6.25 SVS CONVERTS to 1 PVS or VICE-VERSA ! - PROPORTIONATE VOTING SHARES are RESTRICTED SECURITIES
^^^
Restricted Securities
Proportionate Voting Shares
For reference purposes only, the description of the Proportionate Voting Shares is set out directly below. No Proportionate Voting Shares are being distributed under this Prospectus. Except as disclosed directly below, the Proportionate Voting Shares do not have any additional pre-emptive rights, conversion rights or exchange rights and are not further subject to redemption, retraction purchase for cancellation or surrender provisions. There are no additional sinking or purchase fund provisions, no provisions permitting or restricting the issuance of additional securities or any other material restrictions, and there are no additional provisions which are capable of requiring a security holder to contribute additional capital.
Voting
The holders of Proportionate Voting Shares (the “Proportionate Voting Shareholders”) shall be entitled to receive notice of and to attend and vote at all meetings of shareholders of the Company except a meeting at which only the holders of another class or series of shares is entitled to vote. Subject to provisions relating to the alteration to rights of Proportionate Voting Shares and to the creation of shares superior to Proportionate Voting Shares, each Proportionate Voting Share shall entitle the holder to 6.25 votes and each fraction of a Proportionate Voting Share shall entitle the holder to the number of votes calculated by multiplying the fraction by 6.25 and rounding the product down to the nearest whole number, at each such meeting.
Alteration to Rights of Proportionate Voting Shares
So long as any Proportionate Voting Shares remain outstanding, the Company will not, without the consent of the Proportionate Voting Shareholders expressed by separate special resolution alter or amend the Articles if the result of such alteration or amendment would: (a) prejudice or interfere with any right or special right attached to the Proportionate Voting Shares; or (b) affect the rights or special rights of the holders of Subordinate Voting Shares or Proportionate Voting Shares on a per share basis as provided for herein.
At any meeting of Proportionate Voting Shareholders called to consider such a separate special resolution, each Proportionate Voting Share shall entitle the holder to one (1) vote and each fraction of a Proportionate Voting Share will entitle the holder to the corresponding fraction of one (1) vote.
Shares Superior to Proportionate Voting Shares
The Company may take no action which would authorize or create shares of any class or series having preferences superior to or on a parity with the Proportionate Voting Shares without the consent of the holders of a majority of the Proportionate Voting Shares expressed by separate ordinary resolution.
At any meeting of Proportionate Voting Shareholders called to consider such a separate ordinary resolution, each Proportionate Voting Share will entitle the holder to one (1) vote and each fraction of a Proportionate Voting Share shall entitle the holder to the corresponding fraction of one (1) vote.
Dividends
The Proportionate Voting Shareholders shall be entitled to receive such dividends payable in cash or property of the Company as may be declared by the Board from time to time. The Board may declare no dividend payable in cash or property on the Proportionate Voting Shares unless the Board simultaneously declares a dividend payable in cash or property on the Subordinate Voting Shares, in an amount equal to the amount of the dividend declared per Proportionate Voting Share divided by 6.25.
The Board may declare a stock dividend payable in Proportionate Voting Shares on the Proportionate Voting Shares, but only if the Board simultaneously declares a stock dividend payable in Proportionate Voting Shares on the Subordinate Voting Shares, in a number of shares per Subordinate Voting Share equal to the amount of the dividend declared per Proportionate Voting Share divided by 6.25.
The Board may declare a stock dividend payable in Subordinate Voting Shares on the Proportionate Voting Shares, but only if the Board simultaneously declares a stock dividend payable in Subordinate Voting Shares on the Subordinate Voting Shares, in a number of shares per Subordinate Voting Share equal to the amount of the dividend declared per Proportionate Voting Share divided by 6.25.
Holders of fractional Proportionate Voting Shares shall be entitled to receive any dividend declared on the Proportionate Voting Shares, in an amount equal to the dividend per Proportionate Voting Share multiplied by the fraction thereof held by such holder.
Liquidation Rights
In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or in the event of any other distribution of assets of the Company to its shareholders for the purpose of winding up its affairs, the Proportionate Voting Shareholders shall be entitled to participate pari passu with the holders of the Subordinate Voting Shares, with the amount of such distribution per Proportionate Voting Share equal to the amount of such distribution per Subordinate Voting Share multiplied by 6.25.
Subdivision or Consolidation
The Proportionate Voting Shares shall not be consolidated or subdivided unless the Subordinate Voting Shares are simultaneously consolidated or subdivided utilizing the same divisor or multiplier.
Voluntary Conversion
Subject to the conversion limitation set out below, Proportionate Voting Shareholders shall have the following rights of conversion (the “Proportionate Share Conversion Right”):
| (a) | Right to Convert Proportionate Voting Shares. Each Proportionate Voting Share shall be convertible at the option of the holder into such number of Subordinate Voting Shares as is determined by multiplying the number of Proportionate Voting Shares in respect of which the Proportionate Share Conversion Right is exercised by 6.25. Fractions of Proportionate Voting Shares may be converted into such number of Subordinate Voting Shares as is determined by multiplying the fraction by 6.25. |
| | |
| (b) | Foreign Private Issuer Status. The Company shall use commercially reasonable efforts to maintain its status as a “foreign private issuer” (as determined in accordance with Rule 3b-4 under the Exchange Act. Accordingly, the Company shall not give effect to any voluntary conversion of Proportionate Voting Shares pursuant to its Articles or otherwise, and the Proportionate Share Conversion Right will not apply, to the extent that after giving effect to all permitted issuances after such conversion of Proportionate Voting Shares, the aggregate number of Subordinate Voting Shares and Proportionate Voting Shares (calculated on the basis that each Subordinate Voting Share and Proportionate Voting Share is counted once, without regard to the number of votes carried by such share) held of record, directly or indirectly, by residents of the United States (as determined in accordance with Rules 3b-4 and 12g3-2(a) under the Exchange Act (“U.S. Residents”) would exceed forty percent (40%) (the “40% Threshold”) of the aggregate number of Subordinate Voting Shares and Proportionate Voting Shares (calculated on the same basis) issued and outstanding (the “FPI Restriction”). The Board may by resolution waive this restriction for any individual transaction or increase the 40% Threshold to a number not to exceed fifty percent (50%), and if any such resolution is adopted, all references to the 40% Threshold herein shall refer instead to the amended percentage threshold set by the Board in such resolution. |
| (c) | Conversion Limitation. In order to give effect to the FPI Restriction, the number of Subordinate Voting Shares issuable to a Proportionate Voting Shareholder upon exercise by such holder of the Proportionate Share Conversion Right will be subject to the 40% Threshold based on the number of Proportionate Voting Shares held by such holder as of the date of issuance of Proportionate Voting Shares to such holder, and thereafter at the end of each of the Company’s subsequent fiscal quarters (each, a “Determination Date”), calculated as follows: |
X = [A x 40% - B] x (C/D)
where, on the Determination Date:
X = Maximum Number of Subordinate Voting Shares which may be issued upon exercise of the Proportionate Share Conversion Right.
A = Aggregate number of Subordinate Voting Shares and Proportionate Voting Shares issued and outstanding.
B = Aggregate number of Subordinate Voting Shares and Proportionate Voting Shares held of record, directly or indirectly, by U.S. Residents.
C = Aggregate Number of Proportionate Voting Shares held by such holder.
D = Aggregate Number of all Proportionate Voting Shares.
An officer designated by the Board (or a committee thereof) shall determine as of each Determination Date, in his or her sole discretion acting reasonably, the aggregate number of Subordinate Voting Shares and Proportionate Voting Shares held of record, directly or indirectly, by U.S. Residents, the maximum number of Subordinate Voting Shares which may be issued upon exercise of the Proportionate Share Conversion Right, generally in accordance with the formula set forth immediately above. Upon request by a holder of Proportionate Voting Shares, the Company will provide each Proportionate Voting Shareholder with notice of such maximum number as at the most recent Determination Date, or a more recent date as may be determined by the Conversion Limitation Officer in its discretion. To the extent that issuances of Subordinate Voting Shares on exercise of the Proportionate Share Conversion Right would result in the 40% Threshold being exceeded, the number of Subordinate Voting Shares to be issued will be pro-rated among each holder of Proportionate Voting Shares exercising the Proportionate Share Conversion Right.
Notwithstanding the provisions set out above, the Board may by resolution waive the application of the Conversion Restriction to any exercise or exercises of the Proportionate Share Conversion Right to which the Conversion Restriction would otherwise apply, or to future Conversion Restrictions generally, including with respect to a period of time.
Restricted Securities Disclosure
Part 12 of National Instrument 41-101 – General Prospectus Requirements (“NI 41-101”) and Ontario Securities Commission Rule 56-501 – Restricted Shares (“OSC Rule 56-501”and, together with Part 12 of NI 41-101, the “Restricted Share Rules”) regulate the creation and distribution of “restricted shares”(as defined in OSC Rule 56-501) and “restricted securities”(as defined in NI 41-101) by reporting issuers in Canada. The definitions of “restricted shares” and “restricted securities” include equity shares which have voting rights exercisable in all circumstances, irrespective of the number or percentage of shares owned, that are less, on a per share basis, than the voting rights attached to any other shares of an outstanding class of shares of the issuer. A “subject security” under NI 41-101 means a security that results, or would result if and when issued, in an existing class of securities being considered restricted securities. According to these definitions, the Subordinate Voting Shares are “restricted shares”(as defined in OSC Rule 56-501) and “restricted securities”(as defined in NI 41-101). As of the date of this Prospectus, 100% of the aggregate voting rights attached to the Company’s securities are represented by Subordinate Voting Shares.
In accordance with Section 7.7(1)(d) of NI 44-101, the Company has complied with Part 12 of NI 41-101 as follows:
| | The Company held a special meeting of shareholders on July 17, 2023 (the “2023 Special Meeting”) pursuant to which the Company delivered the Information Circular to its shareholders of record. At the 2023 Special Meeting, the holders of Subordinate Voting Shares passed a special resolution (the “Ratification Resolution”) ratifying, among other things: (i) the change of name of the “Common shares” of the Company to “Class A Subordinate Voting shares”; (ii) the creation of the Proportionate Voting Shares of the Company; and (iii) the addition of special rights and restrictions to the Subordinate Voting Shares and the Proportionate Voting Shares. The completion of the foregoing matters constituted a “restricted security organization” under NI 41-101 (the “Restricted Security Organization”), which Restricted Security Organization was previously approved by the shareholders of the Company on July 19, 2021 and made effective on July 20, 2021. |
| | At the time of the Restricted Security Organization relating to the Subordinate Voting Shares: |
| | | the passing of the Ratification Resolution qualified as the “minority approval” required by the Restricted Share Rules on the following basis: |
| | | “minority approval” means, for the purposes of the Restricted Share Rules, approval by a majority of the votes cast by holders of shares of the Company in accordance with applicable law, and if required by applicable corporate law, by a majority of the votes cast by holders of a class of shares voting separately as a class, other than, in both cases, (A) “affiliates” of the issuer, or (B) “control persons” of the issuer, as those terms are defined in the Restricted Share Rules; |
| | | no affiliate of the Company beneficially owned, or controlled or directed, directly or indirectly, any voting securities of the Company and the only control persons of the Company are Gabriel Rene and Dan Mapes; and |
| | | on the date of the 2023 Special Meeting, Mr. Ren and Mr. Mapes, each directly controlled 5,000,000 Proportionate Voting Shares and 25,001 Subordinate Voting Shares or, approximately 21.41% of the total voting power of the Company on a non-diluted basis (42.82% in the aggregate). Any votes cast in respect of Mr. Ren and Mr. Mapes’ Subordinate Voting Shares were excluded from determining whether minority approval had been obtained for the Ratification Resolution. In addition, because (i) a separate class vote is not required under applicable corporate law; and (ii) all of the outstanding Proportionate Voting Shares are held by Mr. Ren and Mr. Mapes’, a separate class vote of Proportionate Voting Shares was not required for the approval of the Ratification Resolution; |
| | | the Company was a reporting issuer in British Columbia, Alberta, Saskatchewan and Ontario; and |
| | The Information Circular that was delivered to shareholders in connection with the 2023 Special Meeting: (a) confirmed that, as of the date of the Information Circular, no affiliate of the Company beneficially owned, or controlled or directed, directly or indirectly, any voting securities of the Company; (b) disclosed the name of each control person and the number of securities beneficially owned, directly or indirectly, by the control person as of the date of the Information Circular; (c) included a statement of the number of votes attaching to the securities that were excluded for the purpose of the approval of the Ratification Resolution; and (d) disclosed the purpose and business reasons for the creation of the Subordinate Voting Shares. |
https://www.streetinsider.com/SEC+Filings/Form+F-10+Verses+AI+Inc./23753364.html ***
z173