to such other address as may be given in writing by the Party. Any notice given by personal delivery shall be deemed to be received on the date of delivery. Any notice sent by courier shall be deemed to be received on the next Business Day following the deposit of the communication with the courier service.
4.9     Counterparts and Facsimile

This Agreement may be executed in counterparts by original or facsimile signature, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.
4.10     Governing Law

This Agreement shall be governed by and interpreted in accordance with the laws of the Province of Alberta without giving effect to provisions of conflicts of law thereto. Each Party irrevocably submits to the non-exclusive jurisdiction of the courts of the Province of Alberta with respect to any matter arising hereunder or related hereto.

IN WITNESS WHEREOF the Parties have caused this Agreement to be duly executed as of the date first above written.

	 	
PATCH INTERNATIONAL INC.

	 	 	 
	 	 	 
	 	
Per:
	
"John Thornton"

	 	
Name:
	
John Thronton

	 	
Title:
	
President 

	 	 	 
	 	 	 
	 	 	 

	 	
PATCH ENERGY INC.

	 	 	 
	 	 	 
	 	
Per:
	
"John Thornton"

	 	
Name:
	
John Thronton

	 	
Title:
	
President

	 	 	 
	 	 	 
	 	 	 
	 	
1286664 ALBERTA LTD.

	 	 	 
	 	 	 
	 	
Per:
	
"Michael S. Vandale"

	 	
Name:
	
Michael S. Vandale

	 	
Title:
	
President

	 	 	 
	 	 	 

 

SCHEDULE "A"

The Series A Preferred Shares of Patch Energy Inc. (the "Exchangeco") shall have attached thereto, as a class, the following rights, privileges, restrictions, and conditions:

Article 5

INTERPRETATION
5.1     For the purposes of these Share Provisions:

(a)     "Act" means the Canada Business Corporations Act as amended.

(b)     "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by, or under common control of that Person.  For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control of"), as applied to any Person, means the possession by another Person, directly or indirectly, of the power to direct or cause the direction of the management and policies of that first mentioned Person, whether through the ownership of voting securities, by contract or otherwise, provided that for the purpose of these Share Provisions the Vendors (as such term is defined in the Support Agreement) shall be deemed not to be Affiliates of Patch.

(c)     "Board of Directors" means the board of directors of Exchangeco.

(d)     "Bulletin Board" means the Over-the-Counter Bulletin Board, an over-the-counter securities market operated by the National Association of Securities Dealers.

(e)     "Business Day" means any day on which commercial banks are open for business in the Province of Alberta other than a Saturday, a Sunday or a day observed as a holiday under the laws of the Province of Alberta or the Federal laws of Canada.

(f)     "Canadian Dollar Equivalent" means in respect of an amount expressed in a foreign currency (the "Foreign Currency Amount") at any date the product obtained by multiplying:
(i)     the Foreign Currency Amount by,

(ii)     the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such spot exchange rate on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors, acting reasonably to be appropriate for such purpose.

(g)     "Common Shares" means common shares in the capital of Exchangeco.

 
(h)     "Current Market Price" means the Canadian Dollar Equivalent of the average of the closing bid and ask prices of a Patch Share during a period of twenty (20) consecutive trading days ending not more than three (3) trading days before such date on the Bulletin Board, or if the Patch Shares are no longer quoted on the Bulletin Board, then on such other stock exchange or automated quotation system on which the Patch Shares are listed or quoted, as the case may be, as may be selected by the Board of Directors for such purpose; provided, however, that if, in the opinion of the Board of Directors, the public distribution or trading activity of Patch Shares during such period does not create a market which reflects the fair market value of a Patch Share, then the Current Market Puce of a Patch Share shall be determined by the Board of Directors, in good faith and acting reasonably, based upon the advice of such qualified independent financial advisors as the Board of Directors may deem appropriate, and in its sole discretion, and provided further that any such selection, opinion or determination by the Board of Directors shall be conclusive and binding.

(i)     "Exchange Right" has the meaning ascribed thereto in section 10.6 of these Share Provisions.

(j)     "Exchangeable Shares" means the Series A Preferred Shares in the capital of Exchangeco, being non-voting exchangeable shares having the rights, privileges, restrictions, and conditions set forth herein.

(k)     "Exchangeable Share Voting Event" means any matter in respect of which holders of Exchangeable Shares are entitled to vote as shareholders of Exchangeco, other than an Exempt Exchangeable Share Voting Event, and for greater certainty, excluding any matter in respect of which holders of Exchangeable Shares are entitled to vote (or instruct the Trustee to vote) in their capacity as beneficiaries under the Exchange and Voting Trust Agreement.

(l)     "Exempt Exchangeable Share Voting Event" means any matter in respect of which holders of Exchangeable Shares are entitled to vote as shareholders of Exchangeco in order to approve any change to, or in the rights of the holders of, the Exchangeable Shares, where the approval or disapproval, as applicable, of such change would be required to maintain the equivalence of the Exchangeable Shares and the Patch Shares.

(m)     "Exchange and Voting Trust Agreement" means the Exchange and Voting Trust Agreement among Patch, Exchangeco, the Trustee and holders of the Exchangeable Shares.

(n)     "Liquidation Amount" has the meaning ascribed thereto in section 9.1 of these Share Provisions.

(o)     "Liquidation Call Purchase Price" has the meaning ascribed thereto in section 12.1 (a) of these Share Provisions.

 
(p)     "Liquidation Call Right" has the meaning ascribed thereto in section 12.1(a) of these Share Provisions.

(q)     "Liquidation Date" has the meaning ascribed thereto in section 9.1 of these Share Provisions.

(r)     "Liquidation Distribution" means a distribution of assets of Exchangeco among its shareholders arising on the liquidation, dissolution, or winding-up of Exchangeco, whether voluntary or involuntary, or any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding-up its affairs.

(s)     "Patch" means Patch International Inc., a corporation existing under the laws of the State of Nevada, and any successor corporation thereto.

(t)     "Patch Call Notice" has the meaning ascribed thereto in section 10.3 of these Share Provisions.

(u)     "Patch Shares" means the shares of common stock in the capital of Patch, as consolidated or subdivided from time to time, and any other securities into which such shares may be reclassified or changed.

(v)     "Patch Control Transaction" means any merger, amalgamation, tender offer, material sale of shares or rights or interests therein or thereto, or a sale of all or substantially all of the assets of Patch, or similar transactions involving Patch, or any proposal to do so.

(w)     "Patch Dividend Declaration Date" means the date on which the Board of Directors of Patch declares any dividend on the Patch Shares.

(x)     "Person" includes any individual, firm, partnership, joint venture, venture capital fund, association, trust, agent, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, government body, syndicate or other entity, whether or not having legal status.

(y)     "Purchase Price" has the meaning ascribed thereto in section 10.3 of these Share Provisions.

(z)     "Redemption Call Purchase Price" has the meaning ascribed thereto in section 12.2 of these Share Provisions.

(aa)     "Redemption Call Right" has the meaning ascribed thereto by section 12.2 of these Share Provisions.

 
(bb)     "Redemption Date" means the date, established by the Board of Directors for the redemption by Exchangeco of all but not less than all of the outstanding Exchangeable Shares pursuant to Article 11 of these Share Provisions, which date shall not be earlier than the tenth anniversary of the date of issuance of the Exchangeable Shares, unless:
(i)     the number of Exchangeable Shares outstanding (other than Exchangeable Shares held by Patch and its Affiliates, and as such number of shares may be adjusted as deemed appropriate by the Board of Directors to give effect to any subdivision or consolidation of or stock dividend on the Exchangeable Shares, any issue or distribution of rights to acquire Exchangeable Shares or securities exchangeable for or convertible into Exchangeable Shares, any issue or distribution of other securities or rights or evidences of indebtedness or assets, or any other capital reorganization or other transaction affecting the Exchangeable Shares) is less than 10% of the number of Exchangeable Shares issued upon the first issuance of Exchangeable Shares, in which case the Board of Directors may accelerate such redemption date to such earlier date as it may determine, upon at least sixty (60) days' prior written notice to the registered holders of the Exchangeable Shares;

(ii)     a Patch Control Transaction occurs, in which case, provided that the Board of Directors determines, in good faith and in its sole discretion, that it is not reasonably practicable to substantially replicate the terms and conditions of the Exchangeable Shares in connection with such Patch Control Transaction and that the redemption of all but not less than all of the outstanding Exchangeable Shares is necessary to enable the completion of such Patch Control Transaction in accordance with its terms, the Board of Directors may accelerate such redemption date to such earlier date as it may determine, upon such number of days prior written notice to the registered holders of the Exchangeable Shares as the Board of Directors may determine to be reasonably practicable in such circumstances;

(iii)     an Exchangeable Share Voting Event is proposed, in which case, the redemption date shall be the Business Day prior to the record date for any meeting or vote of the holders of the Exchangeable Shares to consider the Exchangeable Share Voting Event and the Board of Directors shall give such number of days' prior written notice of such redemption to the registered holders of the Exchangeable Shares as the Board of Directors may determine to be reasonably practicable in such circumstances (provided that the Board of Directors has determined, in good faith and in its sole discretion, that it is not reasonably practicable to accomplish the business purpose intended by the Exchangeable Share Voting Event, which business purpose must be bona fide and not for the primary purpose of causing the occurrence of a Redemption Date, in any other commercially reasonable manner that does not result in an Exchangeable Share Voting Event);

 
(iv)     an Exempt Exchangeable Share Voting Event is proposed and the holders of the Exchangeable Shares fail to take the necessary action at a meeting or other vote of holders of Exchangeable Shares to approve the Exempt Exchangeable Share Voting Event, in which case the redemption date shall be the Business Day following the day on which the holders of the Exchangeable Shares failed to take such action and the Board of Directors shall be deemed to have given such prior written notice of such redemption to the registered holders of the Exchangeable Shares or the Board of Directors may establish another Business Day as it may determine to be reasonably practicable in such circumstances; or

(v)     if changes are enacted to Canadian tax laws which would allow an exchange of the Exchangeable Shares for Patch Shares on a tax-deferred basis;

 

provided, however, that the accidental failure or omission to give any notice of redemption under clauses (i), (ii), (iii), (iv) or (v) above to less than 10% of such holders of Exchangeable Shares shall not affect the validity of any such redemption.

(cc)     "Redemption Price" has the meaning ascribed thereto in section 11.1 of these Share Provisions.

(dd)     "Retracted Shares" has the meaning ascribed thereto in section 10.1(a) of these Share Provisions.

(ee)     "Retraction Call Right" has the meaning ascribed thereto in section 10.1(c) of these Share Provisions.

(ff)     "Retraction Date" has the meaning ascribed thereto in section 10.1(b) of these Share Provisions.

(gg)     "Retraction Price" has the meaning ascribed thereto in section 10.1 of these Share Provisions.

(hh)     "Retraction Request" has the meaning ascribed thereto in section 10.1 of these Share Provisions.

(ii)     "Share Provisions" means these share provisions.

(jj)     "Support Agreement" means the exchangeable share Support Agreement between Patch, the Trustee and Exchangeco entered into in support of the holders of Exchangeable Shares.

 
(kk)     "Transfer Agent" means such Person as may from time to time be appointed by Exchangeco as the registrar and transfer agent for the Exchangeable Shares, and if no such Person has been appointed, shall mean Exchangeco.

(ll)     "Trustee" means 1286664 Alberta Ltd.

(mm)     "Unpaid Dividend Amount" means the full amount of any and all declared and unpaid dividends on the Exchangeable Shares.

 

Article 6

RANKING OF EXCHANGEABLE SHARES

6.1     The Exchangeable Shares shall be entitled to a preference over the Common Shares and any other shares of Exchangeco with respect to the payment of dividends and on a Liquidation Distribution to the extent provided for in Article 9 hereof.

 

Article 7

DIVIDENDS

7.1     The Board of Directors shall, subject to applicable law, on each Patch Dividend Declaration Date, declare a dividend on each Exchangeable Share as follows:
(a)     in the case of a cash dividend declared on the Patch Shares, a cash dividend in U.S. dollars, or the Canadian Dollar Equivalent thereof, on the Patch Dividend Declaration Date, equal to the cash dividend declared on each Patch Share;

(b)     in the case of a stock dividend or other distribution declared on the Patch Shares to be paid in Patch Shares, a stock dividend of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of Patch Shares to be paid on each Patch Share;

(c)     in the case of a dividend declared on the Patch Shares in property other than cash or Patch Shares, a dividend in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent to the type and amount of property declared as a dividend on each Patch Share (to be determined by the Board of Directors as contemplated by section 7.5 hereof).  Such dividends shall be paid out of money, assets or property of Exchangeco properly applicable to the payment of dividends, or out of authorized but unissued Exchangeable Shares of Exchangeco, as applicable.

7.2     Cheques of Exchangeco payable at par at any branch of the bankers of Exchangeco shall be issued in respect of any cash dividends contemplated by section 7.1(a) hereof and the sending of such a cheque to each holder of an Exchangeable Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation.  Certificates representing the applicable number of Exchangeable Shares registered in the name of the registered holder of Exchangeable Shares shall be issued or transferred in respect of any stock dividends contemplated in section 7.1(b) hereof and the sending of such a certificate to each holder of an Exchangeable Share shall satisfy the stock dividend represented thereby.  Such other type and amount of property in respect of any dividends contemplated by section 7.1(c) hereof shall be issued, distributed or transferred by Exchangeco in such manner as it shall determine and the issuance, distribution or transfer thereof by Exchangeco to each holder of an Exchangeable Share shall satisfy the dividend represented thereby.  No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against Exchangeco any dividend that is represented by a cheque that has not been duly presented to Exchangeco's bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was payable.

7.3     The record date for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend declared on the Exchangeable Shares under section 7.1 hereof shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the Patch Shares.

7.4     If on any payment date for any dividends declared on the Exchangeable Shares under section 7.1 hereof the dividends are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates determined by the Board of Directors on which Exchangeco shall have sufficient moneys, assets or property properly applicable to the payment of such dividends.

7.5     The Board of Directors shall determine, in good faith and in its sole discretion, acting reasonably (with the assistance of such reputable and qualified independent financial advisors and/or other experts as the Board of Directors may determine necessary or desirable) economic equivalence for the purposes of section 7.1(c) hereof, and each such determination shall be conclusive and binding on Exchangeco and its shareholders absent manifest error.  In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors to be relevant, be considered by the Board of Directors, and shall be acted upon in accordance with the provisions herewith:

 
(a)     in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price;

(b)     in the case of the issuance or distribution of any other form of property (including, without limitation, any shares or securities of Patch of any class other than Patch Shares, any rights, options or warrants other than those referred to in section 7.5(a) above, any evidences of indebtedness of Patch or any assets of Patch), the relationship between the fair market value (as determined by the Board of Directors in good faith acting reasonably) of such property to be issued or distributed with respect to each outstanding Patch Share and the Current Market Price; and

(c)     in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of Patch Shares as a result of differences between taxation laws of Canada and the United States of America (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares)

 

Article 8

CERTAIN RESTRICTIONS

8.1     So long as any of the Exchangeable Shares are outstanding, Exchangeco shall not at any time without the approval of the holders of the Exchangeable Shares given as specified in section 15.2 of these Share Provisions:
(a)     pay any dividends on the Common Shares or any shares other than the Exchangeable Shares, other than stock dividends payable in Common Shares or any such other shares, as the case may be;

(b)     redeem or purchase or make any capital distribution in respect of Common Shares or any shares other than the Exchangeable Shares;

(c)     redeem or purchase any shares of Exchangeco other than the Exchangeable Shares; or

(d)     issue any Exchangeable Shares or any other shares of Exchangeco other than by way of stock dividends to the holders of such Exchangeable Shares.

 

Article 9

DISTRIBUTION ON LIQUIDATION

9.1     In the event of a Liquidation Distribution, a holder of Exchangeable Shares shall be entitled, subject to applicable law, to receive from the assets of Exchangeco in respect of each Exchangeable Share held by such holder on the effective date (the "Liquidation Date") to the Liquidation Distribution, before any distribution of any part of the assets of Exchangeco among the holders of the Common Shares or any other shares of Exchangeco, an amount per Exchangeable Share (the "Liquidation Amount") equal to (i) the Current Market Price of a Patch Share on the last Business Day prior to the Liquidation Date (which may be satisfied in full by Exchangeco causing Patch to deliver, in respect of each Exchangeable Share held by each respective holder thereof, one Patch Share), plus (ii) the Unpaid Dividend Amount, if any, on any Exchangeable Share held by such holder on any dividend record date which occurred prior to the Liquidation Date.

9.2     Patch and Exchangeco shall notify all holders of the Exchangeable Shares, of any proposed liquidation, dissolution or winding-up of Exchangeco, at least 60 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding-up of Exchangeco, and promptly upon receiving notice of or becoming aware of any claim, suit, petition or other proceeding with respect to an involuntary liquidation, dissolution or winding-up of Exchangeco.

9.3     On or promptly after the Liquidation Date, and subject to the exercise by Patch of the Liquidation Call Right, Exchangeco shall cause to be delivered to the holders of the Exchangeable Shares the Liquidation Amount for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the articles and by-laws of Exchangeco and such additional documents and instruments as the Trustee and Transfer Agent may reasonably require, at the registered office of Exchangeco or at any office of the Trustee or Transfer Agent as may be specified by Exchangeco by notice to the holders of the Exchangeable Shares.  Payment of the total Liquidation Amount for such Exchangeable Shares shall be made by delivery to each holder, at the address of the holder recorded in the securities register of Exchangeco for the Exchangeable Shares or by holding for pick-up by the holder at the registered office of Exchangeco or at any office of the Transfer Agent as may be specified by Exchangeco by notice to the holders of Exchangeable Shares, on behalf of Exchangeco of the certificates representing Patch Shares (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance and a cheque of Exchangeco payable at par at any branch of the bankers of Exchangeco in respect of the remaining portion, if any, of the total Liquidation Amount (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom).  On and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Liquidation Amount, unless payment of the total Liquidation Amount for such Exchangeable Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Liquidation Amount has been paid in the manner hereinbefore provided.  Exchangeco shall have the right at any time after the Liquidation Date to deposit or cause to be deposited the total Liquidation Amount in respect of the Exchangeable Shares represented by certificates that have not at the Liquidation Date been surrendered by the holders thereof in a custodial account with any chartered bank or trust company in Canada less any amounts withheld on account of tax required to be deducted and withheld therefrom.  Upon such deposit being made, the rights of the holders of Exchangeable Shares after such deposit shall be limited to receiving their proportionate part of the total Liquidation Amount (in each case less such amounts withheld on account of tax required to be deducted and withheld therefrom) for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions.  Upon such payment or deposit of the total Liquidation Amount, the holders of the Exchangeable Shares shall hereafter be considered and deemed for all purposes to be holders of the Patch Shares delivered to them or the custodian on their behalf.

9.4     After Exchangeco has satisfied its obligations to pay the holders of the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant to section 9.1 of these Share Provisions, such holders shall not be entitled to share in any further distribution of the assets of Exchangeco.

Article 10

RETRACTION OF EXCHANGEABLE SHARES BY HOLDER

10.1     A holder of Exchangeable Shares shall be entitled at any time, subject to the exercise by Patch of the Retraction Call Right and otherwise upon compliance with the provisions of this Article 10, to require Exchangeco to redeem any or all of the Exchangeable Shares registered in the name of such holder for an amount per Exchangeable Share (the "Retraction Price") equal to (i) the Current Market Price of a Patch Share on the last Business Day prior to the Retraction Date (which may be satisfied in full by Exchangeco causing Patch to deliver to such holder, one Patch Share for each Exchangeable Share presented and surrendered by the holder), plus (ii) the Unpaid Dividend Amount, if any, on any such Exchangeable Share held by such holder on any dividend record date which occurred prior to the Retraction Date.  To effect such redemption, the holder shall present and surrender at the registered office of Exchangeco or at any office of the Trustee or Transfer Agent as may be specified by Exchangeco by notice to the holders of Exchangeable Shares the certificate or certificates representing the Exchangeable Shares which the holder desires to have Exchangeco redeem, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the articles and by-laws of Exchangeco and such additional documents and instruments as the Trustee and Transfer Agent may reasonably require, and together with a duly executed statement (the "Retraction Request") in the form attached hereto as Appendix 1, or in such other form as may be acceptable to Exchangeco:
(a)     specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate or certificates (the "Retracted Shares") redeemed by Exchangeco;

(b)     stating the Business Day on which the holder desires to have Exchangeco redeem the Retracted Shares (the "Retraction Date"), provided that the Retraction Date shall be not less than 10 Business Days nor more than 15 Business Days after the date on which the Retraction Request is delivered to Exchangeco and further provided that, in the event that no such Business Day is specified by the holder in the Retraction Request, the Retraction Date shall be deemed to be the 15th Business Day after the date on which the Retraction Request is delivered to Exchangeco; and

(c)     acknowledging the overriding right of Patch (the "Retraction Call Right") to purchase all but not less than all the Retracted Shares directly from the holder, and that the Retraction Request shall be deemed to be a revocable offer by the holder to sell the Retracted Shares to Patch in accordance with the Retraction Call Right on the terms and conditions set out in section 6.3 hereof.

10.2     Subject to the exercise of the Retraction Call Right by Patch, upon receipt by Exchangeco or the Trustee or Transfer Agent in the manner specified in section 10.1 hereof of a certificate or certificates representing the number of Exchangeable Shares which the holder desires to have Exchangeco redeem, together with a Retraction Request, and provided that the Retraction Request is not revoked by the holder in the manner specified in section 10.7 hereof, Exchangeco shall redeem the Retracted Shares effective at the close of business (Calgary time) on the Retraction Date and shall cause to be delivered to such holder the total Retraction Price with respect to such shares, provided that all declared and unpaid dividends for which the record date has occurred prior to the Retraction Date shall be paid on the payment date for such dividends, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  If only a part of the Exchangeable Shares represented by any certificate is redeemed, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of Exchangeco.

10.3     Upon receipt by Exchangeco of a Retraction Request, Exchangeco shall immediately provide notice thereof to Patch.  In order to exercise the Retraction Call Right, Patch must notify Exchangeco of its determination to do so (the "Patch Call Notice") within five (5) Business Days of notification to Patch by Exchangeco of the receipt by Exchangeco of the Retraction Request.  If Patch does not so notify Exchangeco within such five Business Day period, Exchangeco will notify the holder as soon as possible thereafter that Patch will not exercise the Retraction Call Right.  If Patch delivers the Patch Call Notice within such five Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in section 10.7, the Retraction Request shall thereupon be deemed to be an offer by the holder to sell the Retracted Shares to Patch in accordance with the Retraction Call Right.  In such event, Exchangeco shall not redeem the Retracted Shares and Patch shall purchase from such holder and such holder shall sell to Patch on the Retraction Date the Retracted Shares for an amount per Retracted Share (the "Purchase Price") equal to (i) the Current Market Price of a Patch Share on the last Business Day prior to the Retraction Date (which may be satisfied in full by Patch instructing the Transfer Agent to deliver to such holder one Patch Share for each 

Exchangeable Share presented and surrendered by the holder), plus (ii) the Unpaid Dividend Amount, if any, on those Retracted Shares held by such holder on any dividend record date which occurred prior to the Retraction Date.  For the purposes of completing a purchase pursuant to the Retraction Call Right, in addition to Patch giving instructions to the Transfer Agent, Patch shall deposit with the Transfer Agent a cheque or cheques of Patch payable at par at any branch of the bankers of Patch representing the Unpaid Dividend Amount, if any, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  Provided that Patch has complied with the immediately preceding sentence, the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by Exchangeco of such Retracted Shares shall take place on the Retraction Date.  In the event that Patch does not deliver a Patch Call Notice within such five Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in section 10.7 hereof, Exchangeco shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in this Article 10.

10.4     Pursuant to exercise of the Patch Call Notice, Patch shall instruct the Transfer Agent to deliver, to the relevant holder, at the address of the holder recorded in the securities register of Exchangeco for the Exchangeable Shares or at the address specified in the holder's Retraction Request or by holding for pick-up by the holder at the registered office of Exchangeco or at any office of the Trustee or Transfer Agent as may be specified by Exchangeco by notice to the holders of Exchangeable Shares, certificates representing the Patch Shares (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance) registered in the name of the holder or in such other name as the holder may request, and, if applicable and on or before the payment date therefor, a cheque payable at par at any branch of the bankers of Exchangeco or Patch, as applicable, representing the aggregate Unpaid Dividend Amount, if any, in payment of the total Retraction Price or the total Purchase Price, as the case may be, in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom, and such delivery of such certificates by the Transfer Agent and cheques on behalf of Patch shall be deemed to be payment of and shall satisfy and discharge all liability for the total Retraction Price or the total Purchase Price, as the case may be, to the extent that the same is represented by such share certificates and cheques (plus any tax deducted and withheld therefrom).

10.5     On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall cease to be a holder of such Retracted Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive his proportionate part of the total Retraction Price or the total Purchase Price, as the case may be, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the total Retraction Price or the total Purchase Price, as the case may be, shall not be made as provided in section 10.4, in which case the rights of such holder shall remain unaffected until the total Retraction Price or the total Purchase Price, as the case may be, has been paid in the manner hereinbefore provided.  On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of the total Retraction Price or the total Purchase Price, as the case may be, has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so redeemed by Exchangeco shall thereafter be considered and deemed for all purposes to be a holder of the Patch Shares so delivered.

10.6    Notwithstanding any other provision of this Article 10, Exchangeco shall not be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law.  If Exchangeco believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and provided that Patch shall not have exercised the Retraction Call Right with respect to the Retracted Shares, Exchangeco shall only be obligated to redeem Retracted Shares specified by a   holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the holder at least two Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by Exchangeco.  In any case in which the redemption by Exchangeco of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law, Exchangeco shall redeem the maximum number of Retracted Shares in accordance with section 10.2 of these Share Provisions which the Board of Directors determine Exchangeco is, on the Retraction Date, permitted to redeem, on a pro rata basis (disregarding fractions) in proportion to the total number of Exchangeable Shares tendered for retraction by each holder thereof, and Exchangeco shall issue to each holder of Retracted Shares a new certificate, at the expense of Exchangeco, representing the Retracted Shares not redeemed by Exchangeco pursuant to section 10.2 hereof.  Provided that the Retraction Request is not revoked by the holder in the manner specified in section 10.7 hereof, the holder of any such Retracted Shares not redeemed by Exchangeco pursuant to section 10.2 hereof as a result of solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to require Patch to purchase such Retracted Shares from such holder on the Retraction Date or as soon as practicable thereafter on payment by Patch to such holder of the Purchase Price for such Retracted Shares (the "Exchange Right"), all as more specifically provided in the Exchange and Voting Trust Agreement.

10.7     A holder of Retracted Shares may, by notice in writing given by the holder to Exchangeco before the close of business on the Business Day immediately preceding the Retraction Date, withdraw the Retraction Request, in which event such Retraction Request shall be null and void and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to Exchangeco or Patch, as the case may be, shall be deemed to have been revoked.

Article 11

REDEMPTION OF EXCHANGEABLE SHARES BY THE CORPORATION

11.1     Subject to applicable law, and provided Patch has not exercised the Redemption Call Right, Exchangeco shall on the Redemption Date redeem all but not less than all of the then outstanding Exchangeable Shares for an amount per Exchangeable Share (the "Redemption Price") equal to (i) the Current Market Price of a Patch Share on the last Business Day prior to the Redemption Date (which may be satisfied in full by Exchangeco causing Patch to deliver, in 

respect of each Exchangeable Share held by each respective holder thereof, one Patch Share), plus (ii) the Unpaid Dividend Amount, if any, on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the Redemption Date.

11.2     In any case of a redemption of Exchangeable Shares under this Article 11, Exchangeco shall send or cause to be sent to each holder of Exchangeable Shares a notice in writing of the redemption by Exchangeco or the purchase by Patch under the Redemption Call Right, as the case may be, of the Exchangeable Shares held by such holder.  In the case of a Redemption Date established in connection with a Patch Control Transaction, an Exchangeable Share Voting Event and an Exempt Exchangeable Share Voting Event, the written notice of redemption by Exchangeco or the purchase by Patch under the Redemption Call Right will be sent on or before the Redemption Date, on as many days prior written notice as may be determined by the Board of Directors of Exchangeco to be reasonably practicable in the circumstances, and in all other cases such notice shall be sent at least 60 days before the Redemption Date.  In any such case, such notice shall set out the formula for determining the Redemption Price or the Redemption Call Purchase Price, as the case may be, the Redemption Date and, if applicable, particulars of the Redemption Call Right.

11.3     On or after the Redemption Date and subject to the exercise by Patch of the Redemption Call Right, Exchangeco shall cause to be delivered to the holders of the Exchangeable Shares to be redeemed the Redemption Price for each such Exchangeable Share, upon presentation and surrender at the registered office of Exchangeco or at any office of the Trustee or Transfer Agent as may be specified by Exchangeco in such notice of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the articles and by-laws of Exchangeco and such additional documents and instruments as the Trustee or Transfer Agent may reasonably require.  Payment of the total Redemption Price for such Exchangeable Shares shall be made by instruction to the Transfer Agent to deliver to each holder, at the address of the holder recorded in the securities register of Exchangeco or by holding for pick-up by the holder at the registered office of Exchangeco or at any office of the Transfer Agent as may be specified by Exchangeco in such notice, of certificates representing Patch Shares (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance) and, if applicable, a cheque of Exchangeco payable at par at any branch of the bankers of Exchangeco in payment of any such Unpaid Dividend Amount, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom. On and after the Redemption Date, the holders of the Exchangeable Shares called for redemption shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Redemption Price, unless payment of the total Redemption Price for such Exchangeable Shares shall not be made upon presentation and surrender of certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Redemption Price have been paid in the manner hereinbefore provided.  Exchangeco shall have the right at any time after the sending of notice of its intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to be deposited the total Redemption Price for the Exchangeable Shares so called for redemption, or of such of the said Exchangeable Shares represented by certificates that have not at the date of such deposit been surrendered by the 

holders thereof in connection with such redemption, in a custodial account with any chartered bank or agent named in such notice, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  Upon the later of such deposit being made and the Redemption Date, the Exchangeable Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the holders thereof after such deposit or Redemption Date, as the case may be, shall be limited to receiving their proportionate part of the total Redemption Price, for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions.  Upon such payment or deposit of the total Redemption Price, less any amounts withheld on account of tax required to be deducted and withheld therefrom, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the Patch Shares delivered to them.

Article 12

CERTAIN RIGHTS OF PATCH TO ACQUIRE EXCHANGEABLE SHARES
12.1     Patch Liquidation Call Right:

(a)     Patch shall have the overriding right (the "Liquidation Call Right"), in the event of and notwithstanding the proposed liquidation, dissolution or winding-up of Exchangeco pursuant to Article 9 of these Share Provisions, to purchase from all but not less than all of the holders of Exchangeable Shares (other than any holder of Exchangeable Shares which is an Affiliate of Patch) on the Liquidation Date all but not less than all of the Exchangeable Shares held by each such holder on payment by Patch of an amount per Exchangeable Share (the "Liquidation Call Purchase Price") equal to (i) the Current Market Price of a Patch Share on the last Business Day prior to the Liquidation Date (which may be satisfied in full by Patch causing to be delivered to such holder one Patch Share), plus (ii) the Unpaid Dividend Amount, if any, on each such Exchangeable Share held by such holder on any dividend record date which occurred prior to the date of purchase by Patch.  In the event of the exercise of the Liquidation Call Right by Patch on the Liquidation Date on payment by Patch to the holder of the Liquidation Call Purchase Price for each such share, Exchangeco shall have no obligation to redeem such shares so purchased by Patch.

(b)     To exercise the Liquidation Call Right, Patch must notify the Trustee, the holders of Exchangeable Shares, and Exchangeco, of Patch's intention to exercise such right at least 45 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding-up of Exchangeco and at least five Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding-up of Exchangeco.  Exchangeco will notify the holders of Exchangeable Shares as to whether or not Patch has exercised the Liquidation Call Right forthwith after the expiry of the period during which the same may be exercised by Patch.  If Patch exercises the Liquidation Call Right, then on the Liquidation Date Patch will purchase and the holders 

will sell all of the Exchangeable Shares then outstanding for a price per share equal to the Liquidation Call Purchase Price.

(c)     For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Liquidation Call Right, Patch shall ensure that the Transfer Agent holds, on or before the Liquidation Date, sufficient certificates representing the aggregate number of Patch Shares deliverable in respect of the Liquidation Call Right and a cheque or cheques of Patch payable at par at any branch of the bankers of Patch representing the aggregate Unpaid Dividend Amount in payment of the Total Liquidation Call Purchase Price, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  Provided that Patch has complied with the immediately preceding sentence, on and after the Liquidation Date the rights of each holder of Exchangeable Shares will be limited to receiving such holder's proportionate part of the total Liquidation Call Purchase Price payable by Patch upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Liquidation Date be considered and deemed for all purposes to be the holder of the Patch Shares to which it is entitled.  Upon surrender to the Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the articles and by-laws of Exchangeco and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of Patch shall deliver to such holder, a cheque or cheques of Patch payable at par at any branch of the bankers of Patch in payment of the remaining portion, if any, of the total Liquidation Call Purchase Price, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  If Patch does not exercise the Liquidation Call Right in the manner described above, on the Liquidation Date the holders of the Exchangeable Shares will be entitled to receive in exchange therefor the liquidation price otherwise payable by Exchangeco in connection with the liquidation, dissolution or winding up of Exchangeco pursuant to Article 9 of these Share Provisions.

(d)     Patch shall at any time be entitled to assign all of its rights in this section to an Affiliate of Patch provided that such company assumes all of Patch's obligations under this Section.

12.2     Patch Redemption Call Right.

(a)     Patch shall have the overriding right (the "Redemption Call Right"), notwithstanding the proposed redemption of the Exchangeable Shares by Exchangeco pursuant to Article 11 of these Share Provisions, to purchase from all but not less than all of the holders of Exchangeable Shares (other than any holder of Exchangeable Shares which is an Affiliate of Patch) on the Redemption Date all but not less than all of the Exchangeable Shares held by each such holder on payment by Patch to each holder of an amount per Exchangeable Share (the "Redemption Call Purchase Price") equal to (i) the Current Market Price of a Patch Share on the last Business Day prior to the 

Redemption Date, (which may be satisfied in full by Patch delivering to such holder one Patch Share) plus (ii) the Unpaid Dividend Amount, if any, on each Exchangeable Share held by such holder on any dividend record date which occurred prior to the Redemption Date.  In the event of the exercise of the Redemption Call Right by Patch, each holder shall be obligated to sell all the Exchangeable Shares held by the holder to Patch on the Redemption Date on payment by Patch to the holder of the Redemption Call Purchase Price for each such share, and Exchangeco shall have no obligation to redeem such shares so purchased by Patch.

(b)     To exercise the Redemption Call Right, Patch must notify the Trustee, the Transfer Agent, the holders of Exchangeable Shares, and Exchangeco, of Patch's intention to exercise such right at least 45 days before the Redemption Date, except in the case of a redemption occurring as a result of a Patch Control Transaction, an Exchangeable Share Voting Event or an Exempt Exchangeable Share Voting Event or such shorter period as may be agreed, in writing, by Exchangeco, Patch and the holders of the Exchangeable Shares, in which case Patch shall so notify the Trustee, the Transfer Agent, the holders of Exchangeable Shares and Exchangeco on or before the Redemption Date.  Exchangeco will notify the holders of Exchangeable Shares as to whether or not Patch has exercised the Redemption Call Right forthwith after the expiry of the period during which the same may be exercised by Patch.  If Patch exercises the Redemption Call Right, on the Redemption Date Patch will purchase and the holders will sell all of the Exchangeable Shares then outstanding for a price per share equal to the Redemption Call Purchase Price.

(c)     For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Redemption Call Right, Patch shall ensure that the Transfer Agent holds, on or before the Redemption Date, sufficient certificates representing the aggregate number of Patch Shares deliverable in respect of the Redemption Call Right and a cheque or cheques of Patch payable at par at any branch of the bankers of Patch representing the aggregate Unpaid Dividend Amount in payment of the total Redemption Call Purchase Price, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  Provided that Patch has complied with the immediately preceding sentence, on and after the Redemption Date the rights of each holder of Exchangeable Shares will be limited to receiving such holder's proportionate part of the total Redemption Call Purchase Price payable by Patch upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Redemption Date be considered and deemed for all purposes to be the holder of the Patch Shares to which it is entitled. Upon surrender to the Trustee or Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Act and the articles and by-laws of Exchangeco and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and Transfer Agent on behalf of Patch shall deliver to such holder, certificates representing the Patch Shares to which the holder is entitled and a cheque or cheques of Patch payable at par at any branch of the bankers of 

Patch in payment of the remaining portion, if any, of the total Redemption Call Purchase Price, in each case, less any amounts withheld on account of tax required to be deducted and withheld therefrom.  If Patch does not exercise the Redemption Call Right in the manner described above, on the Redemption Date the holders of the Exchangeable Shares will be entitled to receive in exchange therefor the redemption price otherwise payable by Exchangeco in connection with the redemption of the Exchangeable Shares pursuant to Article 11 of these Share Provisions.

(d)     Patch shall at any time be entitled to assign all of its rights in this Section to an Affiliate of Patch provided that such company assumes all of Patch's obligations under this Section.

 

Article 13

PURCHASE FOR CANCELLATION

13.1     Subject to applicable law and the articles of Exchangeco, Exchangeco may at any time and from time to time offer to purchase for cancellation all or any part of the outstanding Exchangeable Shares at any price by tender to all the holders of record of Exchangeable Shares then outstanding or through the facilities of any stock exchange on which the Exchangeable Shares are listed or quoted at any price per share together with an amount equal to the Unpaid Dividend Amount.  If in response to an invitation for tenders under the provisions of this Article 13, more Exchangeable Shares are tendered at a price or prices acceptable to Exchangeco than Exchangeco is prepared to purchase, the Exchangeable Shares to be purchased by Exchangeco shall be purchased as nearly as may be pro rata according to the number of shares tendered by each holder who submits a tender to Exchangeco, provided that when shares are tendered at different prices, the pro rating shall be effected (disregarding fractions) only with respect to the shares tendered at the price at which more shares were tendered than Exchangeco is prepared to purchase after Exchangeco has purchased all the shares tendered at lower prices.  If part only of the Exchangeable Shares represented by any certificate shall be purchased, a new certificate for the balance of such shares shall be issued at the expense of Exchangeco.

 

Article 14

VOTING RIGHTS

14.1     Except as required by applicable law and by Article 15, Article 16 and Article 17 hereof, and by the provisions of the Support Agreement referred to in Article 16 hereof, the holders of the Exchangeable Shares shall not be entitled as such to receive notice of or to attend any meeting of the shareholders of Exchangeco or to vote at any such meeting.  The holders of Exchangeable Shares shall, however, be entitled to notice of meetings of the shareholders called for the purpose of authorizing the liquidation, dissolution or winding up of Exchangeco or the sale, lease, or exchange of all or substantially all of the property of Exchangeco other than in the ordinary course of business of Exchangeco.  Nothing herein shall be construed to limit the voting rights of any issued and outstanding Patch Shares held in trust by the Trustee or otherwise limit rights reserved to the holders of the Exchangeable Shares pursuant to the terms of the Exchange and Voting Trust Agreement.

 

Article 15

AMENDMENT AND APPROVAL

15.1     The rights, privileges, restrictions, and conditions attaching to the Exchangeable Shares may be added to, changed or removed but only with the approval of the holders of the Exchangeable Shares given as hereinafter specified.

15.2     Any approval given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law subject to a minimum requirement that such approval be evidenced by resolution passed by not less than two-thirds (2/3) of the votes cast on such resolution at a meeting of holders of Exchangeable Shares duly called and held at which the holders of at least two-thirds (2/3) of the outstanding Exchangeable Shares at that time are present or represented by proxy; provided that, if at any such meeting the holders of at least two-thirds (2/3) of the outstanding Exchangeable Shares at that time are not present or represented by proxy within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than five (5) days thereafter and to such time and place as may be designated by the Chairman of such meeting.  At such adjourned meeting the holders of Exchangeable Shares present or represented by proxy thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than two-thirds (2/3) of the votes cast on such resolution at such meeting shall constitute the approval or consent of the holders of the Exchangeable Shares.

 

Article 16

RECIPROCAL CHANGES, ETC. IN RESPECT OF PATCH SHARES

16.1     Each holder of an Exchangeable Share acknowledges that the Support Agreement provides that Patch will not without the prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with 15.2 of these Share Provisions:
(a)     issue or distribute Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares) to the holders of all or substantially all of the then outstanding Patch Shares by way of stock dividend or other distribution, other than an issue of Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares) to holders of Patch Shares who exercise an option to receive dividends in Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares) in lieu of receiving cash dividends;

(b)     issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding Patch Shares entitling them to subscribe for or to purchase Patch Shares (or securities exchangeable for or convertible into or carrying rights to acquire Patch Shares); or

(c)     issue or distribute to the holders of all or substantially all of the then outstanding Patch Shares:
(i)     shares or securities of Patch of any class other than Patch Shares (other than shares convertible into or exchangeable for or carrying rights to acquire Patch Shares);

(ii)     rights, options or warrants other than those referred to in 16.1(b) above;

(iii)     evidences of indebtedness of Patch; or

(iv)     assets of Patch, 

unless (a) Patch is permitted under applicable law to issue or distribute the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets to holders of the Exchangeable Shares in which any and all such cases, such rights, options, securities, shares, evidences of indebtedness or other assets shall be delivered by Patch to the Trustee; and (b) the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously by the Trustee to holders of the Exchangeable Shares.

16.2     Each holder of an Exchangeable Share acknowledges that the Support Agreement further provides that Patch will not without the prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with section 15.2 of these Share Provisions:
(a)     subdivide, redivide or change the then outstanding Patch Shares into a greater number of Patch Shares;

(b)     reduce, combine, consolidate or change the then outstanding Patch Shares into a lesser number of Patch Shares; or

(c)     reclassify or otherwise change the Patch Shares or effect an amalgamation, merger, reorganization or other transaction affecting the Patch Shares,

unless (i) Patch is permitted under applicable law to undertake an action described in sections (a), (b) or (c) above; and (ii) the same or an economically equivalent change shall on a per share basis simultaneously be made to, or in the right of the holders of the Exchangeable Shares.

16.3     Each holder of an Exchangeable Share acknowledges that the Support Agreement further provides that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the Exchangeable Shares given in accordance with section 15.2 of these Share Provisions.

 

Article 17

ACTIONS BY THE CORPORATION UNDER THE SUPPORT AGREEMENT

17.1     Exchangeco will take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to ensure performance and compliance by Patch and Exchangeco with all provisions of the Support Agreement and the Share Provisions applicable to Patch, Exchangeco and the holders of the Exchangeable Shares, in accordance with the terms thereof including, without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of Exchangeco and the holders of the Exchangeable Shares all rights and benefits in favour of Exchangeco and the holders of the Exchangeable Shares under or pursuant to such agreement.

17.2     Exchangeco shall not propose, agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement without the approval of the holders of the Exchangeable Shares given in accordance with section 15.2 of these Share Provisions, other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of:
(a)     adding to the covenants of Patch to such agreement for the protection of Exchangeco or the holders of the Exchangeable Shares thereunder;

(b)     making such provisions or modifications not inconsistent with such agreement as may be necessary or desirable with respect to matters or questions arising thereunder which, in the good faith opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith and reasonable opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or

(c)     making such changes in or corrections to such agreement which, on the advice of counsel to Exchangeco, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith and reasonable opinion, that such changes or corrections will not be prejudicial to the interests of the holders of the Exchangeable Shares.

 

Article 18

LEGEND; CALL RIGHTS

18.1     The certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend in form and on terms approved by the Board of Directors, with respect to the Support Agreement, the provisions herein relating to the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right.

18.2     Each holder of an Exchangeable Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favour of Patch, and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of Exchangeco or the retraction or redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of Patch as therein provided.

 

Article 19

NOTICES

19.1     Any notice, request or other communication to be given to Exchangeco by a holder of Exchangeable Shares shall be in writing and shall be valid and effective if given by personal or courier delivery to the registered office of Exchangeco and addressed to the attention of the President.  Any such notice, request or other communication shall only be deemed to have been given and received upon actual receipt thereof by Exchangeco.

 

19.2     Any presentation and surrender by a holder of Exchangeable Shares to Exchangeco, the Trustee or the Transfer Agent of certificates representing Exchangeable Shares in connection with the liquidation, dissolution or winding-up of Exchangeco or the retraction or redemption of Exchangeable Shares shall be made by personal or courier delivery to the registered office of Exchangeco or to such office of the Trustee or the Transfer Agent as may be specified by Exchangeco, in each case, addressed to the attention of the President of Exchangeco.  Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by Exchangeco, the Trustee or the Transfer Agent, as the case may be.

 

19.3     Any notice, request or other communication to be given to a holder of Exchangeable Shares by or on behalf of Exchangeco shall be in writing and shall be valid and effective if given by personal or courier delivery to the address of the holder recorded in the securities register of Exchangeco 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 date of delivery.  Accidental failure or omission to give any notice, request or other communication to one or more holders of Exchangeable Shares shall not invalidate or otherwise alter or affect any action or proceeding to be taken by Exchangeco pursuant thereto.

APPENDIX 1

FORM OF NOTICE OF RETRACTION

To:     Patch Energy Inc. (the "Exchangeco")

This notice is given pursuant to Article 10 of the provisions (the "Share Provisions") attaching to the Series A Preferred Shares of Exchangeco represented by the certificate (the "Certificate") which accompanies this notice and all capitalized words and expressions used in this notice that are defined in the Share Provisions have the meanings ascribed to such words and expressions in such Share Provisions.

The undersigned hereby notifies Exchangeco that, subject to the Retraction Call Right referred to below, the undersigned desires to have Exchangeco redeem in accordance with Article 10 of the Share Provisions:
[  ]     all share(s) represented by the Certificate; or

[  ]     ________________ share(s) only.

The undersigned hereby notifies Exchangeco that the Retraction Date shall be:

NOTE:     The Retraction Date must be a Business Day and must not be less than 10 Business Days or more than 15 Business Days after the date upon which this notice is delivered to Exchangeco.  If no such Business Day is specified above, the Retraction Date shall be deemed to be the 15th Business Day after the date on which this notice is delivered to Exchangeco.

The undersigned acknowledges the overriding Retraction Call Right of Patch International Inc. ("Patch") to purchase all but not less than all the Retracted Shares from the undersigned and that this notice is and shall be deemed to be a revocable offer by the undersigned to sell such shares to Patch in accordance with the Retraction Call Right on the Retraction Date for the Purchase Price and on the other terms and conditions set out in section 6.3 of the Share Provisions.  This notice of retraction, and this offer to sell the Retracted Shares to Patch, may be revoked and withdrawn by the undersigned only by notice in writing given to Exchangeco at any time before the close of business on the Business Day immediately preceding the Retraction Date as provided in section 10.7 of the Share Provisions.

The undersigned acknowledges that if, as a result of solvency provisions of applicable law, Exchangeco is unable to redeem all Retracted Shares, the undersigned will be deemed to have exercised the Exchange Right (as defined in the Share Provisions) so as to require Patch, to purchase the unredeemed Retracted Shares.

The undersigned hereby represents and warrants to Exchangeco and Patch that the undersigned:

(select one)

[  ] is

[  ]  is not

a non-resident of Canada for purposes of the Income Tax Act (Canada).  The undersigned acknowledges that, in the absence of an indication that the undersigned is not a non-resident of Canada, withholding on account of Canadian tax may be made from amounts payable to the undersigned on the redemption or purchase of the Retracted Shares.

The undersigned hereby represents and warrants to Exchangeco and Patch that the undersigned has good title to, and owns, the share(s) represented by the Certificate to be acquired by Exchangeco or Patch, as the case may be, free and clear of all liens, claims and encumbrances except with respect to restrictions and legends required for purposes of compliance with U.S. federal securities laws.

„
 Please check box if the securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares are to be held for pick-up by the shareholder from the Transfer Agent, failing which the securities and any cheque(s) will be mailed to the last address of the shareholder as it appears on the register.

 

Date:                                              

 

Name of Person in Whose Name Securities or Cheque(s) are to be Registered, Issued or Delivered (please print)

 

Street Address or P.O. Box

 

Signature of Shareholder

 

City, Province and Postal Code

 

Signature Guaranteed by
NOTE:     (1) This panel must be completed and the Certificate, together with such additional documents as the Transfer Agent may require, must be deposited with the Transfer Agent.  The securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares will be issued and registered in, and made payable to, respectively, the name of the shareholder as it appears on the register of Exchangeco and the securities and any cheque(s) resulting from such retraction or purchase will be delivered to such shareholder as indicated above, unless the form appearing immediately below is duly completed.

(2) If this notice of retraction is for less than all of the shares represented by the Certificate, a certificate representing the remaining share(s) of Exchangeco represented by the Certificate will be issued and registered in the name of the shareholder as it appears on the register of Exchangeco, unless the share transfer power on the reverse side of the Certificate is duly completed in respect of such share(s)

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