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Exhibit 10.14
AMALGAMATION AGREEMENT made as of the 30th day of November, 1999.
B E T W E E N:
DELANO TECHNOLOGY CORPORATION, a corporation governed by the Business
Corporations Act (Ontario), ("Delano")
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XDL DELANO HOLDINGS INC., a corporation governed by the Business
Corporations Act (Ontario), ("Holdings")
RECITALS:
X. Xxxxxx was incorporated pursuant to the provisions of the Business
Corporations Act (Ontario) by Certificate and Articles of Incorporation
dated May 7, 1998 and its authorized capital consists of an unlimited
number of Common Shares, Class A Preferred Shares, Class B Preferred Shares
and Class C Preferred Shares, of which 3,500,000 Common Shares, 4,000,000
Class A Preferred Shares and 3,789,476 Class B Preferred Shares have been
issued and are currently outstanding.
B. Prior to the Effective Date of the amalgamation referenced in this
Agreement, it is anticipated that 4,326,924 Class C Preferred Shares of
Delano will be issued pursuant to the exercise of previously issued special
warrants.
C. Holdings was incorporated pursuant to the provisions of the Business
Corporations Act (Ontario) by Certificate and Articles of Incorporation
dated July 14, 1998 and its authorized capital consists of an unlimited
number of Common Shares and Class A Preferred Shares of which 3,150 Common
Shares and 1,100 Class A Preferred Shares have been issued and are
currently outstanding.
D. The parties to this Agreement, having made full disclosure each to the
other of all their respective assets and liabilities, have determined that
it is desirable that their amalgamation should be effected and, acting
under the authority contained in the Business Corporations Act (Ontario),
have agreed to amalgamate and continue as one corporation upon the terms
and conditions set out in this Agreement.
NOW THEREFORE, the parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
Whenever used in this Agreement, the following terms shall have the respective
meanings ascribed to them as follows:
(a) "Act" means the Business Corporations Act (Ontario) as amended from
time to time and includes any regulations made pursuant to such Act
and any term
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defined in the Act and not otherwise defined herein is used in this
Agreement with the same meaning;
(b) "Board" means the board of directors of the Corporation, it being
understood that references herein to matters to be decided by the
Board shall not be in derogation of the rights of the Board pursuant
to the provisions of Section 127 of the Act;
(c) "Corporation" means the corporation continuing from the amalgamation
of the parties hereto;
(d) "Expiry Date" shall have the meaning ascribed to it in the Special
Warrant Indenture, which, as at the date hereof is the date which is
the earlier to occur of (i) the fifth business day after the date on
which a receipt has been issued by the last of the securities
regulatory authorities in each province of Canada in which holders of
Special Warrants are resident for the (final) prospectus qualifying
the issuance of shares of Delano upon exercise of the Special Warrants
and (ii) June 24, 2000;
(e) "Special Warrants" means, collectively, the special warrants of Delano
issued pursuant to the Special Warrant Indenture;
(f) "Special Warrant Indenture" means the special warrant indenture dated
as of June 24, 1999 between Delano and The Trust Company of Bank of
Montreal, as such indenture may be amended or supplemented from time
to time; and
(g) "Fair Market Value" means, except as otherwise explicitly set forth
herein, (a) in respect of the Class A Preferred Shares, the Class B
Preferred Shares and the Class C Preferred Shares, in the event that
the Common Shares of Delano have been approved for trading on NASDAQ,
the closing price of the Common Shares on the date prior to the Expiry
Date, or if there is no such closing price, the opening price of the
Common Shares on the Expiry Date, or if there is no such opening price
prior to the effective time of the amalgamation, the price of the
Common Shares issued by Delano in the public offering to which the
NASDAQ listing of Common Shares relates; or (b) in the event that the
Common Shares of Delano have not been approved for trading on NASDAQ,
the amount, as determined by the directors of Delano who are not
precluded from voting in respect of the amalgamation by virtue of
Section 132(5) of the Act, in their sole discretion, that is
equivalent to the price of the share or other property, as the case
may be, on the effective date of the amalgamation in an open and
unrestricted market between informed prudent parties, acting at arm's
length and under no compulsion to act.
ARTICLE 2
IMPLEMENTATION
2.1 EFFECTIVE DATE
Delano and Holdings shall amalgamate under the provisions of the Act effective
immediately following the deemed exercise of Special Warrants on the Expiry Date
and shall continue as one
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corporation upon the terms and conditions set out in this Agreement. Subject to
Section 2.3, articles of amalgamation in prescribed form shall be sent to the
Director under the Act, together with all other documents necessary to bring the
amalgamation into effect.
2.2 EFFECT
Upon the amalgamation of Delano and Holdings and their continuance as one
corporation becoming effective:
(a) the Corporation shall possess all the property, rights, privileges and
franchises and shall be subject to all liabilities; including civil,
criminal and quasi-criminal and all contracts, disabilities and debts
of each of Delano and Holdings;
(b) a conviction against, or ruling, order or judgment in favour or
against any of Delano or Holdings may be enforced by or against the
Corporation;
(c) the Corporation shall be deemed to be the party plaintiff or the party
defendant, as the case may be, in any civil action commenced by or
against Delano or Holdings before the amalgamation has become
effective; and
(d) except for the purposes specified in the Act, the Corporation's
articles of amalgamation shall be deemed to be its articles of
incorporation and the Corporation's certificate of amalgamation shall
be deemed to be its certificate of incorporation.
2.3 TERMINATION
Notwithstanding the approval of this Agreement by their shareholders, the board
of directors of any of Delano and Holdings, without further shareholder
approval, may terminate the amalgamation and this Agreement at any time before
the issuance of a certificate of amalgamation.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 MUTUAL CONDITION PRECEDENT
The amalgamation is subject to the condition that the amalgamation and this
Agreement shall be approved by:
(a) (i) not less than two-thirds of the votes cast by the holders of
Common Shares of Holdings who vote in respect of the special
resolution to approve the amalgamation and this Agreement and not less
than two-thirds of the votes cast by the holders of Class A Preferred
Shares of Holdings, voting separately as a class, who vote in respect
of the special resolution to approve the amalgamation and this
Agreement at a special meeting of Holdings' Shareholders called for
that purpose or (ii) all of the holders of Common Shares and Class A
Preferred Shares of Holdings, in writing.
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(b) (i) not less than two-thirds of the votes cast by the holders of
Common Shares, Class A Preferred Shares, Class B Preferred Shares and
Class C Preferred Shares, each voting separately as a single class,
who vote in respect of the special resolution to approve the
amalgamation and this Agreement at a special meeting of Delano
shareholders called for that purpose or (ii) all of the holders of
Common Shares, Class A Preferred Shares, Class B Preferred Shares and
Class C Preferred Shares of Delano, in writing; and
(c) Xx. Xxxxxx Xxxxxxxxxx, in accordance with the terms of the amended and
restated shareholders agreement in respect of Delano dated as of
January 27, 1999.
ARTICLE 4
ORGANIZATION
4.1 NAME
The name of the Corporation shall be DELANO TECHNOLOGY CORPORATION.
4.2 AUTHORIZED CAPITAL
The Corporation shall be authorized to issue the following shares:
(a) an unlimited number of Common Shares;
(b) an unlimited number of Class A Special Shares;
(c) an unlimited number of Class B Special Shares; and
(d) an unlimited number of Class C Special Shares.
provided that, notwithstanding the foregoing, in the event that the issued and
outstanding preferred shares of Delano have been converted to Common Shares of
Delano in accordance with their terms prior to the effective time of the
amalgamation, the Corporation shall be authorized to issue an unlimited number
of Common Shares.
The holders of the Common Shares, the Class A Special Shares, the Class B
Special Shares and the Class C Special Shares shall have the rights, privileges,
and are subject to the restrictions and conditions set out in Schedule A to this
Agreement.
4.3 BUSINESS
There shall be no restrictions on the business the Corporation may carry on or
on the powers the Corporation may exercise.
4.4 REGISTERED OFFICE
Until changed in accordance with the Act, the place in Ontario where the
registered office of the Corporation is to be situated is the City of Toronto,
in the Province of Ontario, and the address of
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the registered office of the Corporation shall be 00 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxx Xxxx, Xxxxxxx, X0X 0X0.
4.5 BY-LAWS
Until repealed, amended, altered or added to, so far as applicable, the by-laws
of Delano at the time the amalgamation becomes effective shall be the by-laws of
the Corporation. A copy of the by-laws may be examined at the registered office
of the Corporation.
4.6 SHARE CERTIFICATE
Until altered, the forms of share certificates for the Common Shares, the Class
A Special Shares, the Class B Special Shares and the Class C Special Shares of
the Corporation shall be in the same forms respectively as the share
certificates for the Common Shares, the Class A Preferred Shares, the Class B
Preferred Shares and the Class C Preferred Shares of Delano, as such share
certificate shall be amended from time to time.
4.7 BANKING
Until repealed, amended, altered or added to, so far as applicable, the banking
resolutions of the Corporation shall be the same as the banking resolutions of
Delano.
ARTICLE 5
DIRECTORS AND OFFICERS
5.1 DIRECTORS
Until changed in accordance with the Act, the Board of the Corporation shall
consist of the Board of Delano at the time the amalgamation becomes effective.
Each director shall hold office until the first meeting of shareholders of the
Corporation, or until his successor is elected or appointed. The election of
subsequent directors shall take place thereafter in accordance with the
provisions of the by-laws of the Corporation and the Act. Subject to the
provisions of the Act and any unanimous shareholder agreement, the Board shall
manage or supervise the management of the business and affairs of the
Corporation.
5.2 OFFICERS
The officers of the Corporation shall consist of the officers of Delano at the
time the amalgamation becomes effective, until their successors are duly elected
or appointed.
ARTICLE 6
ISSUED CAPITAL
6.1 TRANSITION
At the time the amalgamation of Delano and Holdings becomes effective, their
shares become issued and fully paid shares of the Corporation, or are cancelled,
as the case may be, as follows:
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(a) Class A Preferred Shares (Holdings) - all of the issued and outstanding
Class A Preferred Shares in the capital of Holdings shall be converted into
fully paid and non-assessable Class A Special Shares, Class B Special
Shares and Class C Special Shares of the Corporation equal to that
percentage (the "Class A Preferred Applicable Percentage") of each of (A)
4,000,000 Class A Preferred Shares, (B) 2,631,580 Class B Preferred Shares
and (C) 124,308 Class C Preferred Shares that the Fair Market Value of the
Class A Preferred Shares of Holdings is of the Fair Market Value of
Holdings; and for this purpose the Fair Market Value of the Class A
Preferred Shares of Holdings is $4,646,401.60 and the aggregate Fair Market
Value of Holdings is the aggregate Fair Market Value of each of 4,000,000
Class A Preferred Shares, 2,631,308 Class B Preferred Shares and 124,308
Class C Preferred Shares.
Accordingly, each Class A Preferred Share of Holdings shall be converted
into fully paid and non-assessable Class A Special Shares, Class B Special
Shares and Class C Special Shares in accordance with the following formula:
Number of Class A Special Shares =
Class A Preferred Applicable Percentage x 4,000,000
1,100
Number of Class B Special Shares =
Class A Preferred Applicable Percentage x 2,631,580
1,100
Number of Class C Special Shares =
Class A Preferred Applicable Percentage x 124,308
1,100
(b) Common Shares (Holdings) - all of the issued and outstanding Common Shares
in the capital of Holdings shall be converted into fully paid and
non-assessable Class A Special Shares, Class B Special Shares and Class C
Special Shares of the Corporation equal to that percentage (the "Common
Share Applicable Percentage") of each of (A) 4,000,000 Class A Preferred
Shares, (B) 2,631,580 Class B Preferred Shares and 124,308 Class C
Preferred Shares that the Fair Market Value of the Common Shares of
Holdings is of the Fair Market Value of Holdings and for this purpose the
Fair Market Value of the Class A Preferred Shares of Holdings is
$4,646,401.60 and the Fair Market Value of Holdings is the aggregate Fair
Market Value of each of 4,000,000 Class A Preferred Shares and 2,631,308
Class B Preferred Shares and 124,308 Class C Preferred Shares and the Fair
Market Value of the Common Shares of Holdings is equal to the Fair Market
Value of Holdings less the Fair Market Value of the Class A Preferred
Shares of Holdings.
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Accordingly, each Common Share of Holdings shall be converted into fully
paid and non-assessable Class A Special Shares, Class B Special Shares and
Class C Special Shares in accordance with the following formula:
Number of Class A Special Shares =
Common Share Applicable Percentage x 4,000,000
3,150
Number of Class B Special Shares =
Common Share Applicable Percentage x 2,631,580
3,150
Number of Class C Special Shares =
Common Share Applicable Percentage x 124,308
3,150
(c) Common Shares - the following issued and outstanding shares become Common
Shares of the Corporation on the basis that all of the issued and
outstanding Common Shares in the capital of Delano shall be converted into
fully paid and non-assessable Common Shares of the Corporation on the basis
of one Common Share of the Corporation for each Common Share of Delano.
(d) Class B Preferred Shares - all of the issued and outstanding Class B
Preferred Shares in the capital of Delano held by Shareholders other than
Holdings shall be converted into fully paid and non-assessable Class B
Special Shares of the Corporation on the basis of one Class B Special Share
of the Corporation for each Class B Preferred Share of Delano;
(e) Class C Preferred Shares - all of the issued and outstanding Class C
Preferred Shares in the capital of Delano held by shareholders other than
Holdings shall be converted into fully paid and non-assessable Class C
Special Shares of the Corporation on the basis of one Class C Special Share
of the Corporation for each Class C Preferred Share of Delano; and
(f) Cancelled Shares - the following shares are cancelled:
(i) the 4,000,000 issued and outstanding Class A Preferred Shares in the
capital of Delano, without any repayment of capital in respect
thereof;
(ii) the 2,631,580 Class B Preferred Shares in the capital of Delano owned
by Holdings, without any repayment of capital in respect thereof;
(iii) the 124,308 Class C Preferred Shares in the capital of Delano owned
by Holdings, without any repayment of capital in respect thereof; and
(iv) all authorized but unissued shares in the capital of Delano and
Holdings;
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6.2 CONVERSION TO COMMON SHARES OF DELANO
In the event that the issued and outstanding preferred shares of Delano have
been converted to Common Shares of Delano in accordance with their terms prior
to the effective time of the amalgamation, all references in this Agreement to
Special Shares of the Corporation shall be deemed to be references to Common
Shares of the Corporation, as if such Special Shares were Class A Preferred
Shares, Class B Preferred Shares or Class C Preferred Shares of Delano, as the
case may be, and were converted to Common Shares in accordance with their terms.
6.3 FRACTIONAL SHARES
Notwithstanding anything herein contained, no fractional shares of the
Corporation will be issued in connection with this amalgamation. Where the
aggregate number of Class A Special Shares, Class B Special Shares, Class C
Special Shares or Common Shares of the Corporation, as the case may be, to be
issued to a holder of Class A Preferred Shares or Common Shares of Holdings
would result in a fraction of a share being issued, such holder shall receive,
in lieu of such fractional share, a cash payment from the Corporation equal to
the fraction of a Class A Special Share, Class B Special Share, Class C Special
Share or Common Share of the Corporation otherwise issuable, multiplied by the
Fair Market Value of the Class A Preferred Share or Common Share of Holdings, as
the case may be.
6.4 STATED CAPITAL
The aggregate stated capital of the Corporation shall be equal to the aggregate
stated capital of Holdings plus the aggregate stated capital of Delano
immediately prior to the amalgamation, less the stated capital attributable to
the shares of Delano owned by Holdings which are to be cancelled on the
amalgamation and shall be allocated among the shares of the Corporation as
follows:
(a) $1,500,018.65 to the Class A Special Shares of the Corporation;
(b) $3,600,014.37 to the Class B Special Shares of the Corporation;
(c) $22,500,005.58 to the Class C Special Shares of the Corporation; and
(d) $3,500 to the Common Shares of the Corporation
6.5 SHARE CERTIFICATES
After the amalgamation becomes effective, the shareholders of Delano and
Holdings, when requested by the Corporation, shall surrender for cancellation
the certificates representing shares held by them in Delano and Holdings,
respectively, and shall be entitled to receive, upon request, certificates for
shares of the Corporation on the basis aforesaid.
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ARTICLE 7
GENERAL
7.1 INDEMNITY
XDL Ventures Corp. covenants and agrees with Delano to indemnify and save
harmless Delano from and against any and all liabilities of Holdings that Delano
may assume pursuant to the amalgamation.
7.2 EXPENSES
Whether or not the amalgamation is consummated, Holdings agrees to pay or to
reimburse Delano for all out of pocket expenses of Delano relating to the
amalgamation.
7.3 JOINDER
XDL Ventures Corp. has executed this Agreement for the purpose of agreeing to be
bound by the provisions of Section 7.1.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date first
written above.
DELANO TECHNOLOGY CORPORATION
By: [Signed by Xxxxx Xxxxxx]
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Secretary
XDL DELANO HOLDINGS INC.
By: [Signed by Xxxxx Xxxxxx]
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President and Secretary
EXECUTED as of the date first written above, for the purposes of agreeing to be
bound by Section 6.1.
XDL VENTURES CORP.
By: [Signed by Xxxxx Xxxxxx]
-----------------------------------------
Name: Xxxxx Xxxxxx
Title:
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SCHEDULE A
DELANO TECHNOLOGY CORPORATION
ARTICLES OF AMENDMENT
COMMON SHARES
1. VOTING RIGHTS
Each holder of Common Shares shall be entitled to receive notice of and to
attend all meetings of shareholders of the Corporation and to vote thereat,
except meetings at which only holders of a specified class of shares (other than
Common Shares) or specified series of shares are entitled to vote. At all
meetings of holders of Common Shares, each holder of Common Shares shall be
entitled to one vote in respect of each Common Share held by such holder.
2. DIVIDENDS
The Common Shares shall be entitled, subject to the rights, privileges,
restrictions and conditions attaching to any other class of shares of the
Corporation, to receive any dividend declared by the Board of Directors of the
Corporation.
3. LIQUIDATION, DISSOLUTION OR WINDING-UP
In the event of any liquidation, dissolution or winding-up of the Corporation or
other distribution of assets of the Corporation among its shareholders for the
purpose of winding-up its affairs, subject to the rights, privileges,
restrictions and conditions attaching to any other class of shares of the
Corporation, the assets and funds of the Corporation available for distribution
to shareholders shall be distributed among the holders of the Common Shares, the
holders of the Class A Special Shares, the holders of the Class B Special
Shares, the holders of the Class C Special Shares and any other class or series
of shares entitled to participate in a liquidation distribution with the holders
of Common Shares, pro rata based on the number of Common Shares held by each
holder (assuming conversion into Common Shares of all Class A Special Shares,
Class B Special Shares and Class C Special Shares) and any other participating
outstanding series or class of shares convertible into Common Shares.
SPECIAL SHARES
4. DIVIDENDS ON SPECIAL SHARES
The Class A Special Shares, the Class B Special Shares and the Class C Special
Shares (collectively, the "Special Shares") shall participate equally with
respect to dividends and for greater certainty, all dividends which the
directors may declare in any fiscal year of the Corporation on the Class A
Special Shares, the Class B Special Shares and the Class C Special Shares shall
be declared and paid in equal or equivalent amounts per share on the Class A
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Special Shares, the Class B Special Shares and the Class C Special Shares at the
time outstanding without preference or priority.
Holders of outstanding Class A Special Shares shall be entitled to receive, in
any fiscal year, annually or when otherwise as declared by the Board of
Directors of the Corporation and to the extent permitted under the Business
Corporations Act (Ontario), dividends in cash at the rate of $0.03 per share per
annum plus an amount per share equal to 8% per annum of the accrued and unpaid
dividends thereon (providing for an 8% cumulative compounding return), which
shall accrue as provided herein, before any dividend is paid on the Common
Shares. Such dividends shall accrue on outstanding Class A Special Shares
cumulatively, commencing on the date of the original issuance thereof, on a
daily basis. Except to the extent otherwise permitted by these Articles,
dividends or distributions may be declared and paid upon Common Shares in any
fiscal year of the Corporation only if all accrued dividends shall have been
paid on all Class A Special Shares in accordance with this section. If, after
payment of such dividends to holders of the Special Shares, dividends are paid
to holders of Common Shares, the holders of outstanding Special Shares shall be
entitled to receive, out of any assets at the time legally available therefor,
additional dividends per share equal to the per share dividends paid to holders
of Common Shares (treating each Special Share as being equal to the number of
Common Shares into which each such Special Share could be converted pursuant to
Section 4 (Conversion) hereof, with such number determined as of the record date
for the determination of holders of Common Shares entitled to receive such
dividend).
5. LIQUIDATION, DISSOLUTION OR WINDING-UP
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of Class A
Special Shares shall be entitled to receive, prior and in preference to any
distribution of any of the assets of the Corporation to the holders of the
Common Shares or to the holders of the Class B Special Shares or the Class
C Special Shares, by reason of their ownership thereof, the Class A
Redemption Price (as defined in paragraph 5(c) below) for each Class A
Special Share then held by such holders. If the amount available for such
distribution is insufficient to pay the Class A Redemption Price on all
outstanding Class A Special Shares, the assets available for distribution
shall be distributed among the holders of the Class A Special Shares pro
rata in accordance with the total number of Class A Special Shares held by
such holders.
(b) After the payment of all preferential amounts required to be paid to the
holders of the Class A Special Shares and any other class or series of
shares of the Corporation ranking on liquidation on a parity with or senior
to the Class A Special Shares, the holders of Class B Special Shares and
the holders of Class C Special Shares shall be entitled to receive, prior
and in preference to any distribution of any of the assets of the
Corporation to the holders of the Common Shares, by reason of their
ownership thereof, for each Class B Special Share and Class C Special Share
then held by a holder, a sum equal to:
FOR HOLDERS OF CLASS B SPECIAL SHARES:
(i) the Class B Redemption Price (as defined in paragraph 5(c) below); and
(ii) an additional amount equal to the following:
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(A) 8% of the holders subscription price for the Class B Special Share, per
annum since the date of issuance (non-compounded), if the aggregate value
of all assets available for distribution to the holders of the Corporation
(prior to making any payments pursuant to this Section 2) is less than or
equal to $9,999,999; or
(B) 16% of the holders subscription price for the Class B Special Share, per
annum since the date of issuance (non-compounded), if the aggregate value
of all assets available for distribution to the holders of the Corporation
(prior to making any payments pursuant to this Section 2) is greater than
$9,999,999 but less than or equal to $19,999,999; or
(C) 24% of the holders subscription price for the Class B Special Share, per
annum since the date of issuance (non-compounded) if the aggregate value of
all assets available for distribution to the holders of the Corporation
(prior to making any payments pursuant to this Section 2) is greater than
$19,999,999.
FOR HOLDERS OF CLASS C SPECIAL SHARES:
(iii) the Class C Redemption Price (as defined in paragraph 5(c) below);
and
(iv) an additional amount equal to the following:
(A) 8% of the holders subscription price for the Class C Special Share, per
annum since the date of issuance (non-compounded), if the aggregate value
of all assets available for distribution to the holders of the Corporation
(prior to making any payments pursuant to this Section 2) is less than or
equal to $9,999,999; or
(B) 16% of the holders subscription price for the Class C Special Share, per
annum since the date of issuance (non-compounded), if the aggregate value
of all assets available for distribution to the holders of the Corporation
(prior to making any payments pursuant to this Section 2) is greater than
$9,999,999 but less than or equal to $19,999,999; or
(C) 24% of the holders subscription price for the Class C Special Share, per
annum since the date of issuance (non-compounded) if the aggregate value of
all assets available for distribution to the holders of the Corporation
(prior to making any payments pursuant to this Section 2) is greater than
$19,999,999.
If the amount available for such distribution is insufficient to
pay the Class B Redemption Price and the Class C Redemption Price
(plus any additional amount applicable pursuant to this Section
2) on all outstanding Class B Special Shares and Class C Special
Shares, the assets available for distribution shall be
distributed among the holders of the Class B Special Shares and
the holders of the Class C Special Shares pro rata based on the
number of Common Shares into which each Class B Special Share and
Class C Special Share could be converted pursuant to Section 4
(conversion) hereof.
(c) After the payment of all preferential amounts required to be paid to the
holders of the Class A Special Shares, the holders of the Class B Special
Shares and the holders of the Class C Special Shares and any other class or
series of shares of the Corporation ranking on liquidation senior to the
Common Shares, upon the liquidation, dissolution or winding up of
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the Corporation, the remaining assets and funds of the Corporation
available for distribution to its shareholders shall be distributed among
the holders of the Class A Special Shares, the holders of the Class B
Special Shares, the holders of the Class C Special Shares and the holders
of the Common Shares and any other class or series of shares entitled to
participate in liquidation distributions with the holders of Common Shares,
pro rata based on the number of Common Shares held by each holder (assuming
conversion into Common Shares of all Special Shares) and any other
participating outstanding series or class of shares convertible into Common
Shares.
(d) The amalgamation, merger or consolidation of the Corporation into or with
another corporation (where the shareholders of the Corporation are not the
majority shareholders of the merged entity), or the sale of all or
substantially all the assets of the Corporation, shall be deemed a
liquidation, dissolution or winding up of the Corporation for purposes of
this Section 2 unless the prior written consent to such transaction is
obtained from the holders of at least two-thirds of the outstanding Class A
Special Shares, from the holders of at least two-thirds of the outstanding
Class B Special Shares and from the holders of at least two thirds of the
outstanding Class C Special Shares, voting separately.
(e) In the event of a liquidation, dissolution or winding up of the Corporation
resulting in the availability of assets other than cash for distribution to
the holders of Special Shares, the cash amount deemed distributed to such
holders shall be the cash value of the property, rights or securities
distributed to such holders by the Corporation or the acquiring
corporation. If the non-cash consideration is publicly traded shares, then
the cash value for such consideration shall be the simple average of the
closing price (or closing bid price during) in the ten trading days
preceding announcement of the distribution. The Board of Directors of the
Corporation shall first determine the value of such property, rights or
other securities for such purpose, and shall notify all holders of Special
Shares of such determination. The value of such property, rights or other
securities for purposes of the distribution under this paragraph 2(e) shall
be the value as determined by the Board of Directors of the Corporation in
good faith, unless the holders of a majority of the outstanding Special
Shares shall object thereto in writing within 15 days after receiving
written notice of such value. In the event of such objection, the valuation
of such property, rights or other securities for purposes of such
distribution shall be determined by an arbitrator selected by the objecting
shareholders and the Board of Directors of the Corporation, or in the event
a single arbitrator cannot be agreed upon within 10 days after the written
objection sent by the objecting shareholders in accordance with the
previous sentence, the valuation of such property, rights or other
securities shall be determined by arbitration in which (i) the objecting
shareholders shall name one arbitrator, (ii) the Board of Directors of the
Corporation shall name a second arbitrator, (iii) the two arbitrators thus
selected shall select a third arbitrator, and (iv) the three arbitrators
thus selected shall determine the valuation of such property, rights or
other securities within 15 days for purposes of such distribution or as
soon as practicable thereafter by majority vote. The costs of such
arbitration shall be borne by the Corporation or by the holders of the
Special Shares (on a pro rata basis out of the property, rights or other
securities otherwise distributable to them) as follows: (A) if the
valuation as determined by the arbitrators is equal to or exceeds the
valuation as determined by the Board of Directors of the Corporation, the
holders of the Special Shares shall pay the costs of the arbitration, and
(B) otherwise, the Corporation shall bear the costs of the arbitration.
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6. VOTING RIGHTS
Except as otherwise provided herein and except as otherwise required by law, on
all matters submitted to a vote of holders of Common Shares, a holder of Special
Shares shall be entitled to the number of votes which is equal to the number of
Common Shares into which such Special Shares are then convertible pursuant to
Section 4 (Conversion) hereof, and in all ways shall have voting rights and
powers equal to the voting rights and powers of the Common Shares, including the
right to notice of any shareholders' meeting in accordance given to the holders
of Common Shares. Except as otherwise required by law, the Special Shares and
Common Shares vote together as a single class. Fractional votes shall not,
however, be permitted and any fractional voting rights resulting from the above
formula (after aggregating all Common Shares into which Special Shares held by
each holder could then be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
7. CONVERSION
The holders of Special Shares shall have the following conversion rights (the
"Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) OPTIONAL CONVERSION. Each Class A Special Share shall be convertible, at
the option of the holder thereof, at the office of the Corporation, into
such number of fully paid and non-assessable Common Shares as determined by
dividing $0.375 by the Class A Conversion Price (as defined below), in
effect at the time of conversion. The price at which Common Shares shall be
deliverable upon conversion (the "Class A Conversion Price") shall
initially be $0.375. Such Class A Conversion Price shall be subject to
adjustment as hereinafter provided. Each Class B Special Share shall be
convertible, at the option of the holder thereof, at the office of the
Corporation, into such number of fully paid and non-assessable Common
Shares as determined by dividing $0.95 by the Class B Conversion Price (as
defined below), in effect at the time of conversion. The price at which
Common Shares shall be deliverable upon conversion (the "Class B Conversion
Price") shall initially be $0.95. Such Class B Conversion Price shall be
subject to adjustment as hereinafter provided. Each Class C Special Share
shall be convertible, at the option of the holder thereof, at the office of
the Corporation, into one Common Share and the number of Common Shares
received upon the conversion of Class C Special Shares shall not be subject
to adjustment at any time including, without limitation, pursuant to the
provisions of paragraph 4(c).
(ii) AUTOMATIC CONVERSION. Each Special Share shall be converted automatically
into Common Shares (for the Class A Special Shares and the Class B Special
Shares, at the then effective Class A Conversion Price or Class B
Conversion Price, as the case may be) immediately prior to (A) the
completion of a Canadian public offering of Common Shares pursuant to a
prospectus or a sale of Common Shares in a public offering registered under
the U.S. Securities Act of 1933, as amended, (or the applicable law of such
other jurisdiction in which the Corporation goes public) that results in
aggregate net proceeds to the Corporation (defined as aggregate sales price
to the public, less expenses and underwriters' discounts) of at least
twenty million dollars ($20,000,000) at a price per share which is based on
a pre-offering valuation of the Corporation of not less than thirty million
dollars ($30,000,000) (a "Qualified Public Offering"); or (B) the
Corporation acquiring all or substantially all of the
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assets of any other person or business entity or entering into any
consolidation, merger, or other business combination, or transferring all
or substantially all of the Corporation's business or assets to any
partnership, joint venture or other similar jointly owned business venture,
with any other corporation or business entity, or effecting a liquidation,
winding up, reorganization or sale or other disposition of the Corporation
or of all or substantially all of the assets of the Corporation in a
transaction that in any such event either (x) provides the holders of the
Special Shares with cash proceeds, or securities of a class of shares that
is traded on the Toronto Stock Exchange, NASDAQ National Market system or
the NYSE or AMEX exchanges (or any other recognized exchange or trading
system of approximately equivalent stature) or some combination thereof
equal to at least $2.25 per Special Share, less the amount of any dividends
actually paid by the Corporation per share to the holder of Special Shares
(if such transaction closes on or prior to July 31, 2002), or $2.625 per
Special Share less the amount of any dividends actually paid by the
Corporation per share to the holder of Special Shares (if such transaction
closes after July 31, 2002 but on or prior to July 31, 2003) or (y) the
holders of at least 50% of the aggregate number of outstanding Class A
Special Shares, the holders of at least 50% of the aggregate number of
outstanding Class B Special Shares and the holders of at least 50% of the
aggregate number of outstanding Class C Special Shares, voting separately,
approve at a meeting of shareholders or otherwise in writing both the
proposed transaction and the conversion of Special Shares to Common Shares.
The Corporation shall not pay dividends (regardless of whether such
dividends have been accrued or declared) on any Special Shares that are
automatically converted pursuant to this subsection (ii) above in addition
to any dividends that were actually paid to holders of Special Shares prior
to the automatic conversion.
(b) MECHANICS OF CONVERSION. Except on an automatic conversion under
subparagraph 4(a)(ii) above, before any holder of Special Shares shall be
entitled to convert Special Shares into Common Shares, such holder shall
surrender the certificate or certificates thereof, duly endorsed, at the
office of the Corporation and shall give written notice to the Corporation
at such office that such holder elects to convert the Special Shares and
shall state therein the name or names in which such holder wishes the
certificate or certificates for Common Shares to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver at such office
to such holder, or to such holder's nominee or nominees, a certificate or
certificates for the number of Common Shares to which such holder shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
Special Shares to be converted, and the person or persons entitled to
receive the Common Shares issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such Common Shares on
such date. If a holder tenders Special Shares for conversion in connection
with any automatic conversion event described in subparagraph 4(a)(ii)
above the conversion may, at the option of the holder tendering Special
Shares for conversion, be conditioned upon the closing of the relevant
transaction, in which event the person(s) entitled to receive the Common
Shares issuable upon such conversion of the Special Shares shall not be
deemed to have converted such Special Shares until immediately prior to the
closing of such transaction.
(c) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this paragraph 4(c), the following
definitions shall apply:
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(A) Additional Common Shares shall mean all Common Shares issued (or, pursuant
to subparagraph 4(c)(iii), deemed to be issued) by the Corporation after
the Original Issue Date, other than Common Shares issued or issuable:
(1) upon conversion of Special Shares;
(2) to officers, directors or employees of, or consultants to, the
Corporation, in accordance with a plan approved by the Board of Directors
of the Corporation or pursuant to a compensation package for new senior
officers of the Corporation which the holders of a majority of the Special
Shares have agreed to in writing ("Permitted Employee Shares"), subject to
adjustment for all reclassifications, subdivisions, combinations or similar
recapitalizations of Common Shares;
(3) as a dividend or distribution on Special Shares; and
(4) by way of dividend or other distribution on Common Shares which
were, when issued, excluded from the definition of Additional Common Shares
by the foregoing clauses (1), (2) and (3) or this clause (4).
(B) "Convertible Securities" shall mean any evidence of indebtedness, and
shares (other than Common Shares) or other securities convertible into or
exchangeable for Common Shares, including the Special Shares.
(C) "Options" shall mean rights, options or warrants to subscribe for, purchase
or otherwise acquire either Common Shares or Convertible Securities.
(D) "Original Issue Date" shall mean the date on which a Special Share was
first issued.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in either the Class A
Conversion Price or the Class B Conversion Price shall be made in respect
of the issuance of Additional Common Shares unless the Net Cash
Consideration (as defined below) per share for an Additional Common Share
issued or deemed to be issued by the Corporation is less than the Class A
Conversion Price or Class B Conversion Price, as the case may be, in effect
on the date of, and immediately prior to such issue for such Special
Shares. The "Net Cash Consideration" shall mean the cash value of the
consideration received by the Corporation (determined pursuant to
subparagraph 4(c)(v)) less any commissions payable to third parties with
respect to the transaction in which the cash consideration is received.
(iii)DEEMED ISSUE OF ADDITIONAL COMMON SHARES.
(A) OPTIONS AND CONVERTIBLE SECURITIES. If the Corporation at any time or from
time to time after the Original Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum aggregate number (as set forth in
the instrument relating thereto without regard to any provision contained
therein for a subsequent adjustment of such number) of Common Shares
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Common Shares
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issued as of the time of such issue or, in case such a record date shall
have been fixed, as of the close of business on such record date.
Notwithstanding the foregoing, in respect of Special Shares
Additional Common Shares shall not be deemed to have been
issued unless the Net Cash Consideration (as defined in
subparagraph 4(c)(ii)) per share (determined pursuant to
subparagraph 4(c)(v) hereof) of such Additional Common
Shares would be less than the Class A Conversion Price or
the Class B Conversion Price, as the case may be, in effect
on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided further that
in any such case in which Additional Common Shares are
deemed to be issued:
(1) no further adjustment in the Class A Conversion Price or the Class B
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or Common Shares pursuant to the exercise of such Options or
conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide, with the
passage of time or otherwise, for any increase in the consideration payable
to the Corporation, or decrease in the number of Common Shares issuable,
upon the exercise, conversion or exchange thereof, the Class A Conversion
Price and the Class B Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(3) upon the expiration or termination of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not
have been exercised, the Class A Conversion Price and the Class B
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration or termination, be
recomputed as if:
A. in the case of Convertible Securities or Options for Common Shares, the
only Additional Common Shares issued were the Common Shares, if any,
actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration received
therefor was the consideration actually received by the Corporation for the
issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue
of all such Convertible Securities, whether or not actually converted or
exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and
B. in the case of Options for Convertible Securities, only Convertible
Securities, if any, actually issued upon the exercise thereof were issued
at the time of issue of such options, and the consideration received by the
Corporation for the
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Additional Common Shares deemed to have been then issued was the
consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the consideration deemed to
have been received by the Corporation upon the issue of the Convertible
Securities with respect to which such Options were actually exercised; and
(4) for greater certainty, no adjustment pursuant to either clause B. or C.
above shall have the effect of increasing the Class A Conversion Price or
the Class B Conversion Price which shall continue to be, for the purposes
of any recalculation of the number of Additional Common Shares deemed to be
issued, the Class A Conversion Price or the Class B Conversion Price, as
the case may be, in effect immediately prior to the initial deemed issuance
of such Additional Common Shares.
(B) SHARE DIVIDENDS AND SUBDIVISIONS. If the Corporation at any time or from
time to time after the Original Issue Date shall declare or pay any
dividend on the Common Shares payable in Common Shares, or effect a
subdivision of the outstanding shares of Common Shares into a greater
number of shares of Common Shares (by reclassification or otherwise than by
payment of a dividend in Common Shares), then, and in any such event,
Additional Common Shares shall be deemed to have been issued:
(1) in the case of any such dividend, immediately after the close of business
on the record date for the determination of holders of any class of
securities entitled to receive such dividend, or
(2) in the case of any such subdivision, at the close of business on the date
immediately prior to the date upon which such corporate action becomes
effective.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL COMMON SHARES.
If the Corporation shall issue Additional Common Shares (including
Additional Common Shares deemed to be issued pursuant to subparagraph
4(c)(iii)) for a Net Cash Consideration (as defined in subparagraph
4(c)(ii)) per share less than the Class A Conversion Price or the
Class B Conversion Price on the date of and immediately prior to such
issuance, then, and in such event, the Class A Conversion Price and/or
the Class B Conversion Price, as the case may be, shall be reduced,
concurrently with such issue, to a price (calculated to the nearest
hundredth of a cent) determined by multiplying such conversion price
by a fraction, the numerator of which shall be the sum of (1) the
number of Common Shares outstanding immediately prior to such issue,
(2) any Permitted Employee Shares which have not been issued
immediately prior to such issue, but are then issuable pursuant to
options which have been granted, and which have an exercise price
below the price of such issue and (3) the number of Common Shares
which the aggregate consideration received by the Corporation for the
total number of Additional Common Shares so issued would purchase at
such conversion price; and the denominator of which shall be the sum
of (1) the number of Common Shares outstanding immediately prior to
such issue, (2) any Permitted Employee Shares which have not been
issued immediately prior to such issue but are then issuable pursuant
to options which have been granted, and which have an exercise price
below the price of such issue, and (3) the number of such Additional
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Common Shares so issued; provided that, for the purposes of this
subparagraph 4(c)(iv), all Common Shares issuable upon conversion of
outstanding Special Shares and Convertible Securities and upon the
exercise of Options (including the conversion into Common Shares of
Convertible Securities issuable upon the exercise of such Options) and
all Additional Shares previously deemed issued pursuant to
subparagraph 4(c)(iii) (adjusted pursuant to subparagraph
4(c)(iii)(3), if applicable) shall be deemed to be outstanding.
(v) DETERMINATION OF CONSIDERATION. For purposes of this paragraph 4(c), the
consideration received by the Corporation for the issue of any Additional
Common Shares shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
(1) insofar as it consists of cash, be computed at the aggregate amount of cash
received by the Corporation excluding amounts paid or payable for accrued
interest or accrued dividends;
(2) insofar as it consists of property other than cash, be computed at the fair
value thereof at the time of such issue, as determined in good faith by the
Board of Directors of the Corporation (and if the non-cash consideration is
public traded company shares, then the price shall be the simple average of
the closing price (or closing bid price) in the ten trading days preceding
the issue or deemed issue of the Additional Common Shares); and
(3) if Additional Common Shares are issued together with other shares or
securities or other assets of the Corporation for consideration which
covers both, be the proportion of such consideration so received in respect
of the Additional Common Shares, computed as provided in clauses (1) and
(2) above, as determined in good faith by the Board of Directors of the
Corporation.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per share received by
the Corporation for Additional Common Shares deemed to have been issued
pursuant to subparagraph 4(c)(iii)(A), relating to Options and Convertible
Securities, shall be determined by dividing:
(1) the total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration (as set forth in
the instruments relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(2) the maximum number of shares of Common Shares (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
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(C) SHARE DIVIDENDS AND SHARE SUBDIVISIONS. Any Additional Common Shares deemed
to have been issued pursuant to subparagraph 4(c)(iii)(B), relating to
share dividends and share subdivisions, shall be deemed to have been issued
for no consideration.
(vi) ADJUSTMENTS FOR COMBINATIONS OR CONSOLIDATION OF COMMON SHARES. If the
outstanding Common Shares shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of Common Shares, the
Class A Conversion Price and the Class B Conversion Price in effect
immediately prior to such combination or consolidation shall, concurrently
with the effectiveness of such combination or consolidation, be
proportionately increased.
(vii)ADJUSTMENT FOR MERGERS OR REORGANIZATION, ETC. In case of any amalgamation,
consolidation or merger of the Corporation with or into another corporation
or the conveyance of all or substantially all of the assets of the
Corporation to another corporation (which is not, in any such case, deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant
to paragraph 2(c)), each Special Share shall thereafter, at the option of
the holder, be convertible into the number of shares or other securities or
property to which a holder of Common Shares deliverable upon conversion of
such Special Shares would have been entitled upon such consolidation,
merger or conveyance; and, in any such case, appropriate adjustment (as
determined by the Board of Directors of the Corporation) shall be made in
the application of the provisions herein set forth with respect to the
rights and interest thereafter of the holders of the Special Shares, to the
end that the provisions set forth herein (including provisions with respect
to changes in and other adjustments of the Class A Conversion Price and the
Class B Conversion Price) shall hereafter be applicable, as nearly as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the conversion of the Special Shares.
(d) NO IMPAIRMENT. The Board of Directors of the Corporation will at all times
in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Special Shares against impairment.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Class A Conversion Price or the Class B Conversion
Price pursuant to this Section 4, the Corporation, at its expense, promptly
shall compute such adjustment or readjustment in accordance with the terms
hereof and, upon written request of any holder of Class A Special Shares or
Class B Special Shares, as the case may be, shall cause independent public
accountants selected by the Corporation to verify such computation and
prepare and furnish to each holder of Class A Special Shares or Class B
Special Shares, as the case may be, a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Class B Special Shares or
Class C Special Shares, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii)
the conversion price applicable to such Class B Special Shares and Class C
Special Shares in effect at the time, and (iii) the number of Common Shares
and the amount, if any, of other property which at the time would be
received upon the conversion of such Class B Special Shares and Class C
Special Shares.
(f) TAXES. The Corporation shall pay any and all issue taxes that may be
payable solely in respect of any issue or delivery of shares of Common
Shares on conversion of Special Shares
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pursuant hereto; provided, however, that the Corporation shall not be
obligated to pay any transfer taxes resulting from any transfer requested
by any holder in connection with any such conversion or, for greater
certainty, any income tax payable by holders of Special Shares.
(g) RESERVATION OF SHARES ISSUABLE UPON CONVERSION. The Corporation shall at
all times reserve and keep available out of its authorized but unissued
Common Shares, solely for the purpose of effecting the conversion of the
shares of the Special Shares, such number of its Common Shares as shall
from time to time be sufficient to effect the conversion of all outstanding
Special Shares; and if at any time the number of authorized but unissued
Common Shares shall not be sufficient to effect the conversion of all then
outstanding Special Shares, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued Common Shares to such number of shares as shall be
sufficient for such purpose.
(h) FRACTIONAL SHARES. No fractional share shall be issued upon the conversion
of any Special Shares. All Common Shares (including fractions thereof)
issuable upon conversion of more than one Special Share by a holder thereof
shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of
a fraction of a Common Share, the Corporation shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).
8. REDEMPTION
The Special Shares may not be redeemed by the Corporation at any time, but the
holders may require the Corporation to redeem the Special Shares in the
following circumstances:
(a) OPTIONAL REDEMPTION. Each holder of Class A Special Shares may require the
Corporation to redeem, (i) after July 31, 2002 up to fifty percent (50%) of
the outstanding Class A Special Shares then held by such holder, and (ii)
after July 31, 2003, all or any portion of the outstanding Class A Special
Shares then held by such holder. Each holder of Class B Special Shares may
require the Corporation to redeem, (i) after December 31, 2002, up to fifty
percent (50%) of the outstanding Class B Special Shares then held by such
holder, and (ii) after December 31, 2003, all or any portion of the
outstanding Class B Special Shares then held by such holder. Each holder of
Class C Special Shares may require the Corporation to redeem, (i) after
June 22, 2003, up to fifty percent (50%) of the outstanding Class C Special
Shares then held by such holder, and (ii) after June 22, 2004, all or any
portion of the outstanding Class C Special Shares then held by such holder.
At least 60 days prior to any redemption of Special Shares, each holder of
Special Shares electing to redeem its Special Shares in accordance with
this paragraph 5(a) shall give written notice to the Corporation specifying
the number of Special Shares such holder desires the Corporation to redeem
and the date of such redemption (hereinafter referred to as a "Redemption
Date").
(b) OPTIONAL REDEMPTION UPON CHANGE OF CONTROL. Each holder of Class A Special
Shares may require the Corporation to redeem all, but not less than all, of
the outstanding Class A Special Shares then held by such holder, upon a
Change in Control. Similarly, each holder of
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Class B Special Shares and Class C Special Shares may require the
Corporation to redeem all, but not less than all, of the outstanding Class
B Special Shares and Class C Special Shares then held by such holder, upon
a Change in Control. A "Change in Control" for purposes of this paragraph
5(b) shall mean any issuance of voting securities by the Corporation or
transfer of voting securities by the holder(s) thereof (or combination
thereof) to any person or persons acting in concert or a group of
affiliated persons, which issuance and/or transfer results in such person
or persons or group holding in the aggregate voting securities having the
power to cast 50% or more of the votes on any matters submitted from time
to time to holders of voting securities of the Corporation or which
otherwise provides such persons with the ability to elect a majority of the
Board of Directors of the Corporation. Notice of such issuance and/or
transfer (the "Control Notice") shall be given to the holders of Special
Shares by the Corporation within 10 days of the earlier of the
Corporation's making such issuance and/or being informed of such transfer.
Within 60 days of receiving the Control Notice, each holder of Special
Shares electing to redeem all of such holders Class A Special Shares and/or
Class B Special Shares, as the case may be, in accordance with this
paragraph 5(b) shall give written notice to the Corporation specifying the
number of Special Shares held by such holder and the date of such
redemption (also, a "Redemption Date").
(c) REDEMPTION PRICE AND PAYMENT. The Class A Special Shares to be redeemed on
any Redemption Date pursuant to paragraphs 5(a) or 5(b) above shall be
redeemed by paying for each share in cash an amount equal to $0.375 plus
all accrued but unpaid dividends thereon up to and including the date the
redemption price is received by the holder (the "Class A Redemption
Price"). The Class B Special Shares to be redeemed on any Redemption Date
pursuant to paragraphs 5(a) or 5(b) above shall be redeemed by paying for
each share in cash an amount equal to $0.95 plus all accrued but unpaid
dividends thereon up to and including the date the redemption price is
received by the holder (the "Class B Redemption Price"). The Class C
Special Shares to be redeemed on any Redemption Date pursuant to paragraphs
5(a) or 5(b) above shall be redeemed by paying for each share in cash an
amount equal to $0.95 plus all accrued but unpaid dividends thereon up to
and including the date the redemption price is received by the holder (the
"Class C Redemption Price").
(d) REDEMPTION MECHANICS. Upon receipt of payment by each holder of Special
Shares electing to redeem pursuant to paragraphs 5(a) or 5(b) above of the
redemption price applicable to such Special Shares (the Class A Redemption
Price, the Class B Redemption Price or the Class C Redemption Price, as the
case may be), all rights of holders of such redeemed shares shall cease
with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding
for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of Special Shares on any Redemption Date are
insufficient to redeem the total number of outstanding Special Shares as to
which redemption is requested, the holders of Special Shares requesting
redemption shall share rateably in any funds legally available for
redemption of such shares according to the respective amounts which would
be payable with respect to the full number of shares owned by such holders
as to which redemption is requested if all such outstanding shares were
redeemed in full. The Special Shares not redeemed shall remain outstanding
and entitled to all rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available
for the redemption of such Special Shares, such funds will be used, at the
end of the next succeeding fiscal quarter, to redeem the balance of such
shares as to which redemption had been requested, or such portion thereof
for which
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funds are then legally available, on the basis set forth above, regardless
of whether any last date for giving notice pursuant to paragraphs 5(a) or
5(b), as the case may be, has passed.
(e) REDEEMED OR OTHERWISE ACQUIRED SHARES TO BE RETIRED. Any Special Shares
redeemed pursuant to this Section 5 or otherwise acquired by the
Corporation in any manner whatsoever shall be cancelled.
9. CURRENCY
All references herein to dollar amounts are references to Canadian dollars.
