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ARTICLES OF AMENDMENT
The articles of the corporation are amended as follows:
WHEREAS pursuant to Articles of Amendment of the Corporation dated May
12, 1998, the Directors of the Corporation were authorized to fix the number of
Class "B" Special Shares in each series and to determine the rights, privileges,
restrictions and conditions attaching to such number of Class "B" Special Shares
in each series;
AND WHEREAS the Directors of the Corporation now wish to exercise their
authority conferred on them pursuant to the said Article of Amendment of the
Corporation dated May 12, 1998;
A. The Directors of the Corporation hereby fix and authorize and the Corporation
is hereby authorized to issue an unlimited number of Class "B" Special Shares.
B. The Directors of the Corporation hereby determine that the rights,
privileges, restrictions and conditions (collectively, the "Class "B"
Special Share Provisions") attaching to such Class "B" Special Shares
of the Corporation shall be as follows:
The rights, privileges, restrictions and conditions (collectively, the
"Class "B" Special Share Provisions") attaching to the Class "B" Special Shares
are as follows:
1. INTERPRETATION
1.1 Definitions. Where used in these Class "B" Special Share Provisions, the
following words and phrases shall have the following meanings, respectively:
"Capital Reorganization" shall have the meaning ascribed thereto in subsection
5.7.(4);
"Current Market Price" shall have the meaning ascribed thereto in subsection
5.8.(8);
"dividends in the ordinary course" shall have the meaning ascribed thereto in
subsection 5.7.(1);
"Exercise Number" shall have the meaning ascribed thereto in Section 5.1;
"Extraordinary Dividend" shall have the meaning ascribed thereto in subsection
5.7(1);
"Reorganization" shall have the meaning ascribed thereto in subsection 5.7.(1);
"Restructured Purchase Agreement" shall have the meaning ascribed thereto in
subsection 5.7(5)(a)(vi);
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"Rights Offering" shall have the meaning ascribed thereto in subsection 5.7.(2);
"Rights Period" shall have the meaning ascribed thereto in subsection 5.7.(2);
and
"Special Distribution" shall have the meaning ascribed thereto in subsection
5.7.(3).
In addition, there are definitions set forth in subsection 5.7(5)
hereof for the purposes thereof.
1.2 Gender, etc. Words importing only the singular number include the plural and
vice versa and words importing any gender include all genders.
1.3 Currency. All monetary amounts referred to herein shall be in lawful money
of The United States of America.
1.4 Headings. The division of these Class "B" Special Share Provisions into
sections, subsections, paragraphs, or other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.
2. VOTING
2.1 Voting Rights. Except for meetings at which only holders of another
specified class or series of shares of the Corporation are entitled to vote
separately as a class or series, the holders of the Class "B" Special Shares
shall be entitled to receive notice of and to attend all meetings of the
shareholders of the Corporation and shall be entitled at all meetings of the
shareholders of the Corporation to the greater of (a) one vote per share, and
(b) such number of votes per share as shall equal the number of Common Shares
into which each Class "B" Special Share could be converted at the record date
for determination of the shareholders entitled to vote on any matter, or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited, such votes to be counted together with all
other shares of the Corporation having general voting power and not separately
as a class. Fractional votes by the holders of Class "B" Special Shares shall
not, however, be permitted and any fractional voting rights shall, after
aggregating all Common Shares into which Class "B" Special Shares held by each
holder could be converted, be rounded to the nearest whole number.
3. DIVIDENDS
3.1 Discretionary Dividends. The holders of the Class "B" Special Shares shall
be entitled to receive and the Corporation shall pay to them, always in
preference and priority to any payment of dividends on the Common Shares of the
Corporation and any other shares of the Corporation ranking junior to the Class
"B" Special Shares, but rateably with the holders of the Class "A" Special
Shares , as and when declared by the board of directors of the Corporation out
of moneys of the Corporation properly applicable to the payment of dividends,
such dividends as the board of directors of the Corporation may from time to
time declare on the Class "B" Special
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Shares.
3.2 Restrictions. No dividends shall at any time be declared or paid or set
apart for payment on the Class "A" Special Shares or on the Common Shares or any
other shares of the Corporation ranking junior to the Class "B" Special Shares
unless all dividends up to and including the dividend payable for the last
completed period for which such dividends shall be payable on the Class "B"
Special Shares then issued and outstanding shall have been declared and paid or
set apart for payment at the date of such declaration or payment or setting
apart for payment on the Class "A" Special Shares, the Common Shares or such
other shares of the Corporation ranking junior to the Class "B" Special Shares;
nor shall the Corporation call for redemption, redeem, purchase for
cancellation, acquire for value or reduce or otherwise pay off any of the Class
"B" Special Shares (less than the total amount then outstanding) or any the
Class "A" Special Shares, Common Shares or any other shares of the Corporation
ranking junior to the Class "B" Special Shares unless and until all dividends up
to and including the dividends payable for the last completed period for which
such dividends shall be payable on the Class "B" Special Shares then issued and
outstanding shall have been declared and paid or set apart for payment at the
date of such call for redemption, purchase, acquisition, reduction or other
payment.
4. DISSOLUTION, LIQUIDATION OR WINDING-UP
4.1 Priority to Entitlement. In the event of the dissolution, liquidation or
winding-up of the Corporation or other distribution of property or assets of the
Corporation among its shareholders for the purpose of winding up its affairs,
the holders of the Class "B" Special Shares shall be entitled to receive from
the property and assets of the Corporation for each Class "B" Special Share held
by them respectively a sum equivalent to the result obtained when the amount in
the stated capital account for the Class "B" Special Shares is divided by the
number of issued and outstanding Class "B" Special Shares, together with a
fixed, preferential, cumulative cash dividend at the annual rate per share of
eight per cent (8%) of the amount equal to the amount recorded in the stated
capital account maintained in respect of the Class "B" Special Shares divided by
the number of Class "B" Special Shares outstanding, which shall accrue and be
cumulative from the date of issue of such Class "B" Special Shares, before any
amount shall be paid or any property or assets of the Corporation distributed to
the holders of the Common Shares or shares of any other class ranking junior to
the Class "B" Special Shares, but on a rateable basis with the holders of the
Class "A" Special Shares for payments of a like nature to which such holders may
be entitled pursuant to the rights and privileges attaching to the Class "A"
Special Shares. After the payment to the holders of the Class "B" Special Shares
and the Class "A" Shares of the amounts so payable to them, the holders of
Common Shares shall be entitled to receive pro rata from the property and assets
of the Corporation an amount equal to the aggregate amount in the stated capital
account for the Common Shares.
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5. CONVERSION
5.1 Conversion Right. The holders of the Class "B" Special Shares shall have the
right at any time to convert Class "B" Special Shares into Common Shares on the
basis of one Common Share (the "Exercise Number") for each Class "B" Special
Share so converted.
5.2 Manner of Exercise of Conversion Right. The conversion right herein provided
for may be exercised by notice in writing given to the Corporation at its
registered office, accompanied by the certificate or certificates representing
the Class "B" Special Shares in respect of which the holder thereof desires to
exercise such right of conversion. Such notice shall be signed by such holder or
his duly authorized attorney and shall specify the number of Class "B" Special
Shares which the holder desires to have converted. If less than all the Class
"B" Special Shares represented by a certificate or certificates accompanying any
such notice are to be converted, the holder shall be entitled to receive, at the
expense of the Corporation, a new certificate representing the number of Class
"B" Special Shares comprised in the certificate or certificates surrendered as
aforesaid which are not to be converted.
5.3 New Certificates on Conversion. On any conversion of Class "B" Special
Shares, the share certificates for Common Shares of the Corporation resulting
therefrom shall be issued in the name of the registered holder of the Class "B"
Special Shares converted or in such name or names as such registered holder may
direct in writing (either in the notice herein referred to or otherwise). In
either instance the transfer form on the back of the certificates in question
shall be endorsed by the registered holder of the Class "B" Special Shares or
his duly authorized attorney, with signature guaranteed in a manner satisfactory
to the Corporation, provided that the Corporation may waive the necessity for
any such guarantee.
5.4 Deemed Conversion. Subject as hereinafter provided, the right of a holder of
Class "B" Special Shares to convert the same into Common Shares shall be deemed
to have been exercised, and the registered holder of the Class "B" Special
Shares to be so converted (or any person or persons in whose name or names any
such registered holder of Class "B" Special Shares shall have directed
certificates representing Common Shares to be issued) shall be deemed to have
become (and at all times on such date to be) a holder of Common Shares of record
of the Corporation for all purposes on the date of surrender of one or more
certificates duly endorsed representing the Class "B" Special Shares to be
converted.
5.5 Right of Corporation to Convert. On and after either of the following events
having occurred:
(a) the closing price of the Common Shares (which shall be determined prior
to any Reorganization (as hereinafter defined)) on Nasdaq, or, if the
Common Shares are not then quoted on Nasdaq, on such stock exchange on
which the Common Shares are listed as may be selected by the directors
for such purpose, for each and every day of any forty (40) consecutive
trading days was not less than U.S. $11.00; or
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(b) all of the holders of the Class "B" Special Shares as a group
beneficially hold securities convertible, directly or indirectly, or
exercisable into Common Shares, which securities then represent less
than five per cent (5%) of the then issued and outstanding Common
Shares on a fully diluted basis;
the Corporation shall have the right at any time and from time to time to
convert any or all of the Class "B" Special Shares then outstanding or issued
thereafter, in accordance with the procedures set forth in Section 5.6, without
the payment of additional consideration by or to the holder of the Class "B"
Special Shares into the number of fully paid and non-assessable Common Shares in
accordance with the Exercise Number.
5.6 Exercise of Corporation's Right to Convert. In the event the Corporation
wishes to exercise its right to convert pursuant to Section 5.5 hereof, it
shall, at least thirty (30) days prior to the date specified for such
conversion, mail to each person who on such date of mailing is a registered
holder of Class "B" Special Shares, a notice in writing of the exercise by the
Corporation of its right to convert Class "B" Special Shares. Such notice shall
be mailed by letter, postage prepaid, addressed to each such holder at his
address as it appears on the records of the Corporation or in the event of the
address of any such holder not so appearing then to the last known address of
such holder; provided, however, that accidental failure to give any such notice
to one or more of such holders shall not affect the validly of such conversion.
Such notice shall set out the total number of Class "B" Special Shares to be
converted, the number of Class "B" Special Shares held by such holder to be
converted, the Exercise Number and the date on which such conversion will take
place. The Class "B" Special Shares specified for conversion in the
aforementioned notice shall be converted automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or the transfer
agent, and provided further that the Corporation shall not be obligated to issue
certificates evidencing the Common Shares issuable upon such conversion unless
the certificates evidencing such Class "B" Special Shares specified for
conversion in the aforementioned notice are either delivered to the Corporation
or the transfer agent as above provided, or the holder notifies the Corporation
or the transfer agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such lost, stolen or
destroyed certificates. The Corporation shall, as soon a practicable after such
delivery, or such agreement regarding indemnification in the case of a lost,
stolen or destroyed certificate, issue and deliver at such office to such holder
of Class "B" Special Shares, a certificate of certificates (as requested by such
holder) representing the aggregate number of Common Shares to which the holder
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made on the date specified in the notice of conversion mailed as aforesaid, 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 specified date. If fewer than all of the Class "B"
Special Shares represented by the certificate or certificates are to be
converted, the holder shall be entitled to receive, at the expense of the
Corporation, a new certificate representing the Class "B" Special Shares
represented by the
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certificate or certificates delivered as aforesaid which are not to be
converted.
5.7 Adjustment of Exercise Number. Subject to the provisions of Sections 5.8 and
5.9, the Exercise Number shall be subject to adjustment from time to time in the
following events and manner:
(1) Reorganization. If and whenever at any time after the date
hereof the Corporation shall:
(a) issue Common Shares to all or substantially all the
holders of the Common Shares as a stock dividend (an
"Extraordinary Dividend"), or
(b) make a distribution on its outstanding Common Shares
payable in Common Shares or securities exchangeable
for or convertible into Common Shares (except by way
of a stock dividend representing dividends in the
ordinary course (as hereinafter defined)), or
(c) subdivide its outstanding Common Shares into a
greater number of shares, or
(d) consolidate its outstanding Common Shares into a
smaller number of shares,
(any of such events in these clauses (a), (b), (c) and (d)
being called a "Reorganization"), then the Exercise Number
shall be adjusted, effective immediately after the record date
at which the holders of Common Shares are determined for the
purpose of the Reorganization, by multiplying the Exercise
Number in effect immediately prior to such record date by a
fraction, the denominator of which shall be the number of
Common Shares outstanding on such record date before giving
effect to such Reorganization and the numerator of which shall
be the number of Common Shares outstanding immediately after
giving effect to such Reorganization (including, in the case
where securities exchangeable for or convertible into Common
Shares are distributed, the number of Common Shares that would
have been outstanding had such securities been exchanged for
or converted into Common Shares on such record date). For the
purposes of this subsection (1), "dividends in the ordinary
course" shall mean cash dividends paid on the Common Shares in
any fiscal year of the Corporation provided that where shares
in the capital of the Corporation are distributed to a holder
of Common Shares in lieu of a cash dividend pursuant to a
dividend reinvestment plan, such dividend shall be deemed to
be a cash dividend if the value at which such shares are
issued in satisfaction of such dividend is not less than 95%
of the Current Market Price (as hereinafter defined) of the
Common Shares at the time of declaration thereof.
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(2) Rights Offering. If and whenever at any time after the date
hereof the Corporation shall issue rights, options or warrants
to all or substantially all of the holders of the Common
Shares under which such holders are entitled, during a period
expiring not more than forty-five (45) days after the record
date for such issue (the "Rights Period"), to subscribe for or
purchase Common Shares or securities exchangeable for or
convertible into Common Shares at a price per share to the
holder (or, in the case of securities exchangeable for or
convertible into Common Shares, at a conversion or exchange
price per share at the date of issue of such securities to the
holder) of less than 90% of the Current Market Price (as
hereinafter defined) for the Common Shares on such record date
(any of such events being called a "Rights Offering"), then
the Exercise Number shall be adjusted effective immediately
after the end of the Rights Period to a number determined by
multiplying the Exercise Number in effect immediately prior to
the end of the Rights Period by a fraction:
(a) the denominator of which shall be the aggregate of:
(i) the number of Common Shares outstanding as
of the record date for the Rights Offering,
and
(ii) a number determined by dividing (A) either
(I) the product of the number of Common
Shares issued or subscribed for during the
Rights Period upon the exercise of the
rights, warrants or options under the
Rights Offering and the price at which each
such Common Share is offered, or, as the
case may be, (II) the product of the
exchange or conversion price of such
securities offered and the number of Common
Shares for or into which the securities
issued or subscribed for pursuant to the
Rights Offering could have been exchanged or
converted during the Rights Period, by (B)
the Current Market Price (as hereinafter
defined) of the Common Shares as of the
record date for the Rights Offering, and
(b) the numerator of which shall be the number of Common
Shares outstanding or the number of Common Shares
which would be outstanding if the securities
exchangeable or convertible were exchanged or
converted into Common Shares during the Rights
Period, in both cases after giving effect to the
Rights Offering and including the number of Common
Shares actually issued or subscribed for during the
Rights Period upon exercise of the rights, warrants
or options under the Rights Offering.
(3) Special Distribution. If and whenever at any time after the
date hereof the Corporation shall fix a record date for the
issue or the distribution to all or substantially all the
holders of the Common Shares of (A) shares of the
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Corporation of any class other than Common Shares, (B) rights,
options or warrants to acquire or securities exchangeable for
or convertible into Common Shares or shares of the Corporation
of any class other than Common Shares or property or other
assets of the Corporation, (C) evidences of indebtedness, or
(D) any property or other assets and if such issuance or
distribution does not constitute a Reorganization or a Rights
Offering (any of such non-excluded events being herein called
a "Special Distribution"), the Exercise Number shall be
adjusted effective immediately after such record date to a
number determined by multiplying the Exercise Number in effect
on such record date of the Special Distribution by a fraction:
(a) the denominator of which shall be:
(i) the product of the number of Common Shares
outstanding on such record date and the
Current Market Price (as hereinafter
defined) of the Common Shares on such record
date, less
(ii) the fair market value, as determined on a
reasonable basis by the directors of the
Corporation (whose determination shall be
conclusive), to the holder of the Common
Shares of the shares, rights, options,
warrants, evidences of indebtedness or
property or other assets issued or
distributed in the Special Distribution, and
(b) the numerator of which shall be the number of Common
Shares outstanding on such record date multiplied by
the Current Market Price (as hereinafter defined) of
the Common Shares on such record date.
(4) Capital Reorganization. If and whenever at any time after the
date hereof there shall be a reclassification of the Common
Shares at any time outstanding or a change of the Common
Shares into other shares or into other securities (other than
a Reorganization), or a consolidation, amalgamation or merger
of the Corporation with or into any other corporation or other
entity (other than a consolidation, amalgamation or merger
which does not result in any reclassification of the
outstanding Common Shares or a change of the Common Shares
into other shares), or a transfer of the undertaking or assets
of the Corporation as an entirety or substantially as an
entirety to another corporation or other entity (any of such
events being herein called a "Capital Reorganization"), any
holder of Class "B" Special Shares who exercises his right of
conversion after the effective date of such Capital
Reorganization shall be entitled to receive, and shall accept
in lieu of the number of Common Shares to which such holder
was theretofore entitled upon such conversion, the aggregate
number of shares, other securities or other property which
such holder would have been entitled to receive as a result of
such Capital Reorganization if, on the effective date thereof,
the holder had been the
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registered holder of the number of Common Shares to which such
holder was theretofore entitled upon conversion. If determined
appropriate by the directors of the Corporation, appropriate
adjustments shall be made as a result of any such Capital
Reorganization in the application of the provisions set forth
in this Section 5.7 with respect to the rights and interests
thereafter of holders of Class "B" Special Shares so that the
provisions set forth in this Section 5.7 shall thereafter
correspondingly be made applicable as nearly as may reasonably
be in relation to any shares, securities or other property
thereafter deliverable upon the conversion of a Class "B"
Special Share.
(5) Adjustments for Sale of Common Shares Below Conversion Price.
(a) Special Definitions. For purposes of this subsection
5.7(5), the following definitions shall apply:
(i) "Additional Common Shares" shall mean all
Common Shares issued (or, pursuant to
paragraph 5.7(5)(c)(i) below, deemed to be
issued) by the Corporation after the
Original Issue Date, other than Common
Shares issued or issuable:
(A) by reason of a dividend, stock
split, split-up or other
distribution on Common Shares issued
(or pursuant to paragraph
5.7(5)(c)(i) below deemed to be
issued) by the Corporation after the
Original Issue Date; or
(B) pursuant to or upon the exercise of
Rights excluded from the definition
of "Option" in paragraph
5.7(5)(a)(iv);
(ii) "Conversion Price" shall mean the conversion
price of Class "B" Special Shares into
Common Shares in effect immediately prior to
any Reorganization, Rights Offering, Special
Distribution or Capital Reorganization,
which shall be deemed to be U.S.$3.40 at the
date hereof;
(iii) "Convertible Securities" means any evidences
of indebtedness, shares or other securities
directly or indirectly convertible into or
exchangeable for Shares, other than any
Rights excluded from the definition of
"Option" in Subsection 5.7(a)(iv);
(iv) "Option" shall mean Shares or rights,
options or warrants to subscribe for,
purchase or otherwise acquire Shares or
Convertible Securities (collectively,
"Rights"), excluding (A) up to that number
of Rights granted to employees or
consultants of the
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Corporation prior to the Original Issue Date
pursuant to an option plan adopted by the
board of directors of the Corporation
(subject to appropriate adjustment for any
stock dividend, stock split, combination or
other similar recapitalization affecting
such Shares); (B) Rights granted by the
Corporation prior to the Original Issue
Date; (C) any Rights granted by the Company
to the Continuing Investors pursuant to the
Restructured Purchase Agreement, provided
that the terms attaching to such Rights are
not materially less favorable to the Company
than the Restructured Rights Terms; and (D)
for greater certainty, any Common Shares
issued or to be issued by the Company as
part of the consideration paid or payable to
the vendors on the acquisition of any one or
more of those corporations named within the
defined term Pre- Approved Transaction in
the Restructured Purchase Agreement. All
capitalized terms used in this subsection
5.7(5)(a)(iv) and not separately defined
herein have the same meanings, respectively,
as ascribed to them in the Restructured
Purchase Agreement;
(v) "Original Issue Date" shall mean the date of
these Articles of Amendment;
(vi) "Restructured Purchase Agreement" means that
certain Senior Subordinated Unsecured
Convertible Notes Purchase Agreement among
the Company, certain investors and others
entered into on November o, 1998; and
(vii) "Shares" means shares of any class in the
capital of the Company (other than the Class
"A" Special Shares) which may be authorized
for issuance from time to time by the
Company.
(b) No Adjustment of Conversion Price. No adjustment in
the number of Common Shares into which the Class "B"
Special Shares are convertible shall be made by
adjustment in the applicable Conversion Price
thereof; (i) unless the consideration per share
(determined pursuant to clause 5.7(5)(e)) for an
Additional Common Share issued or deemed to be issued
by the Corporation is less than the applicable
Conversion Price in effect on the date of, and
immediately prior to, the issue of such Additional
Common Shares, or (ii) if prior to such issuance, the
Corporation receives written notice from the
representative of holders of at least a majority of
the Class "B" Special Shares agreeing that no such
adjustment shall be made as the result of the
issuance of Additional Common Shares.
(c) Issue of Securities; Deemed Issue of Additional
Common Shares.
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(i) 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 number of Common Shares (as set
forth in the instrument relating thereto
without regard to any provision contained
therein for a subsequent adjustment of such
number) 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 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, provided that
Additional Common Shares shall not be deemed
to have been issued unless the consideration
per share (determined pursuant to clause
5.7(5)(e) hereof) of such Additional Common
Shares would be less than the applicable
Conversion Price in effect on the date of
and immediately prior to such issue, or such
record date, as the case may be.
(ii) No further adjustment in the Conversion
Price shall be made upon the subsequent
issue of Convertible Securities or Common
Shares upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(iii) 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 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.
(iv) No readjustment pursuant to clause (iii)
above shall have the effect of increasing
the Conversion Price to an amount which
exceeds the lower of (i) the Conversion
Price on the original adjustment date, or
(ii) the Conversion Price that resulted from
any other issuance of Additional Common
Shares between the original adjustment date
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and such readjustment date.
(v) Upon the expiration or termination of any
unexercised Option, the Conversion Price
shall not be adjusted and the Additional
Common Shares deemed issued as the result of
the original issue of such Option shall not
be deemed issued for the purposes of any
subsequent adjustment of the Conversion
Price.
(vi) In the event of any change in the number of
Common Shares issuable upon the exercise,
conversion or exchange of any Option or
Convertible Security, including, but not
limited to, a change resulting from the
anti-dilution provisions thereof, the
Conversion Price then in effect shall
forthwith be readjusted to such Conversion
Price as would have been obtained had the
adjustment which was made upon the issuance
of such Option or Convertible Security not
exercised or converted prior to such change
been made upon the basis of such change, but
no further adjustment shall be made for the
actual issuance of Common Shares upon the
exercise or conversion of any such Option or
Convertible Security.
(d) Adjustment of Conversion Price Upon Issuance of
Additional Common Shares. In the event the
Corporation shall at any time after the Original
Issue Date issue Additional Common Shares (including
Additional Common Shares deemed to be issued pursuant
to clause 5.7(5)(c), but excluding shares issued upon
a Reorganization), without consideration or for a
consideration per share less than the applicable
Conversion Price in effect on the date of and
immediately prior to such issue, then, and in such
event, the Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated
to the nearest cent) determined by multiplying the
Conversion Price at such time by a fraction, (1) the
numerator of which shall be (A) the number of Common
Shares outstanding immediately prior to such issue
plus (B) 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
(2) the denominator of which shall be the number of
Common Shares outstanding immediately prior to such
issue plus the number of such Additional Common
Shares so issued; provided that, for the purpose of
this clause 5.7(5)(d), all Common Shares issuable
upon exercise of the warrants held by holders of the
Class "B" Special Shares immediately prior to such
issue shall be deemed to be outstanding, and
immediately after any Additional Common Shares are
deemed issued pursuant to clause 5.7(5)(c) (other
than shares excluded from the definition of
"Additional Common Shares"), such Additional
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Common Shares shall be deemed to be outstanding.
Notwithstanding the foregoing, the applicable Conversion Price
shall not be so reduced at such time if the amount of such
reduction would be an amount less than $.01, but any such
amount shall be carried forward and reduction with respect
thereto made at the time of and together with any subsequent
reduction which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $.01 or
more.
(e) Determination of Consideration. For purposes of this
subsection 5.7(5), the consideration received by the
Corporation for the issue of any Additional Common
Shares shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate of cash
received by the Corporation,
excluding amounts paid or payable
for accrued interest or accrued
dividends;
(B) insofar as it consists of property
other than cash, be computed at the
fair market value thereof at the
time of such issue, as determined in
good faith by the board of directors
of the Corporation; and
(C) in the event 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, computed
as provided in clauses (1) and (2)
above, as determined in good faith
by the board of directors of the
Corporation; and
(ii) Options and Convertible Securities. The
consideration per share received by the
Corporation for Additional Common Shares
deemed to have been issued pursuant to
clause 5.7(5)(c) relating to Options and
Convertible Securities shall be determined
by dividing (x) 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 provision
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
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for Common Shares, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by (y) the maximum number 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.
5.8 Rules Regarding Calculation of Adjustment of Exercise Number. For the
purposes of Section 5.7:
(1) The adjustments provided for in Section 5.7 are cumulative and
such adjustments shall be made successively whenever an event
referred to therein shall occur, subject to the following
subsections of this Section 5.8.
(2) No adjustment in the Exercise Number shall be required unless
it would result in a change of at least one one-hundredth of a
share, as presently constituted, provided, however, that any
adjustments which, except for the provisions of this
subsection (2) of this Section 5.8 would otherwise have been
required to be made shall be carried forward and taken into
account in any subsequent adjustment.
(3) No adjustment in the Exercise Number shall be made in any of
the following instances:
(a) in respect of any event described in Section 5.7 if
holders of Class "B" Special Shares are entitled to
participate in such event on the same terms, mutatis
mutandis, as if such holders had converted their
Class "B" Special Shares into Common Shares prior to
or on the effective date or record date of such
event; provided that the foregoing shall not prevent
such adjustment to be made in respect of the events
referred to in clauses (c) and (d) of subsection (1)
of Section 5.7;
(b) in respect of the issue from time to time of Common
Shares acquired on the conversion of Class "B"
Special Shares which shall be deemed not to be a
Reorganization;
(c) in respect of the issue from time to time of
dividends which do not constitute Extraordinary
Dividends of Common Shares to holders of Common
Shares who exercise an option or election to receive
substantially equivalent dividends in Common Shares
in lieu of receiving a cash dividend, which issue
shall be deemed not to be a Reorganization; and
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(d) in respect of the issue from time to time of Common
Shares pursuant to the exercise of any
non-transferable right, option or warrant extended or
given from time to time to officers, directors or
employees of the Corporation or of a subsidiary of
the Corporation to subscribe for and purchase Common
Shares or any other shares of the Corporation.
(4) If a dispute shall at any time arise with respect to the
adjustments provided for in Section 5.7, such dispute shall be
conclusively determined by the Corporation's auditors, or if
they are unable or unwilling to act, by such other firm of
independent chartered accountants as may be selected by
resolution of the directors of the Corporation and any such
determination shall be binding upon the Corporation, the
transfer agent of the Class "B" Special Shares, and the
holders of Class "B" Special Shares.
(5) If the Corporation shall set a record date to determine the
holders of the Common Shares for the purpose of entitling them
to receive any dividend or distribution or any subscription or
purchase rights and shall, thereafter and before the
distribution to such shareholders of any such dividend,
distribution or subscription or purchase rights, legally
abandon its plan to pay or deliver such dividend, distribution
or subscription or purchase rights, then no adjustment in the
Exercise Number shall be required by reason of the setting of
such record date.
(6) In the absence of the corporate statute governing the
Corporation or a resolution of the directors of the
Corporation fixing a record date for a Reorganization, Rights
Offering or Special Distribution, the Corporation shall be
deemed to have fixed as the record date therefor the date on
which the Reorganization, Rights Offering or Special
Distribution is effected.
(7) In case the Corporation after the date hereof shall take any
action affecting the Common Shares, other than an action
described in Section 5.7 which, in the opinion of the
directors of the Corporation, would materially affect the
rights of the holders Class "B" Special Shares, the Exercise
Number shall be adjusted in such manner, if any, and at such
time, by action of the directors of the Corporation, in their
sole discretion as they may reasonably determine to be
equitable to the holders of Class "B" Special Shares in the
circumstances. Failure of the taking of action by the
directors so as to provide for an adjustment prior to the
effective date of any action by the Corporation affecting the
Common Shares shall be conclusive evidence that the directors
have determined that it is equitable to make no adjustment in
the circumstances, although the directors may reconsider their
determination in the future.
(8) "Current Market Price" of the Common Shares at any date means
the price per share equal to the average of the closing prices
of the Common Shares on Nasdaq,
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or if the Common Shares are not then quoted on Nasdaq, on such
stock exchange on which the Common Shares are listed as may be
selected by the directors for such purpose or, if the Common
Shares are not then listed on any stock exchange, in the
over-the-counter market, for the thirty (30) trading days
commencing forty-five (45) trading days before such date.
5.9 Postponement of Subscription. In any case where the application of Section
5.7 results in a increase of the Exercise Number taking effect immediately after
the record date for a specific event, if any Class "B" Special Shares are
converted after that record date and prior to completion of the event, the
Corporation may postpone the issuance to the holder of Class "B" Special Shares
of the Common Shares to which he is entitled by reason of the increase of the
Exercise Number, but such Common Shares shall be so issued and delivered to that
holder of Class "B" Special Shares upon completion of that event, with the
number of such Common Shares calculated on the basis of the Exercise Number on
the date of conversion adjusted for completion of that event, and the
Corporation shall deliver to the person or persons in whose name or names the
Common Shares are to be issued an appropriate instrument evidencing his or their
right to receive such Common Shares and the right to receive any dividends or
other distributions which, but for the provisions of this Section 5.9, such
person or persons would have been entitled to receive in respect of such Common
Shares from and after the date of conversion in respect thereof.
5.10 Notice of Adjustment of Exercise Number.
(1) At least fourteen days prior to the effective date or record date,
as the case may be, of any event which requires or might require adjustment to
the Exercise Number pursuant to Section 5.7, the Corporation shall give notice
to the holders of Class "B" Special Shares in the manner prescribed by Section
5.7, of the particulars of such event and, if determinable, the required
adjustment.
(2) In case any adjustment for which a notice in subsection (1) of this
Section 5.10 has been given is not then determinable, the Corporation shall
promptly after such adjustment is determinable give notice in the manner
prescribed by Section 5.7 to the holders of Class "B" Special
Shares of the adjustment.
5.11 No Adjustment on Dividends. A holder of a Class "B" Special Share on the
record date for the determination of holders of Class "B" Special Shares
entitled to receive a dividend declared payable on Class "B" Special Shares will
be entitled to such dividend notwithstanding that such share is converted after
such record date and before the payment date of such dividend, and the
registered holder of any Common Shares resulting from any conversion shall be
entitled to rank equally with the registered holders of all other Common Shares
in respect of all dividends declared payable to holders of Common Shares of
record on any date on or after the date of conversion. Subject as aforesaid, no
payment or adjustment will be made on account of any dividend, accrued or
otherwise, on the Class "B" Special Shares converted or the Common
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Shares resulting from any conversion.
5.12 Taxes on Conversion. The issuance of certificates for Common Shares upon
the conversion of Class "B" Special Shares will be made without charge to the
converting holders of Class "B" Special Shares for any fee or tax in respect of
the issuance of such certificates or the Common Shares represented thereby;
provided, however, that the Corporation shall not be required to pay any tax
which may be imposed upon the person or persons to whom such Common Shares are
issued, in respect of the issuance of such Common Shares or the certificates
therefor or which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name or names other than that
of the holder of the Class "B" Special Shares converted, and the Corporation
shall not be required to issue or deliver such certificate unless the person or
persons requesting the issuance thereof shall have paid to the Corporation the
amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid or that the Corporation has not and will
not have any liability in respect of such tax.
5.13 Reservation of Common Shares. So long as any Class "B" Special Shares are
outstanding and entitled to the right of conversion herein provided, the
Corporation shall at all times reserve and hold out of its unissued Common
Shares a sufficient number of unissued Common Shares to enable all of the Class
"B" Special Shares to be converted upon the basis and upon the terms and
conditions provided in these Class "B" Special Share Provisions.
6. SPECIFIC MATTERS REQUIRING APPROVAL
6.1 New Shares. The approval of the holders of the Class "B" Special Shares,
given in the manner described in Section 7.1, shall be required for the creation
and issuance of any new shares ranking prior to or on a parity with the Class
"B" Special Shares, and any cumulative dividends shall not be in arrears or any
declared dividends shall not be unpaid on any outstanding Class "B" Special
Shares at the time of the creation and issue of any such shares.
6.2 Amendment of Rights of Class "B" Special Shares. The provisions of clauses
1.1 to 7.1 inclusive may be deleted, amended, modified or varied in whole or in
part by a certificate of amendment issued by the Director appointed under the
Business Corporations Act (Ontario), but only with the prior approval of the
holders of the Class "B" Special Shares given as hereinafter specified in
addition to any other approval required by the Business Corporations Act
(Ontario) or any other statutory provisions of like or similar effect, from time
to time in force.
7. APPROVAL
7.1 Approval of the Holders of the Class "B" Special Shares. The approval of the
holders of the Class "B" Special Shares with respect to any and all matters
hereinbefore referred to may be given by at least two-thirds of the votes cast
at a meeting of the holders of the Class "B" Special Shares duly called for that
purpose and held upon at least twenty-one (21) days' notice at
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which the holders of a majority of the outstanding Class "B" Special Shares are
present or represented by proxy. If at any such meeting the holders of a
majority of the outstanding Class "B" Special Shares 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 being not less than
thirty (30) days later and to such time and place as may be appointed by the
representative of the holders of the Class "B" Special Shares and not less than
twenty-one (21) days' notice shall be given of such adjourned meeting. At such
adjourned meeting the holders of the Class "B" Special Shares present or
represented by proxy may transact the business for which the meeting was
originally called and a resolution passed thereat by not less than two-thirds of
the votes cast at such adjourned meeting shall constitute the approval of the
holders of the Class "B" Special Shares referred to above. The formalities to be
observed with respect to the giving of notice of any such meeting or adjourned
meeting and the conduct thereof shall be those from time to time prescribed by
the Business Corporations Act (Ontario) and the by-laws of the Corporation with
respect to meetings of shareholders. On every poll taken at every such meeting
or adjourned meeting every holder of Class "B" Special Shares shall be entitled
to one vote in respect of each Class "B" Special Share held.