1
Exhibit 3.1
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1294608
Ministry of Ministere de
[LOGO] Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que les presents
articles are effective on status entrant en vigueur le
MAY 7 MAI, 1998
- -------------------------------------------------------------
(Signed)
Director / Directeur
Business Corporations Act / Loi sur les societes par actions
TRANS Line Corp Method
CODE No. Stat Type Incorp.
A 0 0 A 3
18 20 28 29 30
Notice
Share Req'd Jurisdiction
S N ONTARIO
31 32 33 47
ARTICLES OF INCORPORATION
STATUTS CONSTITUTIFS
Form 1 Business Corporations Act
Formule 1 Loi sur les societes par actions
1. The name of the corporation is:
Denomination sociale de la societe:
DELANO TECHNOLOGY CORPORATION
2. The address of the registered office is:
Adresse du siege social:
40 Sheppard Avenue West, Suite 206
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(Street & Number or R.R. Number & if Multi-Office Building give Room No.)
(Rue et numero ou numero de la R.R. et, s'il s'agit
d'un edifice a bureaux, numero de bureau)
Toronto, Ontario M2N 6K9
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(Name of Municipality or Post Office) (Postal Code)
(Nom de la municipalite ou du bureau de poste) (Code postal)
3. Number (or minimum and maximum number) of directors is:
Nombre (ou nombres minimal et maximal) d'adminstrateurs:
A minimum of one (1) and a maximum of ten (10).
4. The first director(s) is/are:
Premier(s) administrateur(s):
First name, initials and surname Residence address giving Street & Resident Canadian State
No. or R.R. No., Municipality and Yes or No
Postal Code
Prenom, initials et nom de famille Adresse personnelle, y compris la Resident canadien
rue et le numero, le numero de la Oui/Non
R.R., le nom de la municipalite et
le code postal
Bahman Koohestani 16 Portsmith Road Yes
Toronto, ON M2L 2W8
Dennis Bennie 52 Owen Blvd. Yes
Toronto, ON M2P 1E9
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5. Restrictions, if any, on business the corporation may carry on or on powers
the corporation may exercise.
Limites, s'il y a lieu, imposees aux activites commerciales ou aux
pouvoirs de la societe:
None
6. The classes and any maximum number of shares that the corporation is
authorized to issue.
Categories et nombre maximal, s'il y a lieu, d'actions que la societe est
autorisee a emettre:
An unlimited number of Common Shares.
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7. Rights, privileges, restrictions and conditions (if any) attaching to each
class of shares and directors authority with respect to any class of shares
which may be issued in series:
Droits, privileges, restrictions et conditions, s'il y a lieu, rattaches a
chaque categorie d'actions et pouvoirs des administrateurs relatifs a
chaque categorie d'actions qui peut etre emise en serie:
N/A
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8. The issue, transfer or ownership of shares is/is not restricted and the
restrictions (if any) are as follows:
L'emission, le transfert ou la propriete d'actions est/n'est pas restreint.
Les restrictions, s'il y a lieu, sont les suivantes:
The shares of the Corporation shall not be transferred without the approval
of the board of directors of the Corporation to be evidenced by a
resolution of the board.
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9. Other provisions (if any) are:
Autres dispositions, s'il y a lieu:
1. The number of shareholders of the Corporation exclusive of persons who are
in its employment and exclusive of persons who, having been formerly in the
employment of the Corporation, were, while in that employment, and have
continued after termination of that employment to be, shareholders of the
Corporation, is limited to not more than fifty, two or more persons who are the
joint registered owners of one or more shares being counted as one shareholder.
2. Any invitation to the public to subscribe for shares or other securities
of the Corporation shall be prohibited.
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10. The names and addresses of the incorporators are:
Nom et adresse des fondateurs:
First name, initials and surname or Full residence address or address
corporate name of registered office or of principal
place of business giving street &
No. or R.R. No., municipality and
postal code
Prenom, initiale et nom de famile ou Adresse personnelle au complet,
denomination sociale adresse du siege social ou adresse
de l'etablissement principal, y
compris la rue et le numero ou le
numero de la R.R., le nom de la
municipalite et le code postal
Bahman Koohestani 16 Portsmith Road
Toronto, ON M2L 2W8
Dennis Bennie 52 Owen Blvd.
Toronto, ON M2P 1E9
These articles are signed in duplicate.
Les presents status sont signes en double exemplaire.
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Signatures of incorporators
(Signatures des fondateurs)
(Signed) (Signed)
---------------------------------- ------------------------------------
Bahman Koohestani Dennis Bennie
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For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1294608
Ministry of Ministere de
[LOGO] Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que las presents
articles are effective on status entrant en vigueur le
JULY 15 JUILLET, 1998
- -------------------------------------------------------------
(Signed)
Director / Directeur
Business Corporations Act / Loi sur les societes par actions
TRANS
CODE
C
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ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
Form 3 Business Corporations Act
Formule numero 3 Loi sur les compagnies
1. The present name of the corporation is:
Denomination sociale actuelle de la compagnie:
DELANO TECHNOLOGY CORPORATION
2. The name of the corporation is changed to (if applicable):
Nouvelle denomination sociale de la compagnie (s'il y a lieu):
N/A
3. Date of incorporation/amalgamation:
Date de la constitution ou de la fusion:
7 May 1998
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(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended as follows:
Les statuts de la compagnie sont modifies de la facon suivante:
(a) to create an unlimited number of Class A Preferred Shares;
(b) to provide that the existing Common Shares and the Class A Preferred
Shares shall have attached thereto the following rights, privileges,
restrictions and conditions as set out in the attached Schedule A.
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DELANO TECHNOLOGY CORPORATION
ARTICLES OF AMENDMENT
SCHEDULE A
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 on 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 and
the Class A Preferred 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 Preferred Shares) and any other
participating outstanding series or class of shares convertible into Common
Shares.
CLASS A PREFERRED SHARES
1. DIVIDENDS
The holders of outstanding Class A Preferred Shares shall be entitled to
receive, in any fiscal year, annually or when otherwise as declared by the Board
of Directors 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
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any dividend is paid on the Common Shares. Such dividends shall accrue on
outstanding Class A Preferred 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 Preferred Shares in accordance
with this section. If, after payment of such dividends to holders of the Class A
Preferred Shares, dividends are paid to holders of Common Shares, the holders of
outstanding Class A Preferred 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
Class A Preferred Share as being equal to the number of Common Shares into which
each such Class A Preferred 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).
2. 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
Preferred 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,
the Class A Redemption Price (as defined in paragraph 5(c) below) for
each Class A Preferred 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 Preferred Shares, the
assets available for distribution shall be distributed among the
holders of the Class A Preferred Shares pro rata in accordance with
the total number of Class A Preferred Shares held by such holders.
(b) After the payment of all preferential amounts required to be paid to
the holders of the Class A Preferred Shares and any other class or
series of shares of the Corporation ranking on liquidation on a parity
with the Class A Preferred Shares, upon the liquidation, dissolution
or winding up of 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 Preferred Shares and
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 Class A
Preferred Shares) and any other participating outstanding series or
class of shares convertible into Common Shares.
(c) 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
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transaction is obtained from the holders of at least two-thirds of the
outstanding Class A Preferred Shares.
(d) 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 Class A Preferred 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 shall first
determine the value of such property, rights or other securities for
such purpose, and shall notify all holders of Class A Preferred Shares
of such determination. The value of such property, rights or other
securities for purposes of the distribution under this paragraph 2(d)
shall be the value as determined by the Board of Directors in good
faith, unless the holders of a majority of the outstanding Class A
Preferred 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, 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 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 Class A Preferred 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, the holders of the Class A Preferred Shares
shall pay the costs of the arbitration, and (B) otherwise, the
Corporation shall bear the costs of the arbitration.
3. 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 Class A
Preferred Shares shall be entitled to the number of votes which is equal to the
number of Common Shares into which such Class A Preferred 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 Class A Preferred Shares and Common
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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 Class A Preferred Shares held by
each holder could then be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).
4. CONVERSION
The holders of Class A Preferred Shares shall have the following conversion
rights (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) OPTIONAL CONVERSION. Each Class A Preferred 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 Conversion Price (as defined below), in effect at the time of
conversion. The price at which Common Shares shall be deliverable
upon conversion (the "Conversion Price") shall initially be
$0.375. Such Conversion Price shall be subject to adjustment as
hereinafter provided.
(ii) AUTOMATIC CONVERSION. Each Class A Preferred Share shall be
converted automatically into Common Shares at the then effective
Conversion Price 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 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 Class A Preferred 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 Class A Preferred
Share, less the amount
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of any dividends actually paid by the Corporation per share to
the holder of Class A Preferred Shares (if such transaction
closes on or prior to July 31, 2002), or $2.625 per Class A
Preferred Shares less the amount of any dividends actually paid
by the Corporation per share to the holder of Class A Preferred
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 Preferred Shares approve
in writing both the proposed transaction and the conversion of
Class A Preferred Shares to Common Shares. The Corporation shall
not pay dividends (regardless of whether such dividends have been
accrued or declared) on any Class A Preferred Shares that are
automatically converted pursuant to this subsection (ii) above in
addition to any dividends that were actually paid to holders of
Class A Preferred 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 Class A Preferred
Shares shall be entitled to convert the same 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 same 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 Class A Preferred 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 Class
A Preferred 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 Class A
Preferred 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 Class A
Preferred Shares shall not be deemed to have converted such Class A
Preferred 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:
(A) "Additional Common Shares" shall mean all Common Shares
issued (or, pursuant to subparagraph 4(c)(iii), deemed to be
issued) by the
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Corporation after the Original Issue Date, other than Common
Shares issued or issuable:
(1) upon conversion of Class A Preferred Shares;
(2) to officers, directors or employees of, or consultants
to, the Corporation, in accordance with a plan approved
by the Board of Directors ("Permitted Employee
Shares"), subject to adjustment for all
reclassifications, subdivisions, combinations or
similar recapitalizations of Common Shares;
(3) as a dividend or distribution on Class A Preferred
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 Class A Preferred 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 Class A
Preferred Share was first issued.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price of Class A Preferred Shares 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 Conversion Price in effect on the
date of, and immediately prior to such issue for such Class A
Preferred 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.
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(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 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, 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 Conversion Price 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 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 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 Conversion Price computed upon the
original issue thereof (or upon the
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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 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 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 Conversion Price 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
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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
Conversion Price on the date of and immediately prior to such issuance, then,
and in such event, the Conversion Price shall be reduced, concurrently with such
issue, to a price (calculated to the nearest hundredth of a cent) determined by
multiplying the 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 the 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 Common Shares so issued; provided that, for the
purposes of this subparagraph 4(c)(iv), all Common Shares issuable upon
conversion of outstanding Class A Preferred 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.
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(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 (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.
(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
18
1K
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.
(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 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 Class A
Preferred 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
Class A Preferred 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) 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
Class A Preferred Shares, to the end that the provisions set forth
herein (including provisions with respect to changes in and other
adjustments of the 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 Class A
Preferred 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
Class A Preferred Shares against impairment.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Section 4, the
Corporation, at its expense, promptly shall compute such adjustment or
readjustment in accordance
19
1L
with the terms hereof and, upon written request of any holder of Class A
Preferred Shares, shall cause independent public accountants selected by
the Corporation to verify such computation and prepare and furnish to each
holder of Class A Preferred Shares 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 A Preferred Shares,
furnish or cause to be furnished to such holder a like certificate setting
forth (i) such adjustments and readjustments, (ii) the Conversion Price 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 Class A Preferred 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 Class A Preferred Shares 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.
(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 Class A Preferred Shares, such number of its Common Shares as
shall from time to time be sufficient to effect the conversion of all
outstanding Class A Preferred 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 Class A Preferred 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 Class A Preferred Shares. All Common Shares (including fractions
thereof ) issuable upon conversion of more than one Class A Preferred 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).
5. REDEMPTION
The Class A Preferred Shares may not be redeemed by the Corporation at any time,
but the holders may require the Corporation to redeem the Class A Preferred
Shares in the following circumstances:
20
1M
(a) OPTIONAL REDEMPTION AFTER JULY 31, 2002. Each holder of Class A Preferred
Shares may require the Corporation to redeem, (i) after July 31, 2002, up
to fifty percent (50%) of the outstanding Class A Preferred Shares then
held by such holder, and (ii) after July 31, 2003, all or any portion of
the outstanding Class A Preferred Shares then held by such holder. At least
60 days prior to any redemption of Class A Preferred Shares, each holder of
Class A Preferred Shares electing to redeem its Class A Preferred Shares in
accordance with this paragraph 5(a) shall give written notice to the
Corporation specifying the number of Class A Preferred Shares such holder
desires the Corporation to redeem and the date of such redemption
(hereinafter referred to as a "Class A Redemption Date").
(b) OPTIONAL REDEMPTION UPON CHANGE OF CONTROL. Each holder of Class A
Preferred Shares may require the Corporation to redeem all, but not less
than all, of the outstanding Class A Preferred 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. Notice of such issuance and/or transfer (the
"Control Notice") shall be given to the holders of Class A Preferred 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 Class A Preferred Shares
electing to redeem all of such holder's Class A Preferred Shares in
accordance with this paragraph 5(b) shall give written notice to the
Corporation specifying the number of Class A Preferred Shares held by such
holder and the date of such redemption (also, a "Class A Redemption Date").
(c) REDEMPTION PRICE AND PAYMENT. The Class A Preferred Shares to be redeemed
on any Class A 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").
(d) REDEMPTION MECHANICS. Upon receipt of payment by each holder of Class A
Preferred Shares electing to redeem pursuant to paragraphs 5(a) or 5(b)
above of the Class A Redemption Price, 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 Class A Preferred Shares on
any Class A Redemption Date are insufficient to redeem the
21
1N
total number of outstanding Class A Preferred Shares as to which redemption
is requested, the holders of Class A Preferred 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 Class A Preferred 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 Class A Preferred 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 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 Class A Preferred
Shares redeemed pursuant to this Section 5 or otherwise acquired by the
Corporation in any manner whatsoever shall be cancelled.
6. CURRENCY
All references herein to dollar amounts are references to Canadian dollars.
22
5. The amendment has been duly authorized as required by Sections 168 & 170
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement a l'article 168 et,
s'il y a lieu, a article 170 de la Loi sur les compagnies.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
Les actionnaires ou les administrateurs (le cas echeant) de la compagnie
ont approuve la reesolution autorisant la modification
15 July 1998
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate.
Les presents status sont signes en double exemplaire.
DELANO TECHNOLOGY CORPORATION
---------------------------------------------------------------------------
(Name of Corporation)
(Denomination social de la compagnie)
By/Par: (Signed) Secretary
---------------------------------------------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
23
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1294608
Ministry of Ministere de
[LOGO] Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que las presents
articles are effective on status entrant en vigueur le
JANUARY 27 JANVIER, 1999
- -------------------------------------------------------------
(Signed)
Director / Directeur
Business Corporations Act / Loi sur les societes par actions
TRANS
CODE
C
18
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
Form 3 Business Corporations Act
Formule numero 3 Loi sur les compagnies
1. The present name of the corporation is:
Denomination sociale actuelle de la compagnie:
DELANO TECHNOLOGY CORPORATION
2. The name of the corporation is changed to (if applicable):
Nouvelle denomination sociale de la compagnie (s'il y a lieu):
N/A
3. Date of incorporation/amalgamation:
Date de la constitution ou de la fusion:
7 May 1998
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended as follows:
Les statuts de la compagnie sont modifies de la facon suivante:
(a) to create an unlimited number of Class B Preferred Shares;
(b) to provide that the rights, privileges, restrictions and conditions
attaching to the Class B Preferred Shares shall be as set out in
Schedule A attached hereto.
24
1A
DELANO TECHNOLOGY CORPORATION
SCHEDULE A
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 Preferred Shares and the holders of the Class B Preferred
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 Preferred Shares and Class B Preferred Shares) and any
other participating outstanding series or class of shares convertible into
Common Shares.
PREFERRED SHARES
1. DIVIDENDS ON PREFERRED SHARES
The Class A Preferred Shares and the Class B Preferred Shares (collectively, the
"Preferred 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 Preferred Shares and the Class B
Preferred Shares shall be declared and paid in equal or equivalent amounts per
share on the
25
1B
Class A Preferred Shares and the Class B Preferred Shares at the time
outstanding without preference or priority.
Holders of outstanding Class A Preferred 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 Preferred 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 Preferred Shares in accordance with this section. If, after
payment of such dividends to holders of the Preferred Shares, dividends are paid
to holders of Common Shares, the holders of outstanding Preferred 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 Preferred Share as being equal to the
number of Common Shares into which each such Preferred 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).
2. 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
Preferred 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
Preferred Shares, by reason of their ownership thereof, the Class A
Redemption Price (as defined in paragraph 5(c) below) for each Class A
Preferred 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 Preferred Shares, the assets available for
distribution shall be distributed among the holders of the Class A
Preferred Shares pro rata in accordance with the total number of Class
A Preferred Shares held by such holders.
(b) After the payment of all preferential amounts required to be paid to
the holders of the Class A Preferred 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 Preferred Shares, the holders of Class B
Preferred 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 Preferred Share then held by a holder, a sum equal
to:
(i) the Class B Redemption Price (as defined in paragraph 5(c)
below); and
26
1C
(ii) an additional amount equal to the following:
A. 8% of the holder's subscription price for the Class B
Preferred 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 holder's subscription price for the Class B
Preferred 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 holder's subscription price for the Class B
Preferred 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 (plus any additional amount applicable pursuant to
this Section 2) on all outstanding Class B Preferred Shares, the assets
available for distribution shall be distributed among the holders of the
Class B Preferred Shares pro rata in accordance with the total number of
Class B Preferred Shares held by such holders.
(c) After the payment of all preferential amounts required to be paid to the
holders of the Class A Preferred Shares and the holders of the Class B
Preferred 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 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 Preferred Shares and
the holders of the Class B Preferred 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 Preferred 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
27
1D
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 Preferred Shares and from the holders
of at least two-thirds of the outstanding Class B Preferred 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 Preferred 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
Preferred 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 Preferred 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 Preferred 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 Preferred Shares
shall pay the costs of the arbitration, and (B) otherwise, the Corporation
shall bear the costs of the arbitration.
28
1E
3. 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
Preferred Shares shall be entitled to the number of votes which is equal to the
number of Common Shares into which such Preferred 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
Preferred 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
Preferred Shares held by each holder could then be converted) shall be rounded
to the nearest whole number (with one-half being rounded upward).
4. CONVERSION
The holders of Preferred Shares shall have the following conversion rights (the
"Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) OPTIONAL CONVERSION. Each Class A Preferred 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
Preferred 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.
(ii) AUTOMATIC CONVERSION. Each Preferred Share shall be converted
automatically into Common 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
29
1F
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
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 Preferred 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 Preferred Share, less the amount of
any dividends actually paid by the Corporation per share to the
holder of Preferred Shares (if such transaction closes on or
prior to July 31, 2002), or $2.625 per Preferred Share less the
amount of any dividends actually paid by the Corporation per
share to the holder of Preferred 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 Preferred Shares and the holders of at least
50% of the aggregate number of outstanding Class B Preferred
Shares, voting separately, approve at a meeting of shareholders
or otherwise in writing both the proposed transaction and the
conversion of Preferred Shares to Common Shares. The Corporation
shall not pay dividends (regardless of whether such dividends
have been accrued or declared) on any Preferred Shares that are
automatically converted pursuant to this subsection (ii) above in
addition to any dividends that were actually paid to holders of
Preferred 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 Preferred Shares shall be
entitled to convert Preferred 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 Preferred 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
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1G
aforesaid. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of surrender of the Preferred
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 Preferred 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 Preferred
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 Preferred Shares shall not be
deemed to have converted such Preferred 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:
(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 Preferred 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 Preferred
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 Preferred 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
31
1H
into or exchangeable for Common Shares, including the Preferred
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 Preferred
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 Preferred 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 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.
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1I
Notwithstanding the foregoing, in respect of Preferred 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
33
1J
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 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
34
1K
(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 Common
Shares so issued; provided that, for the purposes of this subparagraph 4(c)(iv),
all Common Shares issuable upon conversion of outstanding Preferred 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
35
1L
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.
(C) SHARE DIVIDENDS AND SHARE SUBDIVISIONS. Any Additional Common Shares
deemed to have been issued pursuant to
36
1M
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 Preferred 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 Preferred 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 and approved
in writing or at a meeting of all shareholders 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 Preferred 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 Preferred 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
Preferred 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 Preferred Shares
or Class B Preferred 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
37
1N
of Class A Preferred Shares or Class B Preferred 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 Preferred 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 Preferred 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
Preferred 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 Preferred Shares 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 Preferred 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 Preferred Shares, such number of its Common Shares as shall
from time to time be sufficient to effect the conversion of all outstanding
Preferred 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 Preferred 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 Preferred Shares. All Common Shares (including fractions thereof )
issuable upon conversion of more than one Preferred 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).
5. REDEMPTION
The Preferred Shares may not be redeemed by the Corporation at any time, but the
holders may require the Corporation to redeem the Preferred Shares in the
following circumstances:
38
1O
(a) OPTIONAL REDEMPTION. Each holder of Class A Preferred Shares may require
the Corporation to redeem, (i) after July 31, 2002, up to fifty percent
(50%) of the outstanding Class A Preferred Shares then held by such holder,
and (ii) after July 31, 2003, all or any portion of the outstanding Class A
Preferred Shares then held by such holder. Each holder of Class B Preferred
Shares may require the Corporation to redeem, (i) after December 31, 2002,
up to fifty percent (50%) of the outstanding Class B Preferred Shares then
held by such holder, and (ii) after December 31, 2003, all or any portion
of the outstanding Class B Preferred Shares then held by such holder. At
least 60 days prior to any redemption of Preferred Shares, each holder of
Preferred Shares electing to redeem its Preferred Shares in accordance with
this paragraph 5(a) shall give written notice to the Corporation specifying
the number of Preferred 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
Preferred Shares may require the Corporation to redeem all, but not less
than all, of the outstanding Class A Preferred Shares then held by such
holder, upon a Change in Control. Similarly, each holder of Class B
Preferred Shares may require the Corporation to redeem all, but not less
than all, of the outstanding Class B Preferred 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
Preferred 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 Preferred
Shares electing to redeem all of such holder's Class A Preferred Shares
and/or Class B Preferred Shares, as the case may be, in accordance with
this paragraph 5(b) shall give written notice to the Corporation specifying
the number of Preferred Shares held by such holder and the date of such
redemption (also, a "Redemption Date").
(c) REDEMPTION PRICE AND PAYMENT. The Class A Preferred 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 Preferred 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
39
1P
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").
(d) REDEMPTION MECHANICS. Upon receipt of payment by each holder of Preferred
Shares electing to redeem pursuant to paragraphs 5(a) or 5(b) above of the
redemption price applicable to such Preferred Shares (the Class A
Redemption Price or the Class B 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
Preferred Shares on any Redemption Date are insufficient to redeem the
total number of outstanding Preferred Shares as to which redemption is
requested, the holders of Preferred 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
Preferred 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 Preferred 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
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 Preferred Shares
redeemed pursuant to this Section 5 or otherwise acquired by the
Corporation in any manner whatsoever shall be cancelled.
6. CURRENCY
All references herein to dollar amounts are references to Canadian dollars.
40
5. The amendment has been duly authorized as required by Sections 168 & 170
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement a l'article 168 et,
s'il y a lieu, a article 170 de la Loi sur les compagnies.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
Les actionnaires ou les administrateurs (le cas echeant) de la compagnie
ont approuve la reesolution autorisant la modification
25 January 1999
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate.
Les presents status sont signes en double exemplaire.
DELANO TECHNOLOGY CORPORATION
---------------------------------------------------------------------------
(Name of Corporation)
(Denomination social de la compagnie)
By/Par: (Signed) Secretary
---------------------------------------------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
41
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1294608
Ministry of Ministere de
[LOGO] Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que las presents
articles are effective on status entrant en vigueur le
JUNE 24 JUIN, 1999
- -------------------------------------------------------------
(Signed)
Director / Directeur
Business Corporations Act / Loi sur les societes par actions
TRANS
CODE
C
18
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
Form 3 Business Corporations Act
Formule numero 3 Loi sur les compagnies
1. The present name of the corporation is:
Denomination sociale actuelle de la compagnie:
DELANO TECHNOLOGY CORPORATION
2. The name of the corporation is changed to (if applicable):
Nouvelle denomination sociale de la compagnie (s'il y a lieu):
N/A
3. Date of incorporation/amalgamation:
Date de la constitution ou de la fusion:
7 May 1998
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended as follows:
Les statuts de la compagnie sont modifies de la facon suivante:
(a) to create an unlimited number of Class C Preferred Shares;
(b) to delete the rights, privileges, restrictions and conditions
attaching to the Common Shares and Preferred Shares of the Corporation
and substitute therefor the rights, privileges, restrictions and
conditions as set out in Exhibit A attached hereto;
(c) to remove the following from paragraph 8 of the Articles of the
Corporation;
"The shares of the Corporation shall not be transferred without the
approval of the board of directors of the Corporation to be evidenced
by a resolution of the board."
(d) to remove the following from paragraph 9 of the Articles of the
Corporation;
"1. The number of shareholders of the Corporation exclusive of
persons who are in its employment and exclusive of persons who,
having been formerly in the employment of the Corporation, were,
while in that employment, and have continued after termination of
that employment to be shareholders of the Corporation, is limited
to not more than fifty, two or more persons who are the joint
registered owners of one or more shares being counted as one
shareholder.
2. Any invitation to the public to subscribe for shares or other
securities of the Corporation shall be prohibited."
42
1A
DELANO TECHNOLOGY CORPORATION
ARTICLES OF AMENDMENT
EXHIBIT A
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 Preferred Shares the holders of the Class B Preferred
Shares, the holders of the Class C Preferred 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 Preferred
Shares, Class B Preferred Shares and Class C Preferred Shares) and any other
participating outstanding series or class of shares convertible into Common
Shares.
PREFERRED SHARES
1. DIVIDENDS ON PREFERRED SHARES
The Class A Preferred Shares, the Class B Preferred Shares and the Class C
Preferred Shares (collectively, the "Preferred 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
Preferred Shares, the Class B Preferred Shares and the Class C Preferred Shares
shall be
43
1B
declared and paid in equal or equivalent amounts per share on the Class A
Preferred Shares, the Class B Preferred Shares and the Class C Preferred Shares
at the time outstanding without preference or priority.
Holders of outstanding Class A Preferred 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 Preferred 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 Preferred Shares in accordance with this section. If, after
payment of such dividends to holders of the Preferred Shares, dividends are paid
to holders of Common Shares, the holders of outstanding Preferred 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 Preferred Share as being equal to the
number of Common Shares into which each such Preferred 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).
2. 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
Preferred 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
Preferred Shares or the Class C Preferred Shares, by reason of their
ownership thereof, the Class A Redemption Price (as defined in
paragraph 5(c) below) for each Class A Preferred 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 Preferred Shares, the assets available for distribution shall
be distributed among the holders of the Class A Preferred Shares pro
rata in accordance with the total number of Class A Preferred Shares
held by such holders.
(b) After the payment of all preferential amounts required to be paid to
the holders of the Class A Preferred 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 Preferred Shares, the holders of Class B
Preferred Shares and the holders of Class C Preferred 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
Preferred Share and Class C Preferred Share then held by a holder, a
sum equal to:
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1C
FOR HOLDERS OF CLASS B PREFERRED SHARES:
(i) the Class B Redemption Price (as defined in paragraph 5(c) below); and
(ii) an additional amount equal to the following:
(A) 8% of the holders subscription price for the Class B Preferred
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 Preferred
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 Preferred
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 PREFERRED SHARES:
(i) the Class C Redemption Price (as defined in paragraph 5(c) below); and
(ii) an additional amount equal to the following:
(A) 8% of the holders subscription price for the Class C Preferred
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 Preferred
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
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(C) 24% of the holders subscription price for the Class C Preferred
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 Preferred Shares and Class C Preferred Shares, the assets available
for distribution shall be distributed among the holders of the Class B
Preferred Shares and the holders of the Class C Preferred Shares pro rata
based on the number of Common Shares into which each Class B Preferred
Share and Class C Preferred 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 Preferred Shares, the holders of the Class B
Preferred Shares and the holders of the Class C Preferred 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 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 Preferred Shares, the holders of the Class B
Preferred Shares, the holders of the Class C Preferred 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 Preferred 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
Preferred Shares, from the holders of at least two-thirds of the
outstanding Class B Preferred Shares and from the holders of at least two
thirds of the outstanding Class C Preferred 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 Preferred 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
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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 Preferred 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 Preferred 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 Preferred 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 Preferred Shares
shall pay the costs of the arbitration, and (B) otherwise, the Corporation
shall bear the costs of the arbitration.
3. 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
Preferred Shares shall be entitled to the number of votes which is equal to the
number of Common Shares into which such Preferred 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
Preferred 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
Preferred Shares
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held by each holder could then be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
4. CONVERSION
The holders of Preferred Shares shall have the following conversion rights (the
"Conversion Rights"):
(a) RIGHT TO CONVERT.
(i) OPTIONAL CONVERSION. Each Class A Preferred 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
Preferred 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 Preferred 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 Preferred 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 Preferred Share shall be converted
automatically into Common Shares (for the Class A Preferred
Shares and the Class B Preferred 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
assets of any other person or business
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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 Preferred 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 Preferred Share, less the amount of
any dividends actually paid by the Corporation per share to the
holder of Preferred Shares (if such transaction closes on or
prior to July 31, 2002), or $2.625 per Preferred Share less the
amount of any dividends actually paid by the Corporation per
share to the holder of Preferred 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 Preferred Shares, the holders of at least 50%
of the aggregate number of outstanding Class B Preferred Shares
and the holders of at least 50% of the aggregate number of
outstanding Class C Preferred Shares, voting separately, approve
at a meeting of shareholders or otherwise in writing both the
proposed transaction and the conversion of Preferred Shares to
Common Shares. The Corporation shall not pay dividends
(regardless of whether such dividends have been accrued or
declared) on any Preferred Shares that are automatically
converted pursuant to this subsection (ii) above in addition to
any dividends that were actually paid to holders of Preferred
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 Preferred Shares shall be
entitled to convert Preferred 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 Preferred 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
Preferred 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 Preferred Shares for conversion in
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connection with any automatic conversion event described in subparagraph
4(a)(ii) above the conversion may, at the option of the holder tendering
Preferred 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 Preferred Shares shall
not be deemed to have converted such Preferred 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:
(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 Preferred 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 Preferred
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 Preferred 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
Preferred Shares.
(C) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Shares or
Convertible Securities.
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(D) "Original Issue Date" shall mean the date on which a Preferred
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 Preferred 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 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 Preferred 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
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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
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exercise thereof were issued at the time of issue of
such options, and the consideration received by the
Corporation for the 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
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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
Common Shares so issued; provided that, for the purposes of this
subparagraph 4(c)(iv), all Common Shares issuable upon conversion of
outstanding Preferred 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
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(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.
(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.
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(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 Preferred 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 Preferred 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 Preferred
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 Preferred 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
Preferred 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 Preferred Shares
or Class B Preferred 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 Preferred Shares or Class
B Preferred 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 Preferred Shares or
Class C Preferred 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 Preferred Shares and Class
C Preferred 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 Preferred Shares and Class C
Preferred 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
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Preferred Shares 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 Preferred
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 Preferred Shares, such number of its Common Shares as shall
from time to time be sufficient to effect the conversion of all outstanding
Preferred 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 Preferred 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 Preferred Shares. All Common Shares (including fractions thereof)
issuable upon conversion of more than one Preferred 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).
5. REDEMPTION
The Preferred Shares may not be redeemed by the Corporation at any time, but the
holders may require the Corporation to redeem the Preferred Shares in the
following circumstances:
(a) OPTIONAL REDEMPTION. Each holder of Class A Preferred Shares may require
the Corporation to redeem, (i) after July 31, 2002 up to fifty percent
(50%) of the outstanding Class A Preferred Shares then held by such holder,
and (ii) after July 31, 2003, all or any portion of the outstanding Class A
Preferred Shares then held by such holder. Each holder of Class B Preferred
Shares may require the Corporation to redeem, (i) after December 31, 2002,
up to fifty percent (50%) of the outstanding Class B Preferred Shares then
held by such holder, and (ii) after December 31, 2003, all or any portion
of the outstanding Class B Preferred Shares then held by such holder. Each
holder of Class C Preferred Shares may require the Corporation to redeem,
(i) after June 22, 2003, up to fifty percent (50%) of the outstanding Class
C Preferred Shares then held by such holder, and (ii) after June 22, 2004,
all or any portion of the outstanding Class C Preferred Shares then held by
such holder. At least 60 days prior to any redemption of Preferred Shares,
each holder of Preferred Shares
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electing to redeem its Preferred Shares in accordance with this paragraph
5(a) shall give written notice to the Corporation specifying the number of
Preferred 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
Preferred Shares may require the Corporation to redeem all, but not less
than all, of the outstanding Class A Preferred Shares then held by such
holder, upon a Change in Control. Similarly, each holder of Class B
Preferred Shares and Class C Preferred Shares may require the Corporation
to redeem all, but not less than all, of the outstanding Class B Preferred
Shares and Class C Preferred 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 Preferred 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 Preferred Shares electing to redeem all of such
holders Class A Preferred Shares and/or Class B Preferred Shares, as the
case may be, in accordance with this paragraph 5(b) shall give written
notice to the Corporation specifying the number of Preferred Shares held by
such holder and the date of such redemption (also, a "Redemption Date").
(c) REDEMPTION PRICE AND PAYMENT. The Class A Preferred 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 Preferred 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
Preferred 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").
58
1Q
(d) REDEMPTION MECHANICS. Upon receipt of payment by each holder of Preferred
Shares electing to redeem pursuant to paragraphs 5(a) or 5(b) above of the
redemption price applicable to such Preferred 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 Preferred Shares on any Redemption Date
are insufficient to redeem the total number of outstanding Preferred Shares
as to which redemption is requested, the holders of Preferred 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 Preferred 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 Preferred 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 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 Preferred Shares
redeemed pursuant to this Section 5 or otherwise acquired by the
Corporation in any manner whatsoever shall be cancelled.
6. CURRENCY
All references herein to dollar amounts are references to Canadian dollars.
59
5. The amendment has been duly authorized as required by Sections 168 & 170
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement a l'article 168 et,
s'il y a lieu, a article 170 de la Loi sur les compagnies.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
Les actionnaires ou les adminstrateurs (le cas echeant) de la compagnie ont
approuve la resolution autorisant la modification
June 24, 1999
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate.
Les presents status sont signes en double exemplaire.
DELANO TECHNOLOGY CORPORATION
---------------------------------------------------------------------------
(Name of Corporation)
(Denomination social de la compagnie)
By/Par: (Signed) Secretary
---------------------------------------------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
60
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1294608
Ministry of Ministere de
[LOGO] Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que las presents
articles are effective on status entrant en vigueur le
DECEMBER 21 DECEMBRE, 1999
- -------------------------------------------------------------
(Signed)
Director / Directeur
Business Corporations Act / Loi sur les societes par actions
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18
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
Form 3 Business Corporations Act
Formule numero 3 Loi sur les compagnies
1. The present name of the corporation is:
Denomination sociale actuelle de la compagnie:
DELANO TECHNOLOGY CORPORATION
2. The name of the corporation is changed to (if applicable):
Nouvelle denomination sociale de la compagnie (s'il y a lieu):
N/A
3. Date of incorporation/amalgamation:
Date de la constitution ou de la fusion:
7 May 1998
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended as follows:
Les statuts de la compagnie sont modifies de la facon suivante:
(a) to change the designation of the Class A Preferred Shares of the
Corporation to Class A Special Shares;
(b) to change the designation of the Class B Preferred Shares of the
Corporation to Class B Special Shares;
(c) to change the designation of the Class C Preferred Shares of the
Corporation to Class C Special Shares;
(d) to delete the words "Preferred Shares" throughout the rights,
privileges, restrictions and conditions attached to the Class A
Special Shares, the Class B Special Shares and the Class C Special
Shares and to replace them with the words "Special Shares"; and
(e) to create an unlimited number of Preferred Shares, issuable in series,
and to provide that the rights, privileges, restrictions and
conditions attaching to the Preference Shares, issuable in series,
shall be as set out in the attached Schedule A.
61
1A
SCHEDULE A
PREFERENCE SHARES.
The Preference Shares, as a class, shall have the following rights, privileges,
restrictions and conditions:
1. One or more series - The Preference Shares may from time to time be issued
in one or more series;
2. Terms of each series - Subject to the following provisions, and subject to
the filing of articles of amendment in prescribed form and the endorsement
thereon of a certificate of amendment, in accordance with the Business
Corporations Act (Ontario), the directors may fix from time to time before
such issue the number of shares that is to comprise each series and the
designation, rights, privileges, restrictions and conditions attaching to
each series of Preference Shares including, without limiting the generality
of the foregoing, the issue price per share, the rate or amount of any
dividends or the method of calculating any dividends, the dates of payment
thereof, any redemption, purchase and/or conversion prices and terms and
conditions of any redemption, purchase and/or conversion, and any sinking
fund or other provisions;
3. Ranking of Preference Shares - The Preference Shares of each series shall,
with respect to the payment of any dividends and any distribution of assets
or return of capital in the event of liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, or any other return
of capital or distribution of the assets of the Corporation among its
shareholders for the purpose of winding up its affairs, rank on a parity
with the Preference Shares of every other series and be entitled to a
preference over the Common Shares, the Special Shares and over any other
shares of the Corporation ranking junior to the Preference Shares. The
Preference Shares of any series may also be given such other preferences,
not inconsistent with these articles, over the Common Shares, the Special
Shares and any other shares of the Corporation ranking junior to such
Preference Shares as may be fixed in accordance with section 2;
4. Cumulative Dividends and Payments on the Return of Capital - If any
cumulative dividends, whether or not declared, or any amounts payable on
the return of capital in the event of the liquidation, dissolution or
winding up of the Corporation, in respect of a series of Preference Shares
are not paid in full, the shares of such series of Preference Shares shall
participate rateably with the shares of all other series of Preference
Shares in respect of, all accumulated cumulative dividends, whether or not
declared, or all amounts payable on the return of capital in the event of
the liquidation, dissolution or winding up of the Corporation, as the case
may be.
5. Conversion into Common Shares - The Preference Shares of any series may be
made convertible into Common Shares;
6. Voting - Subject to the provisions of the Business Corporations Act
(Ontario), and section 7 below, the Preference Shares shall have no voting
rights as a class;
62
1B
7. Variation of rights - The provisions attaching to the Preference Shares as
a class may be amended or repealed at any time with such approval as may
then be required by law to be given by the holders of the Preference Shares
as a class.
63
5. The amendment has been duly authorized as required by Sections 168 & 170
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement a l'article 168 et,
s'il y a lieu, a article 170 de la Loi sur les compagnies.
6. The solution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
Les actionnaires ou les adminstrateurs (le cas echeant) de la compagnie ont
approuve la resolution autorisant la modification
13 December 1999
---------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate.
Les presents status sont signes en double exemplaire.
DELANO TECHNOLOGY CORPORATION
---------------------------------------------------------------------------
(Name of Corporation)
(Denomination social de la compagnie)
By/Par: (Signed) Secretary
---------------------------------------------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
64
1294608
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- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
Form 3 1. The present name of Denomination sociale actuelle
Business the corporation is: de la compagnie:
Corporations
Act
Formule D E L A N O T E C H N O L O G Y C O R P O R A T I O N
numero 3 ----------------------------------------------------------
Loi
sur les
compagnies 2. The name of the Nouvelle denomination sociale
corporation is changed de la compagnie (s'il y a lieu):
to (if applicable):
N / A
----------------------------------------------------------
3. Date of incorporation/ Date de la constitution ou de la
amalgamation: fusion:
7 MAY 1998
----------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the Les statuts de la compagnie sont
corporation are amended modifies de la facon suivante:
as follows:
to change each issued and outstanding Common Share of the
Corporation into 1.5 Common Shares, effective on January 1,
2000.
65
5. The amendment has been duly La modification a ete dument autorisee
authorized as required by conformement a l'article 168 et, s'il y
Sections 168 & 170 (as a lieu, a article 170 de la loi sur les
applicable) of the Business compagnies.
Corporations Act.
6. The resolution authorizing the Les actionnaires ou les administrateurs
amendment was approved by the (le cas echeant) de la compagnie ont
shareholders/directors (as approuve la resolution autorisant la
applicable) of the corporation on modification
January 11, 2000
------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents status sont signes en
double exemplaire.
DELANO TECHNOLOGY CORPORATION
-------------------------------------
(Name of Corporation)
(Denomination sociale de la compagnie
By/Par. (Signed/signe) SECRETARY
-------------------------------------
(Signature) (Description of Officer)
(Signature) (Principal)