File #: 0-12600
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the Fiscal Year Ending December 2003
NORSAT INTERNATIONAL INC.
(Registrant's Name)
300-4401 Still Creek Drive
Burnaby, BC V5C 6G9
Canada
(Address of principal executive offices)
Indicate by check mark whether the Registrant files or will file annual reports under cover of Form 20-F or Form 40-F
Form 20-F
X
Form 40-F
Indicate by check mark whether the Registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
No
X
If ‘Yes' is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b).
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Norsat International Inc.
(Registrant)
Date: April 28, 2004
By:
Troy Bullock
CFO
NORSAT INTERNATIONAL INC.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Annual General Meeting of NORSAT INTERNATIONAL INC. (hereinafter called the "Company") will be held in the Le Versailles Salon B at The Sutton Place Hotel, 845 Burrard Street, Vancouver, B.C., V6Z 2K6 on Wednesday, May 19th, 2004 at 2:00 p.m. (Vancouver time), for the following purposes:
1.
To receive and consider the Company's Annual Report to the shareholders and the audited consolidated financial statements of the Company for the fiscal year ended December 31, 2003, together with the report of the auditors thereon;
2.
To elect the directors of the Company for the ensuing year;
3.
To appoint the auditors of the Company for the ensuing year and to authorize the directors to fix their remuneration;
4.
To transact such other business as may properly be brought before the meeting.
Accompanying this Notice are the Company's Annual Report to shareholders including the audited consolidated financial statements for the fiscal year ended December 31, 2003, an Information Circular, a form of proxy and an Annual Return Card form. The accompanying Information Circular provides information relating to the matters to be addressed at the meeting and is incorporated into this Notice.
Shareholders are entitled to vote at the meeting either in person or by proxy. Those who are unable to attend the meeting are requested to read, complete, sign and mail the enclosed form of proxy in accordance with the instructions set out in the proxy and in the Information Circular accompanying this Notice. Please advise the Company of any change in your mailing address.
DATED at Burnaby, British Columbia, this 24th day of March 2004.
BY ORDER OF THE BOARD OF DIRECTORS
"Troy Bullock"
Chief Financial Officer and Secretary
NORSAT INTERNATIONAL INC.
Suite 300 - 4401 Still Creek Drive,
Burnaby, British Columbia, Canada
V5C 6G9
INFORMATION CIRCULAR
(Dated as of April 9th, 2004)
GENERAL INFORMATION
This Information Circular is furnished to the shareholders of Norsat International Inc. (the "Company") by management for use at the Annual General Meeting of the Company (and any adjournment thereof) to be held on May 19, 2004 at the time and place and for the purposes set forth in the accompanying Notice of Meeting. Pursuant to section 111 of the Company Act (British Columbia), advance notice of the Annual General Meeting was published in the Vancouver Sun newspaper in Vancouver, British Columbia on March 24, 2004. The Board of Directors of the Company has approved the contents and the sending of this Information Circular. All dollar amounts referred to herein are in Canadian dollars unless other wise indicated.
SOLICITATION OF PROXIES
The accompanying form of proxy is being solicited by and on behalf of the management of the Company. All costs of solicitation by management will be borne by the Company. While it is expected that the solicitation will be primarily by mail, the regular employees of the Company at nominal cost may solicit proxies personally or by telephone. In addition, the Company may retain the services of agents to solicit proxies on behalf of management of the Company. In that event, the Company will compensate any such agent for such services, including reimbursement for reasonable out-of-pocket expenses, and will indemnify them in respect of certain liabilities, which may be incurred by them in performing their services.
APPOINTMENT AND REVOCATION OF PROXIES
The individuals named in the accompanying form of proxy are the President and Chief Financial Officer, respectively, of the Company. A SHAREHOLDER WISHING TO APPOINT SOME OTHER PERSON (WHO NEED NOT BE A SHAREHOLDER) TO REPRESENT HIM OR HER AT THE MEETING HAS THE RIGHT TO DO SO, EITHER BY STROKING OUT THE NAMES OF THOSE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY AND INSERTING THE DESIRED PERSON'S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING ANOTHER FORM OF PROXY. The signature must conform to the name of the shareholder(s) as registered. To be valid, a proxy must be dated and signed by the shareholder(s) or his or her attorney authorized in writing. Executors, administrators, trustees or other personal representatives signing on behalf of a registered shareholder(s) should so indicate when signing. Where common shares are held jointly, either owner may sign. Where common shares are held by a company, a duly authorized officer or attorney of the company must sign. If the proxy is executed by the personal representative for an individual shareholder(s) or by an officer or attorney of a corporate shareholder(s), not under its corporate seal, the instrument empowering the personal representative, officer or attorney, as the case may be, or a notarial certified copy thereof, must accompany the proxy.
A shareholder who has given a proxy may revoke it by an instrument in writing executed by the shareholder or by his attorney authorized in writing or, where the shareholder is a corporation, by a duly authorized officer or attorney of the corporation, and delivered to the registered office of the Company, Suite 300 - 4401 Still Creek Drive, Burnaby, British Columbia, V5C 6G9 at any time up to and including the last business day preceding the day of the meeting or, if adjourned, any reconvening thereof, or to the Chairman of the meeting on the day of the meeting or, if adjourned, any reconvening thereof or in any other manner provided by law. A revocation of a proxy does not affect any matter on which a vote has been taken prior to the revocation.
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VALIDITY OF PROXIES
A vote cast in accordance with the terms of a proxy will be valid notwithstanding the previous death, incapacity or bankruptcy of the shareholder or intermediary on whose behalf the proxy was given or the revocation of the appointment, unless written notice of such death, incapacity, bankruptcy or revocation is received by the Chairman of the meeting prior to the commencement of the meeting.
A proxy will not be valid unless the completed form of proxy is received by Computershare Trust Company of Canada, 4th Floor, 510 Burrard Street, Vancouver, British Columbia, V6C 3B9, not later than 48 hours (excluding Saturdays, Sundays and holidays) before the time for holding the meeting or any adjournment thereof, or delivered to the Chairman of the meeting prior to the commencement of the meeting.
VOTING OF PROXIES
COMMON SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES IN FAVOUR OF PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY WILL BE VOTED IN FAVOUR OF THE MATTERS DESCRIBED IN THE PROXY.
The shares represented by proxies will, on any poll where a choice with respect to any matter to be acted upon has been specified in the form of proxy, be voted in accordance with the specification made. SUCH SHARES WILL ON A POLL BE VOTED IN FAVOUR OF EACH MATTER FOR WHICH NO CHOICE HAS BEEN SPECIFIED BY THE SHAREHOLDER.
The enclosed form of proxy, when properly completed and delivered and not revoked, confers discretionary authority upon the person appointed proxy thereunder to vote with respect to amendments or variations of matters identified in the Notice of Meeting, and with respect to other matters which may properly come before the meeting. In the event that amendments or variations to matters identified in the Notice of Meeting are properly brought before the meeting or any further or other business is properly brought before the meeting, it is the intention of the persons designated in the enclosed form of proxy to vote in accordance with their best judgement on such matters or business. At the time of the printing of this Information Circular, the management of the Company knows of no such amendment, variation or other matter that may be presented to the meeting.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Company's authorized capital consists of 75,000,000 common shares without par value, of which 39,802,832 common shares are issued and outstanding as at April 9, 2004.
Only persons registered as shareholders on the books of the Company as of the close of business on April 9, 2004 (the "Record Date") who either personally attend the meeting or who have completed and delivered a form of proxy in the manner and subject to the provisions described above shall be entitled to vote or to have their shares voted at the meeting.
Each shareholder is entitled to one vote for each common share registered in his or her name on the list of shareholders, which is available for inspection during normal business hours at Computershare Trust Company of Canada and at the meeting.
To the knowledge of the directors and senior officers of the Company, there are no persons or companies who beneficially own, directly or indirectly, or exercise control or direction over shares carrying more than 10% of the voting rights attached to all outstanding common shares of the Company.
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MATTERS TO BE ACTED UPON
ELECTION OF DIRECTORS
The term of office of each of the present directors expires at the Annual General Meeting. The Board of Directors presently consists of seven (7) directors and the Board has set the number of member of the board at six (6) for the ensuing year. The persons named below will be presented for election at the meeting as management's nominees and the persons named in the accompanying form of proxy intend to vote for the election of these nominees. Each of the nominees named below have consented to act as a director of the Company. In the event the Company is advised prior to the election of directors at the Annual General meeting that any such individual is unable or unwilling to so act, a proxy in enclosed form will confer discretionary authority on the proxyholder so named to vote for the election of such other individuals who may be nominated at the Annual General Meeting. Each director elected will hold office until the next annual general meeting of the Company or until his successor is elected or appointed, unless his office is earlier vacated in accordance with the Articles of the Company or the provisions of the Company Act (British Columbia).
In the following table and notes thereto is stated the name of each person proposed to be nominated by management for election as a director, the country in which he is ordinarily resident, all offices of the Company now held by him, his principal occupation, the period of time for which he has been a director of the Company, and the number of common shares of the Company beneficially owned by him, directly or indirectly, or over which he exercises control or direction, as at the date hereof:
Name, Position and Country of Residence | Principal Occupation | Director Since | Number of common shares (1) |
Kenneth Crump(2)(3) (Chairman and Director) Canada | Mr. Crump is the chairman of the Board and is a member of the Audit Committee and the Corporate Governance and Compensation Committee. Mr. Crump is retired. Previously he served as Chief Operating Officer of NCompass Labs from November of 1999 to May of 2001. From 1990 to 1999, he held a number of senior executive positions in operations and corporate finance at B. C. Telecom including Senior Vice-President, Corporate Services, Chief Financial Officer and Treasurer from 1995 to 1999; Prior to that, Mr. Crump served in a number of senior management positions at Microtel Ltd, including Vice-President and Chief Financial Officer from 1986 to 1989. Mr. Crump received his MBA from the Richard Ivey School of Business, University of Western Ontario, in 1974 and a Bachelor of Science (Engineering) degree from Queen's University in 1970. | June 2002 | Nil |
Ugo A. Doninelli(2)(3) (Director) Switzerland |
Mr. Doninelli serves on the Corporate Governance and Compensation Committee and the Audit Committee. He is the General Manager and Chief Executive Officer, Prismafin S.A., Chiasso, Switzerland | May 1988 | 1,985,575 (4) |
Gaetano Manti(3) (Director) Italy | Mr. Manti is Director of the Company and is the chairman of the Corporate Governance and Compensation Committee. He has served as the president of Il Mio Castello since October 1989. He has also served as an international marketing consultant to Italy's Cartier group, the New York Times magazine division and AMF, a multinational group. | June 2002 | 1,200,000 |
Brian Nixon(2) (Director) Canada | Mr. Nixon was appointed to the board in February 2004 and Chairman of the Audit Committee in March 2004. He also currently serves as Chief Executive Officer of BC Research Inc. From 1992 to 1999, he held senior executive positions with Infosat Communications Inc., first as Vice-President of Finance and then as President and Chief Executive Officer. Following Infosat's acquisition by BCE Media Inc. in 1999, Mr. Nixon was appointed Senior Vice-President - Business Solutions, BCE Media and Chairman of the Board of Vistar Communications Inc. Mr. Nixon is a Certified Management Accountant and holds a MBA from the University of Calgary. | February 2004 | Nil |
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Cameron Hunter (President, CEO, and Director) Canada | Mr. Hunter is a Director, Chief Executive Officer and President of the Company. Prior to joining Norsat in January 2003, Mr. Hunter held a number of senior management positions at SkyStream Networks, including Senior Director, Global Solution Partners and Senior Director, International Sales, Hong Kong. Mr. Hunter received his Asia Pacific Management Cooperative Program diploma from Capilano College and his B.A. (International Politics) from Queens University. | August 2003 | 182,000 |
Troy Bullock (CFO, secretary, and Director) Canada | Mr. Bullock is the Chief Financial Officer and Corporate Secretary of the Company. Prior to joining Norsat in June of 2000, Mr. Bullock was a senior manager advising technology clients with KPMG LLP. Mr. Bullock received his BBA in Accounting from Simon Fraser University and is a Chartered Accountant. | June 2002 | 150,000 |
NOTES:
(1) The information as to common shares beneficially owned or over which a director or nominee exercises control or direction, not being within the knowledge of the Company, has been furnished by the respective directors or nominees individually. See "Voting Shares and Principal Holders Thereof".
(2) Member of the Audit Committee.
(3) Member of the Corporate Governance and Compensation Committee.
(4) Mr. Doninelli, by virtue of his position as General Manager and Chief Executive Officer of Prismafin S.A., exercises direction over 1,985,575 common shares of the Company held by Prismafin S.A.
APPOINTMENT AND REMUNERATION OF AUDITORS
Unless such authority is withheld, the persons named in the accompanying proxy intend to vote for the appointment of KPMG LLP, Chartered Accountants, as auditors of the Company to hold office until the close of the next annual general meeting of shareholders and to authorize the directors to fix their remuneration.
STATEMENT OF EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the periods indicated, all annual and long term compensation earned from the Company and its subsidiaries for the year ended December 31, 2003 by each Chief Executive Officer and each of the individuals who were, at December 31, 2003, the most highly compensated executive officers of the Company (collectively, the "Named Executive Officers").
Annual Compensation | Long Term Compensation | |||||||
Awards | Payouts | |||||||
Name and Principal Position | Year | Salary ($) |
Bonus ($) | Other Annual Compensation ($)(1) | Securities Under Options/ SARs Granted (#) | Restricted Shares or Restricted Share Units ($) | LTIP Payouts ($) | All Other Compensation ($)(2) |
Cameron Hunter(3) President and Chief Executive Officer | 2003 | 155,986 | 103,894 | - | 500,000/Nil | N/A | N/A | 15,631 |
Yutaka Ueda(4) Former President and Chief Executive Officer | 2003 2002 | 230,625 89,688 | N/A N/A | - 160,000(7) | Nil/Nil 225,000/Nil(6) | N/A N/A | N/A N/A | 228,250(5) - |
Troy Bullock Chief Financial Officer | 2003 2002 2001 | 150,000 144,053 110,000 | 7,889 N/A N/A | 25,000 - 15,000 | 150,000/Nil 100,000/Nil 75,000/Nil | N/A N/A N/A | N/A N/A N/A | 14,220 14,351 5,585 |
Chris McCormack(8) Director, Marketing | 2003 2002 | 114,048 44,744 | N/A N/A | - - | 36,000/Nil 16,700/Nil | N/A N/A | N/A N/A | 12,621 2,843 |
NOTES:
(1)
Other annual compensation includes one time ad-hoc payments authorized by the Board of Directors.
(2)
All other compensation includes car allowances, life insurance and provincial health care premiums and employer registered retirement savings plan ("RRSP") contributions.
(3)
Mr. Hunter became an officer of the Company on January 17, 2003 and the President and Chief Executive Officer on August 16, 2003.
(4)
Mr. Ueda became an officer of the Company on September 24, 2002 and ceased to be an officer on August 15, 2003.
Mr Ueda received a housing allowance and a six-month severance package upon leaving the Company on August 15, 2003.
(6)
Mr. Ueda received 75,000 options as a director prior to being appointed President and CEO.
(7)
Represents a relocation-signing bonus.
(8)
Mr. McCormack became an officer of the Company on July 17, 2003 and ceased to be an officer on September 1, 2003.
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LONG-TERM INCENTIVE PLANS
No Long Term Incentive Plan awards were made to any Named Executive Officer for the year ended December 31, 2003.
STOCK OPTIONS
The following table sets forth the stock options granted during the year ended December 31, 2003, and awarded to each of the Named Executive Officers:
Name | Number of common shares Under Options Granted | % of Total Options Granted in 2003 | Average Exercise Price ($/common share) | Market Value of common shares Underlying Options on the Date of Grant ($/common share) | Expiration Date |
Cameron Hunter | 150,000 | 13 | $1.50 | $0.55 | December 15, 2013 |
Cameron Hunter | 250,000 | 21 | $0.55 | $0.55 | December 15, 2008 |
Cameron Hunter | 100,000 | 8 | $1.45 | $0.55 | December 15, 2013 |
Troy Bullock | 150,000 | 13 | $0.55 | $0.55 | December 15, 2008 |
Chris McCormack | 36,000 | 3 | $0.55 | $0.55 | December 15, 2008 |
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth details of all exercises of stock options during the year ended December 31, 2003 by the Named Executive Officers of the Company and the fiscal year-end value of unexercised options on an aggregated basis:
Name | Securities Acquired on Exercise (#)(1) | Aggregate Value Realized ($)(2) | Unexercised Options at Fiscal Year-End (#) Exercisable/Unexercisable | Value of Unexercised In-the-Money Options at Fiscal Year-End ($)(3) Exercisable/ Unexercisable |
Yutaka Ueda | None | Nil | 150,000 / Nil | Nil / Nil |
Cameron Hunter | None | Nil | Nil / 500,000 | Nil / 5,000 |
Troy Bullock | None | Nil | 156,250 / 168,750 | Nil / 3,000 |
Chris McCormack | None | Nil | 16,700 / 36,000 | Nil / 720 |
NOTES:
(1)
Number of common shares of the Company acquired on the exercise of stock options.
(2)
Calculated using the closing price of common shares of the Company on the Toronto Stock Exchange on the date(s) of exercise, less the exercise price of the stock option(s).
(3)
Value of unexercised in-the-money options calculated using the closing price of common shares of the Company on the Toronto Stock Exchange on December 31, 2003, less the exercise price of in-the-money stock options.
STOCK OPTION REPRICING
The Company did not reprice any options or SARs held by any of the Named Executive Officers during the most recently completed fiscal year.
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
The Company does not provide retirement benefits for it's directors or executive officers.
TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS
The Company has entered into an employment agreement with Mr. Cameron Hunter dated August 16, 2003 pursuant
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to which he acts as the Company's Chief Executive Officer, effective August 16, 2003. The agreement is for an indefinite period. Mr. Hunter receives an annual base salary of $200,000 plus benefits totalling approximately $16,000, and is entitled to participate in the Company's bonus program. If Mr. Hunter's employment is terminated without cause, he will receive ten (10) months of his annual compensation, plus one month for each year of service, in lieu of notice of termination of employment. Upon termination of his employment, Mr. Hunter's incentive stock options will continue to vest and he will be entitled to exercise them for a period of two years from the date of his termination.
The Company entered into an employment agreement with Mr. Troy Bullock dated October 23, 2001, as amended on March 18, 2002, pursuant to which he acts as the Company's Chief Financial Officer, effective March 14, 2002. The agreement is for an indefinite period. Mr. Bullock receives an annual base salary of $150,000 plus annual benefits totalling approximately $13,500, and is entitled to participate in the Company's bonus program. If Mr. Bullock's employment is terminated without cause, he will receive six (6) months of his annual compensation, plus one month for each year of service, in lieu of notice of termination of employment. Upon termination of his employment, Mr. Bullock's incentive stock options will continue to vest and he will be entitled to exercise them for a period of two years from the date of his termination.
The Company entered into an employment agreement with Mr. Chris McCormack dated July 17, 2003, as amended on September 1, 2003, pursuant to which he acts as the Company's Director of Marketing. Mr. McCormack received an annual base salary $116,000 plus annual benefits totalling approximately $5,000, and is entitled to participate in the Company's bonus program. If Mr. McCormack's employment is terminated without cause, he will receive three (3) months of his annual compensation, plus one month for each year of service, in lieu of notice of termination of employment.
The Company had entered into an employment agreement with Mr. Yutaka Ueda pursuant to which he acted as the Company's Chief Executive Officer. Mr. Ueda left the Company on August 15, 2003 and, and an agreement was reached in which he received six (6) months of his annual compensation, plus additional relocation cost in lieu of notice of termination of employment. Mr. Yutaka's incentive stock options continue to vest and he will be entitled to exercise them for a period of two years from the date of his termination.
COMPOSITION OF THE COMPENSATION COMMITTEE
The Corporate Governance and Compensation Committee of the Board of Directors is comprised of three directors: Messrs. Manti (Chair), Crump and Doninelli. All of the members of the committee are independent of management. None of the members of the Committee has any indebtedness to the Company, nor do they have any material interest in any actual or proposed transaction in the last financial year that has materially affected or would materially affect the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Corporate Governance Committee ("the Committee") reviews and makes recommendations to the Board with respect to Norsat's Executive Compensation Plan and Stock Option Plan. The Committee recommends to the Board the compensation of the Chief Executive Officer, reviews and approves management's recommendations for compensation and bonuses for senior management and grants of stock options. The Committee is also responsible for reviewing executive management succession and development plans. The Committee reports to the Board and the Board gives final approval on compensation matters.
Compensation Objectives
During 2003, the Committee, with the participation of the executive, undertook a complete review of compensation policies for the executive, management and the employees of the Company including having the polices reviewed by an outside professional compensation firm. New compensation policies were established to address the following objectives:
To assist the Company to attract and retain highly qualified individuals.
To reward employees annually for achieving financial results.
To create among employees a sense of ownership in the Company and to align the interests of the employees with those of the shareholder.
To create a variable component to compensation that is linked to the Company's business strategy, the Company's ability to pay and the employee's ability to influence results.
To ensure competitive compensation that is also financially affordable for the Company.
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To provide a rational methodology for incentive compensation and stock option grants that employees understand and support.
To attract and retain talented individuals to lead those functions that are important to Norsat's success.
In January 2004 the Company introduced a new "results oriented" compensation plan creating a significant variable component to compensation that is linked to key operating metrics. The Company's compensation plan is comprised of a combination of base salary and benefits, an annual incentive compensation and long term equity participation through its Stock Option Plan. To ensure competitiveness, the Company participates in annual compensation surveys, conducted by independent consultants, of salaries, benefits and other incentive programs in the high technology industry in Canada.
Base Salary and Benefits
Base salaries for the executives are targeted, on average at the 75th percentile of the comparator group (see above) and other relevant external market data as well as the individual's skill performance, and experience. The Company's benefit package is designed to be competitive with its peer group in the industry in terms of revenues and number of employees.
Performance Bonus
In recent history the Company has not provided a formal Performance Bonus Plan due to the lack of profitability performance. In January 2004, an annual incentive compensation plan was introduced to all employees based on the objectives previously discussed. Payments under this plan are determined based on the Company's performance and success in achieving specific operating targets together with the performance of the employee relative to key individual performance objectives. The significant considerations in determining bonuses for the executive officers include revenue and income objectives as well as personal achievements that contribute to the company's success. Seventy percent of the executive's bonus is determined by corporate results and thirty percent is based on individual performance.
Equity Participation
The Board believes that all employees should have a stake in Norsat's future and that their interests should be aligned with the interests of the shareholders. To this end, the Board determines the overall amount of the stock option grant and the Committee reviews and recommends to the Board the allocation of such grant to directors, officers and employees, primarily based on whose decisions and actions can have the greatest impact on the Company's performance.
Options are issued at the market price of the stock at the date of the grant. The options have up to a ten (10) year term and vest between 1 and 4 years.
Compensation of the Chief Executive Officer
The compensation of the Chief Executive Officer is reviewed annually by the Committee and approved by the Board of Directors. Mr. Hunter joined Norsat on January 17th, 2003 and was appointed to the position of Chief Executive Officer effective August 16th, 2003. As the Chief Executive Officer, he receives an annual salary of $200,000. Mr. Hunter was awarded 150,000 stock options upon hiring and another 100,000 upon his appointment as Chief Executive Officer. In December, the board awarded Mr. Hunter an additional 250,000 options as part of a stock option grant to all employees. Mr. Hunter earned a bonus of $103,894 based on the achievement of specific goals established by the Committee for the fourth quarter of 2003. Of this amount, $25,000 was paid in 2003 and the balance in the first quarter of 2004.
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PERFORMANCE GRAPH
The following line graph and table compare the cumulative total return on the Company's common shares for the period 1998 through 2003, assuming a $100 initial investment with all dividends reinvested, with the cumulative total returns, for the same investment with all dividends reinvested, in respect of S&P/TSX Composite Index.
COMPENSATION OF DIRECTORS
During 2003 each of the Directors, Mr. Crump, Mr. Manti, Mr. Doninelli, and Dr. MacDonald forgave their regular board and meeting fees. Mr. Crump was asked by the board to increase his responsibilities and to take an active role working with the management. For these additional board duties he received total compensation for the year of $86,000.
Effective January 1, 2004, each director of the Company who is not an executive officer of the Company is paid an annual fee as follows:
Chairman
$35,000
Chairman of the Audit Committee
$25,000
Director
$20,000
In addition, each director will receive $1,000 for each board meeting and $500 for each committee meeting attended during the year. The Company also reimburses its directors for disbursements that they have incurred on behalf of the Company.
The following table sets forth details of all exercises of stock options during the year ended December 31, 2003 by directors who are not Named Executive Officers of the Company as a group, and the fiscal year-end value of unexercised options on an aggregated basis:
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Name | Securities Acquired on Exercise (#)(1) | Aggregate Value Realized ($)(2) | Unexercised Options at Fiscal Year-End (#) Exercisable/ Unexercisable | Value of Unexercised In-the-Money Options at Fiscal Year-End ($)(3) Exercisable/ Unexercisable |
Directors who are not Named Executive Officers |
None |
Nil |
220,833 / 554,167 |
Nil / 6,000 |
NOTES:
(1)
Number of common shares of the Company acquired on the exercise of stock options.
(2)
Calculated using the closing price of common shares of the Company on the Toronto Stock Exchange on the date(s) of exercise, less the exercise price of the stock option(s).
(3)
Value of unexercised in-the-money options calculated using the closing price of common shares of the Company on the Toronto Stock Exchange on December 31, 2003, less the exercise price of in-the-money stock options.
The following table sets forth the stock options granted during the year ended December 31, 2003, and awarded to directors or former directors who are not Named Executive Officers of the Company.
Name | Number of common shares Under Options Granted | % of Total Options Granted in 2003 | Exercise Price ($/common share) | Market Value of common shares Underlying Options on the Date of Grant ($/common share) | Expiration Date |
Gaetano Manti | 100,000 | 8 | $0.55 | $0.55 | December 31, 2008 |
Kenneth Crump | 100,000 | 8 | $0.55 | $0.55 | December 31, 2008 |
Ugo A. Doninelli | 50,000 | 4 | $0.55 | $0.55 | December 31, 2008 |
John MacDonald | 50,000 | 4 | $0.55 | $0.55 | December 31, 2008 |
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
No director or senior officer of the Company, proposed management nominee for election as a director of the Company or any associate or affiliate of any such director, senior officer or proposed nominee was indebted to the Company or any of its subsidiaries during fiscal 2003, except for the following former officer:
Ed Johnson, President of Norsat America Inc.
$450,000
This loan is non-interest bearing. The Company has commenced legal proceedings to recover the loan balance from Mr. Johnson who left the employ of Norsat America Inc. in December 2000.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as set forth elsewhere in this Information Circular, none of the directors or senior officers of the Company, nor any proposed management nominee for election as a director of the Company, nor any shareholders beneficially owning shares carrying more than 10% of the voting rights attached to the shares of the Company, nor any associate or affiliate of any of the foregoing persons had, since January 1, 2003 (being the commencement of the Company's last completed financial year), any material interest, direct or indirect, in any transactions which materially affected or would materially affect the Company or any of its subsidiaries.
CORPORATE GOVERNANCE
The Board of Directors is responsible for the stewardship of the Company and endorses a system of corporate governance designed to effectively manage and supervise the management of the business and the affairs of the Company. The Board also provides considerable guidance to Management in pursuit of the Company's objectives.
The Board acknowledges that good corporate governance is important to the effective performance of the Company and plays a key role in protecting the interests of shareholders.
The Company's corporate governance practices are compared with the TSX corporate governance disclosure guidelines, including the proposed amendments published in April 2002 and additional proposed disclosure and
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continued listing requirements and proposed amendments in December 2002. The Company's "Statement of Corporate Governance Practices" is attached as Schedule "A" to the Circular.
The Board continues to review the existing or proposed amendments to governance guidelines and practices in order to implement the most effective corporate governance policies and practices for the Company. The Board plans to adopt changes to their governance guidelines and practices as necessary to comply with the United States Sarbanes-Oxley Act of 2002 and any new rules issued by the United States Securities and Exchange Commission, the Ontario Securities Commission, the Toronto Stock Exchange, and other applicable securities regulatory authorities.
COMPOSITION OF THE BOARD
The Board is currently composed of seven (7) directors, five (5) of whom are considered "unrelated" to the Company by TSX guidelines - which state an "unrelated" director is a director who is independent of management and is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act with a view to the best interests of the Company, other than interests and relationships arising from shareholdings.
The Board meets at least quarterly to carry out its duties and members of the board who are not management meet on an informal basis during the year to discuss the Company's progress and management.
Board Committees
The Board currently has two standing committees: the Audit Committee and the Corporate Governance and Compensation Committee.
Audit Committee
The Company's Audit Committee is comprised of four (4) directors: Messrs. Nixon (Chair), Crump, Doninelli and MacDonald (each of whom is independent and an "unrelated" director). Dr. MacDonald will not be seeking re-election to the board at this Annual General Meeting. Each member of the Audit Committee considers himself financially literate and capable of reading and understanding financial statements, and Mr. Nixon has an accounting designation and related financial expertise. The board has adopted a formal written charter for the Audit Committee under which the committee is responsible for, among other things, reviewing the Company's annual and quarterly financial statements, financial reporting procedures, internal controls and performance and independence of the Company's external auditors. The Audit Committee is directly responsible for the appointment, compensation and oversight of the auditors including pre-approving all non-audit services provided by the audit firm. The "Audit Committee Mandate" is attached to this Circular as Schedule "B".
During fiscal 2003, the Audit Committee met four (4) times to carry out its responsibilities. The committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks.
As part of its oversight of the Company's financial position, the committee reviewed and discussed with both management and the Company's external auditors the annual financial statements, and with management the quarterly financial statements, prior to their issuance. Management advised the Audit Committee in each case that all financial statements were prepared in accordance with generally accepted accounting principles, and reviewed significant accounting issues with the committee.
The Audit Committee also discussed with KPMG LLP matters relating to its independence, including a review of audit and non-audit fees and the disclosures made to the Committee pursuant to Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). During 2003, the Company paid KPMG LLP $86,000 for audit service, $19,650 for audit related services and $59,950 for taxation services.
Taking all of these reviews and discussions into account, the Audit Committee recommended to the Board of Directors that the Board approve the inclusion of the Company's audited financial statements in the Company's annual report for the fiscal year ended December 31, 2003.
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DECISIONS REQUIRING BOARD APPROVAL
In general, the Company's management operates the business on a day-to-day basis. The Board approves the annual budget and strategic plans and reviews the performance of senior management against those standards. In addition, the Board approves all major acquisitions, dispositions, financings, both debt and equity, and changes in the structure of the Company. The Board also determines the responsibility and compensation of the Chief Executive Officer based on the recommendations of the Corporate Governance and Compensation Committee. The Board appoints the officers of the Company. The Directors also determine the directors' compensation and consider the declaration of dividends.
RECRUITING OF NEW DIRECTORS
If vacancies occur on the Board, the Board as a group considers replacements, reviews the qualifications of prospective members, and determines their relevance, taking into consideration the current Board composition and the skills required to round out the capabilities of the Board and makes recommendation to the board for approval.
MEASURES FOR RECEIVING SHAREHOLDER FEEDBACK
Management has been asked to make the Board aware on an ongoing basis of any significant shareholder concerns communicated to management. The Company assigns an employee to respond to shareholder inquiries and to direct appropriate matters to senior management. Senior management will meet with shareholders to discuss their concerns where appropriate.
THE BOARD'S EXPECTATION OF MANAGEMENT
The Board expects management to operate the Company in accordance with good, prudent business practices. Management is expected to report to the Board on financial and operating matters and to make the Board aware of all important issues and major business developments. The Board also expects management to find new business opportunities for business acquisitions and expansion and to make the appropriate reports to the Board regarding those opportunities.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The 2003 premiums for directors' and officers' liability insurance coverage, in the amount of $10,000,000, amounted to $350,000. The premiums for the same level of insurance for 2004 have decreased to $325,000.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than as set forth in this Information Circular, no person who has been a director or senior officer of the Company at any time since the beginning of the last financial year, nor any proposed nominee for election as a director of the Company, nor any associate or affiliate of any of the foregoing, has any material interest, directly or indirectly, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon, other than the election of directors.
ANY OTHER MATTERS
Management of the Company knows of no other matters to come before the meeting other than those referred to in the Notice of Meeting accompanying this Information Circular. However, if any other matters properly come before the meeting, it is the intention of the persons named in the form of proxy accompanying this Information Circular to vote the same in accordance with their best judgement of such matters.
DATED at Vancouver, British Columbia, this 9th day of April 2004.
BY ORDER OF THE BOARD OF DIRECTORS
"Troy Bullock"
Chief Financial Officer and Secretary
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SCHEDULE A
Toronto Stock Exchange ("TSX") Proposed Corporate Governance Guidelines
Compliance Table
| TSE Corporate Governance |
| Does the | Comments |
1 | The Board should explicitly |
| Yes | The Board has implemented a clear statement of authorities outlining managements authority levels and requiring Board approval on significant decisions. |
(a) | adoption of a strategic |
| Yes | The Board reviews strategic plans formally on an annual basis, and informally as required. |
(b) | identification of principal |
| Yes | The Audit Committee and the Board as a whole have |
(c) | succession planning and monitoring senior management |
| Yes | The Governance and Compensation Committee monitors the performance of senior management, and is responsible for succession planning generally. |
(d) | communications policy |
| Yes | The Board, through and with the assistance of senior |
(e) | integrity of internal control |
| Yes | The Audit Committee has the responsibility for the integrity |
2 | Majority of directors should be "unrelated" (independent of management and free from conflicting interest) |
| Yes | Only Cameron Hunter, the President & CEO, and Troy Bullock the CFO are related. |
3 | Disclosure for each director whether he or she is related, and how that conclusion was reached |
| Yes | Only Cameron Hunter, the President & CEO, and Troy Bullock the CFO are related. |
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4. | Appoint a committee responsible for appointment/assessment of directors Composed exclusively of non-management directors, the majority of whom are unrelated |
| Yes | The unrelated Board members assess the performance and qualification of directors and assess and recommend potential nominees to the Board. |
5 | Implement a process for assessing the effectiveness of the Board, its committee and directors |
| Yes | The Board as a whole reviews the overall effectiveness of the |
6 | Provide orientation and education programs for new directors |
| Yes | The Board provides ad hoc orientation for new directors. |
7 | Consider reducing size of the Board, with view to improving effectiveness |
| Yes | The Board as a whole has reviewed the size of the Board and concluded that the current number of directors is appropriate to the needs of the Company at this time. |
8 | Review compensation of directors in light of risks and responsibilities |
| Yes | The Board as a whole considers the compensation of directors periodically and brings the resulting suggestions to the Board for its consideration. |
9.a. | Committees should generally be composed of non-management directors |
| Yes | All Board committees are composed entirely of non- |
9.b. | Majority of committee members should be unrelated |
| Yes | All Board committees are composed of a majority of |
10 | Appoint a committee responsible for approach to corporate governance issues |
| Yes | The Corporate Governance Committee has the mandate to |
11.a. | Define limits to management's responsibilities by developing mandates for: |
|
|
|
i) the Board |
| Yes | There is a specific mandate for the Board. Any responsibility which is not delegated to senior management or a committee of the Board remains the responsibility of the Board. | |
| ii) the CEO |
| Yes | The written objectives of the Company, as determined |
11.b. | Board should approve CEO's corporate objectives |
| Yes | The CEO's corporate objectives are established annually by |
12 | Establish structures and procedures to enable the Board to function independently of management |
| Yes | On occasions where it is considered advisable, the Board has met in the absence of management. All Board committees are comprised solely of non-management members. |
13.a. | Establish an audit committee with a specifically defined mandate |
| Yes | The Audit Committee is mandated to monitor audit functions, the preparation of financial statements, review press releases on financial results, review other regulatory documents as required and meet with outside auditors independently of management. The audit committee charter is included in Schedule "D" of this Circular. |
13.b. | All members should be non-management directors |
| Yes |
|
14 | Implement a system to enable individual directors to engage outside advisors, at the Company's expense |
| Yes | The Company has implemented a system that enables individual director to engage outside advisors at the Company's expense |
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SCHEDULE B
Norsat International Inc.
AUDIT COMMITTEE CHARTER
Purpose
The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Norsat International Inc. (the "Company") is to assist the Board in achieving its oversight responsibilities with respect to the Company particularly with regards to financial reporting and performance. The Committee shall be governed by this Charter.
Organization
The Committee shall be composed of not less than three Independent Directors, as defined below. Each must be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement and cash flow statement (or be able to do so within a reasonable period of time after appointment to the Committee); and (c) at least one member of the Committee must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
Definition of What Constitutes Independence for Directors
No director will qualify as independent unless the board of directors affirmatively determines that the director has no material relationship with the Company. Independent Directors are encouraged to limit the number of other boards on which they serve, taking into account potential board attendance, participation and effectiveness on these boards. Independent Directors should also advise the Chairman of the Board and the Chairman of the Audit Committee in advance of accepting an invitation to serve on another board. Independent Directors, may not receive any compensation for services excluding normal course board remuneration.
No director will qualify as independent unless the Board affirmatively determines that the director has no material relationship with the Company. A material relationship will include but is not limited to:
Employment by the company within the last 5 years
Receiving any fees for services (outside normal board remunerations)
Immediate family of an officer
Controlling shareholder of the company
Executive of a related company
Significant shareholders, board members or executives of a:
a)
competing company;
b)
supplying company;
c)
distributing company; or
d)
representing company.
Statement of Policy
The Committee shall provide assistance to the Board in fulfilling their responsibility to the shareholders, potential shareholders, and investment community relating to corporate reports of the corporation. In so doing, it is the responsibility of the Committee to maintain free and open means of communication between the directors, the independent auditors, and the financial management of the corporation.
Responsibilities
In carrying out its responsibilities, the Committee shall: (a) review the Company's annual audited and quarterly financial statements prior to release to any shareholder, governmental body or the public, including any certification, report, opinion, or review rendered by the Company's auditors; (b) review on an annual basis the independence of the Company's auditor; (c) be directly responsible for the appointment, compensation and oversight of the auditors including pre-approving all non-audit services provided by the audit firm; (d) provide an assessment of the effectiveness of the Company's internal controls over financial reporting; (e) at the request of the Board, review the Company's other financial statements, reports and information submitted to any shareholder, governmental body or the public; and (f) perform such other duties and tasks as shall be requested by the Board in furtherance of the foregoing.
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Procedures
The Committee shall adhere to the following procedures in order to carry out its purpose and responsibilities:
Annually, review with management and recommend to the Board the appointment of independent auditors of the corporation, its divisions and subsidiaries.
Meet with the independent auditors and financial management of the corporation to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion thereof review such audit, including any comments or recommendations of the independent auditors.
Review with the independent auditors and the financial and accounting personnel, the adequacy and effectiveness of the accounting and financial controls, information technology controls, security and other matters relating to the corporation, and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures or particular areas where new or more detailed controls or procedures are desirable. Particular emphasis should be given to the adequacy of such internal controls to expose any payments, transactions, or procedures that might be deemed illegal or otherwise improper. Further, the committee periodically should review company policy statements to determine their adherence to the code of conduct.
Review the internal audit function of the corporation including the independence and authority of its reporting obligations; the proposed audit plans for the coming year, and the coordination of such plans with the independent auditors.
Receive prior to each meeting, a summary of findings from completed internal audits and a progress report on the proposed internal audit plan, with explanations for any deviations from the original plan.
Prior to their release, review the financial statements contained in the annual report to shareholders with management and the independent auditors to determine that the independent auditors are satisfied with the disclosure and content of the financial statements to be presented to the shareholders. Any changes in accounting principles should be reviewed.
Provide sufficient opportunity for the independent auditors to meet with the members of the Committee without members of management present. Among the items to be discussed in these meetings are the independent auditors' evaluation of the corporation's financial, accounting, and auditing personnel, and the cooperation that the independent auditors received during the course of the audit.
Review accounting and financial human resources and succession planning within the company.
The Committee shall: (a) prepare minutes of all Committee minutes and distribute copies thereof to the Board; and (b) prepare an annual report to the Board specifying the actions the Committee took during the preceding year to satisfy its responsibilities hereunder. Specifically, the report shall disclose whether the Committee has reviewed and discussed the annual financial statements with management, discussed the required items with the independent accountants and auditors, and received the written report from the auditors regarding their independence. Investigate any matter brought to its attention within the scope of its duties, with the power to retain outside counsel for this purpose if, in its judgment, that is appropriate.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS
Annual Review of Audit Committee Structure and Membership. The Board shall annually review the structure and membership of the Committee and shall take such action as may be necessary to ensure that the structure and membership of the Committee meets the requirements set forth in this Charter.
Annual Review and Reassessment of Charter. At its annual meeting, the Board shall review and reassess the adequacy of this Charter and shall make such modifications or amendments to this Charter as the Board shall deem necessary or desirable. Nothing herein shall prevent the Board from adopting standards, policies, procedures and responsibilities beyond those set out in this Charter.
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