VOTING ARRANGEMENT AGREEMENT
This Voting Arrangement Agreement (this
“ Agreement ”) is made as of December 4,
2008, between Bendix CVS Canada Inc. (the “ Purchaser
”), SmarTire Systems Inc. (the “ Vendor
”), YA Global Investments, L.P., f/k/a Cornell Capital
Partners LP, (“ YA Global ”), Xentenial Holdings
Limited (“ Xentenial ”), Staraim Enterprises
Limited (together with YA Global and Xentenial, the “
Convertible Debenture Holders ”).
WHEREAS:
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The Purchaser, Bendix Commercial Vehicle
Systems LLC (as guarantor of the Purchaser), the Vendor and certain
subsidiaries of the Vendor intend to enter into an Asset Purchase
Agreement (the “ Asset Purchase Agreement ”)
which provides for, among other things, the purchase by the
Purchaser of certain assets of the Vendor (the “
Assets ”), pursuant to a letter of intent dated
October 15, 2008.
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Pursuant to the Asset Purchase Agreement, the
Vendor covenants with the Purchaser that it will hold a special
meeting of the shareholders of the Vendor (the “ Special
Meeting ”) to approve and adopt the special resolutions
attached as Exhibit 1 to Appendix A (the “ Special
Resolutions ”).
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The Convertible Debenture Holders, upon
conversion of the necessary amount of convertible debt into common
shares of the Vendor, will vote such shares to approve the Special
Resolutions at the Special Meeting in accordance with the terms and
conditions hereinafter set forth.
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It is in the best interests of the Convertible
Debenture Holders that the purchase and sale of the Assets
contemplated in the Asset Purchase Agreement proceed.
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As a condition precedent to the Purchaser
entering into the Asset Purchase Agreement, the Vendor and the
Convertible Debenture Holders have agreed to enter into this
Agreement with the Purchaser.
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NOW, THEREFORE, in consideration of the
foregoing premises, $1 paid by each party to each other party
hereto and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
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Each of the Convertible Debenture Holders
represents and warrants to the Purchaser that:
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collectively the Convertible Debenture Holders
have the right to convert a portion of their convertible debt into
at least twenty-four billion common shares of the Vendor (the
“ Conversion Shares ”).
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neither the execution, delivery or performance
of this Agreement will constitute a violation of, or conflict with,
or default under, any contract, understanding, arrangement or
restriction of any kind to which it is a party, including any of
its organizational documents; and
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this Agreement is a valid and binding
agreement enforceable by the Purchaser against it in accordance
with its terms, subject to applicable laws, including, without
limitation, laws relating to fiduciary duties and laws relating to
bankruptcy, insolvency, reorganization and other laws of general
application relating to or affecting creditors’ rights
generally and the availability of equitable remedies.
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Each of the Convertible Debenture Holders
hereby agrees and undertakes to cause, prior to the Time of Closing
(as defined in the Asset Purchase Agreement), and subject to the
satisfaction of the Conditions (as defined below):
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to exercise its right to convert the necessary
amount of convertible debt to provide the required number of common
shares of the Vendor to pass the Special Resolutions, provided that
the Vendors shall not be required to convert more than
US$2,000,000.00 of their convertible debt in connection with the
same;
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to enter into the voting agreement with the
Purchaser and Vendor in the form attached as Appendix A (the
“ Voting Agreement ”); and
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to act in accordance with its obligations
under the Voting Agreement.
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Each of the Convertible Debenture Holders
hereby acknowledges and confirms that the collateral assignment to
YA Global (in its capacity as collateral agent for the Convertible
Debenture Holders) of, and security interest in and to, payments
due the Vendor under the Asset Purchase Agreement are subject to
the Purchaser's set-off rights set forth in the Purchase
Agreement.
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As used herein, “ Conditions
” means: (i) the Asset Purchase Agreement shall not have
terminated in accordance with its terms; (ii) neither the Vendor
nor any one of the Convertible Debenture Holders shall have
received or become subject to any executive, administrative or
judicial order, writ, injunction, stay or other process prohibiting
or restricting such party from taking any of the actions
contemplated under this Agreement, the Asset Purchase Agreement or
any Voting Agreement; (iii) there shall not have been commenced or
threatened in writing against any of the Convertible Debenture
Holders any material action or proceeding relating to any of the
transactions contemplated under this Agreement or any Voting
Agreement whereby such Convertible Debenture Holder believes,
acting reasonably, there is a material risk that such action or
proceeding has merit, provided, however that if the Purchaser,
acting reasonably, disagrees that there is such a material risk,
the parties will promptly obtain a legal opinion from a third party
law firm reasonably acceptable to both parties as to
whether there is such a material risk, and if such legal opinion
indicates that there is no such material risk, this condition shall
be satisfied; and (iv) the performance by a Convertible Debenture
Holder of its obligations hereunder or under any Voting Agreement
would constitute a breach by such Convertible Debenture Holder of
applicable law, as determined by such Convertible Debenture Holder
acting reasonably, provided, however, that if the Purchaser, acting
reasonably, disagrees with such Convertible Debenture Holder as to
whether such performance would cause a breach of applicable law,
the parties will promptly obtain a legal opinion from a third party
law firm reasonably acceptable to both parties as to whether such
performance would constitute a violation of applicable law, and if
such legal opinion indicates that no such violation or breach would
occur, this condition shall be satisfied; provided ,
that if, any event described in the foregoing clause (ii),
(iii), or (iv) occurs involving one or more of the Convertible
Debenture Holders, each such Convertible Debenture Holder agrees to
use its commercially reasonable best efforts to (x) cause such
order, writ, injunction, stay, process, action or proceeding to be
dismissed or threat to be withdrawn as to such Convertible
Debenture Holder as soon as practicable, and/or (y) determine and
act in a manner in which to perform its obligations hereunder which
does not, or will not, constitute a breach of such applicable law,
provided that the Convertible Debenture Holders shall not be
required to pay more than US$250,000.00 in out of pocket expenses
(including, without limitation, attorneys fees and expenses) or
payments to third parties in order to obtain or satisfy
conditions (x) or (y). If at any time any party
hereto believes condition (ii), (iii) or (iv) may become
applicable, it will forthwith both notify the other parties and
provide all relevant information to the other parties and, if
applicable, any appointed third party law firm in order for each of
the parties and such law firm to make its own determination.
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Each of the parties will from time to time
execute and deliver all such further documents and instruments and
do all acts and things as any other party may reasonably require to
effectively carry out or better evidence or perfect the full intent
and meaning of this Agreement.
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This Agreement shall be binding upon and enure
to the benefit of the parties and their respective successors and
assigns.
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This Agreement shall be governed by and
construed in accordance with the laws of the Province of British
Columbia and the laws of Canada applicable therein.
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For the purpose of all legal proceedings, this
Agreement will be deemed to have been performed in the Province of
British Columbia and the courts of the Province of British Columbia
will have jurisdiction to entertain any action arising under this
Agreement. Each of the parties attorns to the
jurisdiction of the courts of the Province of British Columbia.
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This Agreement may be executed in any number
of counterparts, each of which will be deemed to be an original and
all of which taken together will be deemed to constitute one and
the same instrument.
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Delivery of an executed signature page to
th
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