CINRAM INTERNATIONAL INC.
NOTICE OF ANNUAL AND SPECIAL
MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that an annual and special meeting (the
"Meeting") of shareholders of CINRAM INTERNATIONAL INC. (the "Corporation") will
be held at the TSX Conference Centre, 130 King Street West, Toronto, Ontario on
Friday, June 13, 2003, at the hour of 11:00 a.m. (Toronto time) for the
following purposes:
1. TO RECEIVE the annual report and the financial statements for the year
ended December 31, 2002 and the report of the auditors thereon;
2. TO APPOINT auditors and to authorize the directors to fix their
remuneration;
3. TO ELECT directors;
4. TO CONSIDER and, if deemed advisable, to pass an ordinary resolution to
approve the increase in the number of common shares reserved for issuance
upon the due exercise of options granted pursuant to the Stock Option
Incentive Plan (the "Plan") of the Corporation to 8,000,000 being an
increase of 4,000,000 common shares;
5. TO CONSIDER and, if deemed advisable, to pass the resolution, with or
without amendment, in the form of Schedule "B" attached to the
accompanying Information Circular, confirming the adoption of the
Corporation's By-Law No.41; and
6. TO TRANSACT such further and other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
A form of proxy solicited by management of the Corporation in
respect of the Meeting is enclosed herewith, together with a copy of the annual
report of the Corporation which contains the financial statements of the
Corporation for the year ended December 31, 2002.
Shareholders who are unable to be present at the Meeting are
requested to sign the enclosed form of proxy and return it in the envelope
provided for that purpose. To be effective, the form of proxy must be received
at the offices of Computershare Trust Company of Canada, 100 University Avenue,
9th Floor, Toronto, Ontario M5J 2Y1 or by fax to (416) 981-9803 or
1-866-249-7775, not later than 11:00 a.m. (Toronto time) on Wednesday, June 11,
2003. The accompanying management proxy circular provides additional information
relating to the matters to be dealt with at the Meeting.
DATED this 12th day of May, 2003.
By Order of the Board
(signed)
HENRI A. ABOUTBOUL
Non-Executive Chairman
CINRAM INTERNATIONAL INC.
MANAGEMENT PROXY CIRCULAR
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
JUNE 13, 2003
SOLICITATION OF PROXIES
THIS MANAGEMENT PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION
BY THE MANAGEMENT OF CINRAM INTERNATIONAL INC. (THE "CORPORATION") OF PROXIES TO
BE USED AT THE ANNUAL AND SPECIAL MEETING OF THE SHAREHOLDERS OF THE CORPORATION
(THE "MEETING") TO BE HELD AT THE TIME AND PLACE AND FOR THE PURPOSES SET FORTH
IN THE ACCOMPANYING NOTICE OF MEETING, AND AT ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF. In addition to solicitation by mail, certain officers, directors and
employees of the Corporation may solicit proxies by telephone, telegraph or
personally. These persons will receive no compensation for such solicitation
other than their regular fees or salaries. The cost of solicitation by
management will be borne directly by the Corporation. The registered office of
the Corporation is located at 2255 Markham Road, Toronto, Ontario, M1B 2W3.
VOTING OF PROXIES
The common shares in the capital of the Corporation (the "COMMON SHARES")
represented by the accompanying form of proxy (if the same is properly executed
in favour of Isidore Philosophe or Lewis Ritchie, the management nominees, and
is received at the offices of Computershare Trust Company of Canada, 100
University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1, not later than 11:00
a.m. (Toronto time) on June 11, 2003 or, if the Meeting is adjourned, not later
than forty-eight (48) hours, excluding Saturdays, Sundays and holidays,
preceding the time of such adjourned Meeting) will be voted at the Meeting, and,
where a choice is specified in respect of any matter to be acted upon, will be
voted in accordance with the specification made. IN RESPECT OF PROXIES IN WHICH
SHAREHOLDERS HAVE NOT SPECIFIED THAT THE PROXY NOMINEES ARE REQUIRED TO VOTE OR
WITHHOLD FROM VOTING IN RESPECT OF THE ELECTION OF DIRECTORS AND THE APPOINTMENT
OF AUDITORS, THE COMMON SHARES REPRESENTED BY PROXIES IN FAVOUR OF MANAGEMENT
NOMINEES WILL BE VOTED IN FAVOUR OF THE DIRECTORS LISTED IN THIS INFORMATION
CIRCULAR AND THE APPOINTMENT OF AUDITORS.
THE ACCOMPANYING FORM OF PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE PERSONS
NAMED THEREIN WITH RESPECT TO AMENDMENTS OR VARIATIONS TO THE MATTERS SET FORTH
IN THE ACCOMPANYING NOTICE OF MEETING, OR OTHER MATTERS WHICH MAY PROPERLY COME
BEFORE THE MEETING. At the date hereof, management of the Corporation knows of
no such amendments, variations or other matters to come before the Meeting.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the accompanying form of proxy are directors and officers
of the Corporation. A SHAREHOLDER DESIRING TO APPOINT SOME OTHER PERSON TO
REPRESENT HIM OR HER AT THE MEETING MAY DO SO EITHER BY INSERTING SUCH PERSON'S
NAME IN THE BLANK SPACE PROVIDED IN THE ACCOMPANYING FORM OF PROXY AND STRIKING
OUT THE NAMES OF THE MANAGEMENT NOMINEES OR BY DULY COMPLETING ANOTHER PROPER
FORM OF PROXY AND, IN EITHER CASE, RETURNING THE COMPLETED PROXY AT THE OFFICES
OF COMPUTERSHARE TRUST COMPANY OF CANADA, 100 UNIVERSITY AVENUE, 9TH FLOOR,
TORONTO, ONTARIO, M5J 2Y1 OR BY FAX TO (416) 981-9803 OR 1-866-249-7775, BEFORE
THE SPECIFIED TIME.
A SHAREHOLDER GIVING A PROXY HAS THE POWER TO REVOKE IT. Such revocation may be
made by the shareholder attending the Meeting, by fully executing another form
of proxy bearing a later date and duly depositing the same before the specified
time, or by written instrument revoking such proxy duly executed by the
shareholder or his or her attorney authorized in writing or, if the shareholder
is a body corporate, under its corporate seal or by an officer or attorney
thereof, duly authorized, and deposited either at the registered office of the
Corporation, 2255 Markham Road, Toronto, Ontario, M1B 2W3, at any time up to and
including the last business day preceding the date of the Meeting or any
adjournment thereof, or with the Chairman of the Meeting on the day of the
Meeting or any adjournment thereof. Such instrument will not be effective with
respect to any matter on which a vote has already been cast pursuant to such
proxy.
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VOTING SECURITIES AND PRINCIPAL
HOLDERS OF VOTING SECURITIES
The authorized capital of the Corporation consists of an unlimited number of
redeemable preference shares and an unlimited number of Common Shares, of which
55,238,392 Common Shares were issued and outstanding as at May 1, 2003.
Each shareholder is entitled to one vote for each Common Share shown as
registered in his or her name on the list of shareholders which is available for
inspection at the Meeting. The directors have fixed May 9, 2003 as the record
date for the Meeting. Accordingly, pursuant to the Canada Business Corporations
Act, only shareholders of record as at the close of business on May 9, 2003 are
entitled to receive notice of and to attend and vote at the Meeting except that
a transferee of Common Shares acquired after that date shall be entitled to vote
at the Meeting if such transferee produces properly endorsed certificates for
such shares or otherwise establishes ownership of such shares and has demanded
not later than 10 days before the Meeting that the name of such transferee be
included on the list of shareholders entitled to vote at the Meeting.
At the date hereof, to the knowledge of the directors and officers of the
Corporation, no person beneficially owns or exercises control or direction over
securities carrying more than 10% of the voting rights attached to any class of
outstanding voting securities of the Corporation entitled to be voted at the
Meeting.
MATTERS TO BE ACTED UPON
1. APPOINTMENT OF AUDITORS
The management of the Corporation recommends the re-appointment of Messrs. KPMG
LLP as auditors of the Corporation. UNLESS SUCH AUTHORITY IS WITHHELD, THE
COMMON SHARES REPRESENTED BY THE ACCOMPANYING FORM OF PROXY WILL BE VOTED IN
FAVOUR OF THE RE-APPOINTMENT OF MESSRS. KPMG LLP AS AUDITORS OF THE CORPORATION
TO HOLD OFFICE UNTIL THE NEXT ANNUAL MEETING OF SHAREHOLDERS AND AUTHORIZING THE
DIRECTORS OF THE CORPORATION TO FIX THEIR REMUNERATION.
To be approved the resolution must be approved by a majority of the votes cast
in respect of the resolution.
2. ELECTION OF DIRECTORS
Directors of the Corporation are elected annually by the shareholders. The
articles of the Corporation provide that the number of directors to be elected
shall be a minimum of one (1) and a maximum of fifteen (15). Accordingly, a
Board of six (6) directors is to be elected at the Meeting.
UNLESS SUCH AUTHORITY IS WITHHELD, THE COMMON SHARES REPRESENTED BY THE
ACCOMPANYING FORM OF PROXY WILL BE VOTED IN FAVOUR OF THE NOMINEES SET OUT
BELOW.
The term of office of all present directors of the Corporation expires at the
Meeting. Management has been informed by each nominee that he is willing to
stand for election or re-election, as applicable, and serve as a director. As of
May 1, 2003, the directors and senior officers of the Corporation, as a group,
beneficially owned directly or indirectly approximately 5.7% of the outstanding
Common Shares.
The following information is submitted with respect to the nominees for
directors:
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NUMBER OF COMMON SHARES
BENEFICIALLY OWNED, DIRECTLY OR
NAME AND POSITION OR OFFICE PERIODS DURING WHICH NOMINEE INDIRECTLY OR CONTROLLED
HELD WITH THE HAS SERVED AS A AS OF THE DATE HEREOF(1)
CORPORATION PRINCIPAL OCCUPATION DIRECTOR OF THE CORPORATION
Isidore Philosophe Chief Executive Officer of the Since August 29, 1969 2,483,200
Director and Chief Executive Corporation
Officer
Lewis Ritchie, C.A. Chief Financial Officer of the Since June 1, 1985 31,938
Director, Executive Vice Corporation
President, Finance, Chief
Financial Officer and Secretary
Norman May, Q.C.(3) Partner of Fogler, Rubinoff LLP Since December 1, 1985 20,000
Director
Henri A. Aboutboul(2) (3) Director, Waste Management Since November 19, 1986 40,000
Non-Executive Chairman, International B.V.
Director
Peter G. White (2)(3) Executive Vice President, Argus Since June 12, 1997 7,500
Director Corporation
David Rubenstein President, Cinram Americas Since June 19, 2002 Nil
Director
President, Cinram Americas
NOTES:
(1) The information as to Common Shares beneficially owned or over which
control or direction is exercised, not being within the knowledge of the
Corporation, has been furnished by the respective proposed nominees.
(2) Member of Compensation Committee.
(3) Member of the Audit Committee.
Each of the foregoing individuals has held his or her present principal
occupation or other office or position with the same company or firm set out
opposite his or her name for the past five years with the exception of Mr.
Aboutboul, who prior to May 2001 was the Managing Director of Chemicals, Waste
Management International and David Rubenstein, who was elected as a Director in
June 2001, and prior to June 2001 was President, Cinram U.S. Operations.
The Corporation is required to have and has an audit committee which consists of
Messrs. Henri A. Aboutboul, Norman May, Q.C. and Peter G. White. The Corporation
does not have an executive committee of the Board of Directors.
IF ANY OF THE ABOVE NOMINEES IS FOR ANY REASON UNAVAILABLE TO SERVE AS A
DIRECTOR, PROXIES IN FAVOUR OF MANAGEMENT WILL BE VOTED FOR ANOTHER NOMINEE IN
THE DISCRETION OF MANAGEMENT UNLESS THE SHAREHOLDER HAS SPECIFIED IN THE PROXY
THAT HIS OR HER SHARES ARE TO BE WITHHELD FROM VOTING IN THE ELECTION OF
DIRECTORS.
3. APPROVAL OF AMENDMENTS TO STOCK OPTION INCENTIVE PLAN TO INCREASE NUMBER
OF COMMON SHARES RESERVED
On June 23, 1994, shareholders approved the establishment of the Corporation's
Stock Option Incentive Plan (the "Plan") which stipulates that the maximum
number of Common Shares that can be reserved for issuance upon the exercise of
options is 4,000,000 Common Shares. In order for the Plan to properly reflect
the current market capitalization of the Corporation the Plan is proposed to be
amended to increase the maximum number of shares to be reserved for issuance
upon the exercise of options duly granted pursuant to the Plan from 4,000,000
Common Shares, as presently constituted to 8,000,000 being an increase of
4,000,000 Common Shares.
As at the date hereof, options to purchase a total of 3,234,340 Common Shares
are outstanding in favour of directors, officers and employees of the
Corporation with only 1,497 remaining available for future grants of options. In
order to be effective, the resolution increasing the number of Common Shares
reserved under the Plan must be approved by a majority of the votes cast at the
meeting but excluding the votes attaching to the shares beneficially owned by:
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(a) insiders (as defined in the Securities Act (Ontario)) of the
Corporation to whom shares may be issued under the Plan, other than
persons who are insiders solely by virtue of being a director or
senior officer of a subsidiary of the Corporation; and
(b) associates (as defined in the Securities Act (Ontario)) of the
persons referred to in subparagraph (a) above.
To the best of the Corporation's knowledge, the votes attaching to approximately
3,182,638 Common Shares will be excluded.
IT IS THE INTENTION OF THE MANAGEMENT REPRESENTATIVES DESIGNATED IN THE ENCLOSED
FORM OF PROXY TO VOTE THE COMMON SHARES IN RESPECT OF WHICH THEY ARE APPOINTED
FOR THE PROPOSED RESOLUTION. THE AMENDMENT MUST ALSO RECEIVE THE APPROVAL OF THE
TSX IN ORDER TO BE EFFECTIVE.
4. CONFIRMATION OF BY-LAWS
Given the amendments to the CBCA in November 2001, the Board of Directors
concluded that a comprehensive review of the Corporation's By-Laws was both
timely and in the best interests of the Corporation and its shareholders. As a
result of that review, the Board of Directors determined that it was appropriate
for the Corporation to adopt new By-Laws. On May 12, 2003, the Board of
Directors adopted the Corporation's new By-Law No. 41. A copy of the new By-Laws
is attached as Appendix 1 to Schedule "B" to this Circular. The new By-Laws are
required to be submitted to shareholders at the annual meeting of shareholders
for confirmation, rejection or amendment.
The notable changes in the new By-Laws from the previous By-Laws as follows:
(a) the new By-Laws provide greater flexibility by permitting that the
Corporation's registered office shall be in the province or territory of
Canada specified in the Articles, as opposed to the specific place in such
province or territory specified in the Articles;
(b) the new By-Laws provide greater flexibility by reducing the Canadian
residency requirements of directors of the Corporation from a majority of
directors to at least 25% of the directors;
(c) the new By-Laws change the duties of the board of directors from managing
the business and affairs of the Corporation to managing or supervising the
management of the business and affairs of the Corporation;
(d) the new By-Laws eliminate the requirement that a majority of any members
of a committee of the board of directors be resident Canadians;
(e) the new By-Laws provide greater flexibility with respect to where the
Corporation can hold meetings of shareholders;
(f) the new By-Laws reflect the amendment to the CBCA relating to the time
periods required for notice of meetings of shareholders and relating to
the record date for notice of meetings of shareholders and for dividends;
(g) the new By-Laws provide detailed provisions regarding determination of a
record date for voting at meetings of shareholders;
(h) the new By-Laws provide greater flexibility by permitting that meetings of
shareholders may be held by means of an electronic communications
facility; and
(i) the new By-Laws provide greater flexibility by permitting that the
Corporation may, subject to the consent of the applicable addressee,
provide certain notices or documents to shareholders or directors by means
of electronic delivery.
-5-
The form of the proposed resolution to confirm the new By-Laws is set out as
Schedule "B" to this Circular.
In order to be effective, the proposed resolution must be approved by at least a
majority of the votes present in person or represented by proxy at the Meeting
or any adjournment thereof.
It is the intention of the Management representatives designated in the enclosed
form of proxy to vote the Common Shares in respect of which they are appointed
proxy FOR the proposed resolution, a copy of which is set out in Schedule "B" to
this Circular.
5. PARTICULARS OF OTHER MATTERS TO BE ACTED ON
The management of the Corporation knows of no matters to come before the Annual
and Special Meeting of Shareholders other than the matters referred to in the
Notice of the Annual and Special Meeting of Shareholders.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
In 1995, The Toronto Stock Exchange passed a by-law containing new disclosure
requirements for listed companies regarding their corporate governance. These
disclosure requirements require that this Statement of Corporate Governance
Practices relate the corporate governance practices of the Board of Directors
(the "Board") of the Corporation to the disclosure requirements set out in
Section 473 and the guidelines set out in Section 474 of The Toronto Stock
Exchange Company Manual (the "GUIDELINES"). The Guidelines require that the
Corporation must provide a complete description of its system of corporate
governance with specific reference to each of the Guidelines and, where the
Corporation's system is different from any of those guidelines or where the
Guidelines do not apply to the Corporation's system, an explanation of the
differences or their inapplicability. In 2002, the TSX proposed changes to its
corporate governance standards creating additional guidelines and proposing
certain mandatory requirements (the "Proposal"). The Proposal is currently under
review by the Ontario Securities Commission. The Corporation is required to
continue to disclose corporate governance practices against the current
Guidelines. However, the TSX has encouraged the Corporation to review the
proposed amendments and voluntarily provide the suggested information in the
Proposal. The Corporation is pleased to make the following disclosure regarding
its corporate governance policies, along with the additional disclosure
contained in Appendix A to this Circular.
BOARD COMPOSITION
The Board is currently composed of six members. Of the current Board members,
Mr. White is considered by the Board to be an "unrelated director" within the
meaning of the Guidelines, as he 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 Corporation, other than interests and relationships arising from
shareholding". The other five members are related within the meaning of the
Guidelines; Mr. Isidore Philosophe is a member of management and has an interest
in corporations from whom the Corporation leases its premises; Mr. Ritchie and
Mr. Rubenstein are members of management; Mr. May is a partner in a law firm
which has provided legal services to the Corporation; and Mr. Aboutboul has
received consulting fees from the Corporation for assisting with the management
of the Corporation's operations in Europe. In deciding whether a particular
director is or is not a "related director", the Board examined the factual
circumstances of each director and considered them in the context of many
factors.
Although the Board does not presently have a majority of unrelated directors as
recommended by the Guidelines, the Board believes that the current composition
of the Board nonetheless serves the Corporation and its shareholders well. The
Board believes that all of its directors make a valuable contribution to the
Board, the Corporation and its subsidiaries. A number of the directors, although
not "unrelated directors", possess an extensive knowledge of the Corporation's
businesses and business environment which has proven to be beneficial to the
Board, and their participation as directors contributes to the effectiveness of
the Board. The Board also believes that the directors are sensitive to conflicts
of interest and excuse themselves from deliberations and voting in appropriate
circumstances.
The Corporation does not have a "significant shareholder", which the Guidelines
define as "a shareholder with the ability to exercise a majority of the votes
for the election of the Board of Directors."
-6-
BOARD COMMITTEES
The Board has an Audit Committee and a Compensation Committee. As and when
required, ad hoc committees of the Board will be appointed. As the Board has
plenary power, any responsibility which is not delegated to management or a
Board committee remains with the Board.
AUDIT COMMITTEE
The Audit Committee is composed of three directors, all of whom are outside
directors. Contrary to the Guidelines' recommendations that all members of the
Audit Committee should be unrelated directors, only one member is unrelated. The
related directors bring a wealth of knowledge and experience to their function
and their contributions are considered valuable by the Board and important to
fulfilling their role. The Audit Committee is responsible for the integrity of
the Corporation's internal accounting and control systems. The Committee
receives and reviews the financial statements of the Corporation and makes
recommendations thereon to the Board prior to their approval by the full Board.
The Audit Committee communicates directly with the Corporation's external
auditors in order to discuss audit and related matters whenever appropriate.
COMPENSATION COMMITTEE
The Compensation Committee is composed of two members, both of whom are
unrelated directors within the meaning of the Guidelines. The Compensation
Committee makes recommendations to the Board regarding the compensation policies
and practices of the Corporation that apply to the CEO.
-7-
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides a summary of compensation earned during each of the
Corporation's last three fiscal years by the Chief Executive Officer and the
Corporation's four most highly compensated executive officers (hereinafter
collectively referred to as the "NAMED EXECUTIVE OFFICERS") other than the Chief
Executive Officer. Particulars of the compensation are disclosed elsewhere in
this circular.
EXECUTIVE COMPENSATION SUMMARY
OF COMPENSATION TABLE (1)
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
SECURITIES RESTRICTED
UNDER SHARES OR
OPTIONS/ RESTRICTED
NAME AND SARS SHARE LTIP
PRINCIPAL POSITION BONUS/ OTHER ANNUAL GRANTED UNITS PAYOUTS ALL OTHER
OF NAMED SALARY COMMISSIONS/ COMPENSATION ($) (#) ($) ($) COMPENSATION
EXECUTIVE OFFICER YEAR (CDN. $) FEES (CDN. $)
- ----------------- ---- --------- ------------- ---------------- ---------- ---------- ------- ------------
Isidore Philosophe 2002 361,000 2,500,000 (1) 120,000 NIL NIL NIL
Chief Executive 2001 352,000 1,200,000 (1) NIL
Officer 2000 352,000 - (1) 80,000
Lewis Ritchie 2002 300,000 760,000 (1) 100,000 NIL NIL NIL
Executive V-P, 2001 205,000 500,000 (1) NIL
Finance and 2000 205,000 - (1) 60,000
Administration,
CFO and Secretary
David Rubenstein 2002 US325,000 US600,000 (1) 60,000 NIL NIL US550,000(2)
President, Cinram 2001 US250,000 US500,000 (1) 60,000 -
Americas 2000 US250,000 - (1) 40,000 -
Jaime Ovadia 2002 US200,000 US250,000 (1) 20,000 NIL NIL NIL
Executive Vice- 2001 US180,000 US180,000 (1) 20,000
President, 2000 US180,000 - (1) 20,000
Worldwide
Theatrical Home
Video
President, Cinram
Latinoamericana
Jacques Philosophe 2002 300,000 760,000 (1) 100,000 NIL NIL NIL
Executive V-P, 2001 205,000 400,000 (1) NIL
Operations 2000 176,000 - (1) 60,000
NOTES:
(1) The value of perquisites and other benefits did not exceed the lesser of
$50,000 and 10% of the total of the annual salary and bonus and is not
reported herein.
(2) This amount represents the forgiveness of a non-interest bearing loan from
the Corporation.
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The following table summarizes the option grants to the Named Executive Officers
during the most recently completed financial year:
OPTION GRANTS DURING MOST RECENTLY
COMPLETED FINANCIAL YEAR
MARKET VALUE OF
SECURITIES
SECURITIES % OF TOTAL UNDERLYING
UNDER OPTIONS OPTIONS GRANTED OPTIONS ON THE
GRANTED TO EMPLOYEES IN EXERCISE PRICE DATE OF GRANT
NAME (#) FISCAL 2002 ($/SECURITY) ($/SECURITY) EXPIRATION DATE
- ---- ------------- --------------- -------------- --------------- ---------------
Isidore Philosophe 120,000 17% $10.20 $10.20 June 21, 2007
Lewis Ritchie 100,000 14% $10.20 $10.20 June 21, 2007
David Rubenstein 60,000 9% $10.20 $10.20 June 21, 2007
Jaime Ovadia 20,000 3% $10.20 $10.20 June 21, 2007
Jacques Philosophe 100,000 14% $10.20 $10.20 June 21, 2007
The following table sets forth information related to outstanding options of the
Named Executive Officers and particulars of options exercised by each of the
Named Executive Officers during the fiscal year ended December 31, 2002, and the
fiscal year-end value of unexercised options:
AGGREGATED OPTIONS EXERCISED DURING MOST RECENTLY COMPLETED
FINANCIAL YEAR AND OPTION VALUES AT FINANCIAL YEAR-END
VALUE OF UNEXERCISED IN-THE-
SECURITIES AGGREGATE UNEXERCISED OPTIONS AT MONEY OPTIONS AT FINANCIAL
ACQUIRED ON VALUE FINANCIAL YEAR-END YEAR-END
EXERCISE REALIZED (#) ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- --------- ------------------------- ----------------------------
Isidore Philosophe Nil Nil 536,333/165,667 1,337,467/47,733
Lewis Ritchie 50,000 191,250 119,000/136,000 71,600/35,800
David Rubenstein 20,000 160,200 99,667/125,333 47,733/309,867
Jaime Ovadia Nil Nil 68,000/52,000 71,533/107,367
Jacques Philosophe 50,000 161,250 169,000/136,000 222,350/35,800
EMPLOYMENT AGREEMENTS
The Corporation has an employment agreement with Lewis Ritchie, the Executive
Vice-President, Finance, Chief Financial Officer and Secretary as well as a
director of the Corporation, made as of January 1, 2002 with a term of four
years expiring January 1, 2006 and automatic renewals for further consecutive
periods of two years each unless either
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the Corporation or Mr. Ritchie gives notice of intention not to renew at least
one year prior to the expiration of the term period. The agreement provides,
inter alia, that:
(i) Mr. Ritchie shall receive initially a base salary of $300,000 per
annum which shall be increased as of the commencement of each
calendar year in the same proportion as the percentage increase, if
any, in the Consumer Price Index during the immediate preceding year
and in addition, shall be reviewed annually to determine any
appropriate annual increases;
(ii) Mr. Ritchie is entitled to receive a minimum bonus with respect to
each full fiscal year in which he was employed by the Corporation
equal to 1% of the Pre-Tax Earnings (as defined in the agreement)
shown on the audited consolidated financial statements of the
Corporation, only if Pre-Tax Earnings are in excess of $50,000,000,
which bonus shall be paid within 90 days from the end of each fiscal
year;
(iii) Mr. Ritchie is entitled to participate in the supplementary benefits
made available generally to the Corporation's senior executive
employees from time to time and any perquisites established by the
Corporation from time to time as appropriate for him;
(iv) Mr. Ritchie is entitled to the reimbursement of all expenses
actually and properly incurred in furtherance of or in connection
with the business of the Corporation as well as a minimum automobile
allowance of $800 per month; and
(v) upon the earlier of: the termination of Mr. Ritchie by the
Corporation of his employment other than for just cause, disability
or death; or the failure of the Corporation to renew the term of his
employment upon the expiry of the original or any renewal term, the
Corporation shall thereupon pay to Mr. Ritchie (in addition to
payment of his total compensation, including minimum bonus, if any,
for the balance of the contract term, if applicable), an amount
equal to two years salary, average annual bonus for the past three
years and annual benefits which shall be paid, at the option of Mr.
Ritchie, in one lump sum or in twenty-four (24) equal monthly
instalments.
The Corporation has an employment agreement with Jacques Philosophe, the
Executive Vice-President, Operations, made as of January 1, 2002 with a term of
four years expiring January 1, 2006 and automatic renewals for further
consecutive periods of two years each unless either the Corporation or Mr.
Philosophe gives notice of intention not to renew at least one year prior to the
expiration of the term period. The agreement provides, inter alia, that:
(i) Mr. Philosophe shall receive initially a base salary of $300,000 per
annum which shall be increased as of the commencement of each
calendar year in the same proportion as the percentage increase, if
any, in the Consumer Price Index during the immediate preceding year
and in addition, shall be reviewed annually to determine any
appropriate annual increases;
(ii) Mr. Philosophe is entitled to receive a minimum bonus with respect
to each full fiscal year in which he was employed by the Corporation
equal to 1% of the Pre-Tax Earnings (as defined in the agreement)
shown on the audited consolidated financial statements of the
Corporation, only if Pre-Tax Earnings are in excess of $50,000,000,
which bonus shall be paid within 90 days from the end of each fiscal
year;
(iii) Mr. Philosophe is entitled to participate in the supplementary
benefits made available generally to the Corporation's senior
executive employees from time to time and any perquisites
established by the Corporation from time to time as appropriate for
him;
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(iv) Mr. Philosophe is entitled to the reimbursement of all expenses
actually and properly incurred in furtherance of or in connection
with the business of the Corporation as well as a minimum automobile
allowance of $800 per month; and
(v) upon the earlier of: the termination of Mr. Philosophe by the
Corporation of his employment other than for just cause, disability
or death; or the failure of the Corporation to renew the term of his
employment upon the expiry of the original or any renewal term, the
Corporation shall thereupon pay to Mr. Philosophe (in addition to
payment of his total compensation, including minimum bonus, if any,
for the balance of the contract term, if applicable), an amount
equal to two years salary, average annual bonus for the past three
years and annual benefits which shall be paid, at the option of Mr.
Philosophe, in one lump sum or in twenty-four (24) equal monthly
instalments.
The Corporation has an employment agreement with David Rubenstein, the
President, Cinram Americas and a director of the Corporation, made as of January
1, 2002 with a term of four years expiring January 1, 2006 and automatic
renewals for further consecutive periods of two years each unless either the
Corporation or Mr. Rubenstein gives notice of intention not to renew at least
one year prior to the expiration of the term period. The agreement provides,
inter alia, that:
(i) Mr. Rubenstein shall receive initially a base salary of US$325,000,
per annum which shall be increased as of the commencement of each
calendar year in the same proportion as the percentage increase, if
any, in the U.S. Consumer Price Index during the immediate preceding
year and in addition, shall be reviewed annually to determine any
appropriate annual increases;
(ii) Mr. Rubenstein is entitled to receive a minimum bonus with respect
to each full fiscal year in which he was employed by the Corporation
equal to 1.25% of the Pre-Tax Earnings (as defined in the agreement)
shown on the audited consolidated financial statements of the
Corporation, only if Pre-Tax Earnings are in excess of $50,000,000,
which bonus shall be paid within 90 days from the end of each fiscal
year;
(iii) Mr. Rubenstein is entitled to participate in the supplementary
benefits made available generally to the Corporation's senior
executive employees from time to time and any perquisites
established by the Corporation from time to time as appropriate for
him;
(iv) Mr. Rubenstein is entitled to the reimbursement of all expenses
actually and properly incurred in furtherance of or in connection
with the business of the Corporation as well as a minimum automobile
allowance of US$1,334 per month (grossed up for US federal income
tax purposes); and
(v) upon the earlier of: the termination of Mr. Rubenstein by the
Corporation of his employment other than for just cause, disability
or death; or the failure of the Corporation to renew the term of his
employment upon the expiry of the original or any renewal term, the
Corporation shall thereupon pay to Mr. Rubenstein (in addition to
payment of his total compensation, including minimum bonus, if any,
for the balance of the contract term, if applicable), an amount
equal to two years salary, average annual bonus for the past three
years and annual benefits which shall be paid, at the option of Mr.
Rubenstein, in one lump sum or in twenty-four (24) equal monthly
instalments.
-11-
COMPENSATION OF DIRECTORS
The Directors of the Corporation who are not also officers or employees of the
Corporation, like the Named Executive Officers, received a portion of their
compensation by means of stock options. The following stock options were granted
to such directors during the 2002 fiscal year.
NUMBER OF COMMON
SHARES UNDER OPTIONS
NAME GRANTED EXERCISE PRICE/SHARE EXPIRATION DATE
---- -------------------- -------------------- ---------------
Norman May 20,000 $ 10.20 June 20, 2007
Henri Aboutboul 20,000 $ 10.20 June 20, 2007
Peter White 20,000 $ 10.20 June 20, 2007
Those directors of the Corporation who are not officers or employees of the
Corporation or its affiliates received aggregate fees of $116,600 in respect of
meetings of the Board attended by them during the fiscal year ended December 31,
2002 as compensation for their services in such capacity. Each of such directors
was paid for his services as a director at the rate of $15,000 per annum and a
fee of $1,000 for each meeting of the Board attended by him. In addition, each
Committee Chair received annual fees of $2,500, Committee Members received
annual fees of $1,000 and an additional fee of $1,000 for each Committee meeting
attended by him. In addition to the foregoing, the law firm of which Norman May,
Q.C., a director of the Corporation, and Monique T. Rabideau, Assistant
Corporate Secretary of the Corporation, are partners, receive fees from the
Corporation for legal services performed. Henri A. Aboutboul, the Non-Executive
Chairman of the Board of Directors, received consulting fees for assisting with
the management of the Corporation's operations in Europe.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Corporation has purchased, at its expense, directors' and officers'
liability insurance in the amount of $20 million for the protection of its
directors and officers against liability incurred by them in their capacities as
directors and officers of the Corporation and its subsidiaries. For the period
from July 1, 2002 to July 1, 2003, the Corporation paid a total premium of
$156,000 in respect of such insurance.
REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Corporation's compensation philosophy is designed to attract, retain and
motivate executives to strive for continued corporate success. The Corporation's
success is based on a strong service orientation, creativity, aggressive
investments in leading-edge technology and an executive decision-making process
that extends well beyond the next quarter's results. The Corporation rewards
executives with a combination of base salary and annual incentives that are
determined on the basis of these criteria.
In order to achieve these objectives, the compensation paid to the Named
Executive Officers in 2002 consisted of three components:
(i) base salary;
(ii) an annual bonus incentive; and
(iii) long-term incentives in the form of stock options granted in
accordance with the Plan.
-12-
Base Salary
The base salary of each particular executive officer is usually determined by an
assessment by the Board of such executive's performance, a consideration of
competitive compensation levels in companies similar to the Corporation and a
review of the performance of the Corporation as a whole and the role such
executive officer played in such corporate performance. For certain executives,
the base salary is set forth in their respective employment agreements. See
"Employment Agreements".
Annual Bonus Incentive
Annual cash bonus incentive awards are typically based upon the sales and
profitability of the Corporation, as well as certain of the criteria used to
calculate base salary. For example, in 2000, the profitability of the
Corporation was below both internal and public expectation. Accordingly, no
bonuses were awarded to executive officers. This establishes a direct link
between executive compensation and the Corporation's operating performance. For
certain executives, the amount of the bonus, or a formula to be used for
determining the amount of bonus, is contained in their respective employment
agreements. See "Employment Agreements".
Long-Term Incentive
The Corporation provides a long-term incentive by granting options to executives
through the Plan. The options granted permit executives to acquire Common Shares
of the Corporation at an exercise price equal to the market price of such shares
under option at the date the option was granted. The objective of granting
options is to encourage executives to acquire an ownership interest in the
Corporation over a period of time which acts as a financial incentive for such
executive to consider the long-term interests of the Corporation and its
shareholders. The Compensation Committee did not consider the terms and amount
of outstanding options under the Plan when determining the grants of options to
the Named Executive Officers in 2002.
In 2002, the relative emphasis on salary, bonus and options were as follows:
SALARY BONUS OPTIONS
NAME (%) (%) (%)
---- ------ ----- -------
Isidore Philosophe 10 72 18
Lewis Ritchie 19 48 33
David Rubenstein 29 53 18
Jaime Ovadia 39 48 13
Jacques Philosophe 19 48 33
Chief Executive Officer's Compensation
The base salary for Isidore Philosophe was increased by 2.5% to $361,000 in 2002
from $352,000 in 2001. In addition, a bonus of $2,500,000 was awarded to Isidore
Philosophe in respect of the 2002 fiscal year (2001 - $1,200,000). The
compensation of the Corporation's Chief Executive Officer is generally based on
the same criteria as that used in determining the compensation payable to the
Corporation's other Named Executive Officers; however unlike the other Named
Executive Officers, the incentive portion of the Chief Executive Officer's
compensation in fiscal 2002 is determined by a percentage of earnings formula
established by the Board, upon the recommendation of
-13 -
the Compensation Committee, and not by a percentage that is stipulated in an
employment agreement. In establishing this incentive portion, the Board applies
the same criteria used for the other Named Executive Officers. In determining
the salary increase and cash bonus awarded to Isidore Philosophe during the past
fiscal year, the Compensation Committee took into account, among other things
the performance of the Corporation in 2002 versus historical performance.
Submitted by the Compensation Committee:
Henri A. Aboutboul
Peter G. White
COMPOSITION OF THE COMPENSATION COMMITTEE
Henri A. Aboutboul and Peter G. White are the members of the compensation
committee. None of the members of the compensation committee is an officer,
employee or former officer or employee of the Corporation or any of its
subsidiaries. Mr. Aboutboul has received consulting fees from the Corporation
for assisting with the management of the Corporation's operations in Europe. The
compensation committee meets as required to review senior management
compensation and the overall compensation policies and practices of the
Corporation.
-14 -
SHARE PERFORMANCE GRAPH
The following line graph compares the cumulative return of the Common Shares
with the cumulative return of the S&P/TSX Composite Index (the "TSX Index") for
the five most recently completed fiscal years.
FIVE YEAR CUMULATIVE TOTAL RETURN ON A $100 INVESTMENT
ASSUMING DIVIDENDS ARE REINVESTED
(DECEMBER 31, 1997 - DECEMBER 31, 2002)
[LINE GRAPH]
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
CINRAM INTERNATIONAL INC. 100.00 76.24 48.61 12.61 20.00 41.92
TSX INDEX 100.00 98.05 130.20 139.23 121.73 106.28
DIVIDEND POLICY
The Corporation has a policy of declaring annual dividends, payable on a
quarterly basis. In 2002 the Corporation paid aggregate dividends on its Common
Shares in the amount of $4,407,000.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
The Corporation leases its premises at 2255 Markham Road, Toronto, at an annual
rental net to the landlord of approximately $760,000. The premises are owned by
424603 Ontario Limited, a corporation beneficially owned by Isidore Philosophe,
424604 Ontario Limited, a corporation beneficially owned by the family of Samuel
Sokoloff, and JMP Holdings Inc., a corporation beneficially owned by Jacques
Philosophe.
-15 -
INDEPENDENT AUDITORS
KPMG LLP, are the independent auditors of the Corporation and have served as its
auditors since 1986. From time to time, KPMG LLP also provides other non-audit
services to the Corporation and its subsidiaries. The Audit Committee has
considered whether the provision of non-audit services is compatible with
maintaining KPMG LLP's independence and has concluded that it is.
Fees billed by KPMG LLP to the Corporation during fiscal 2002 were as follows:
Audit fees - $519,000; Audit Related Fees - $83,000, which were in connection
with quarterly reviews, other assurance services, and taxation fees -$447,000,
which were in connection with tax compliance services and other tax related
services.
ADDITIONAL INFORMATION
A copy of the following documents may be obtained, without charge, upon request
to the Chief Financial Officer of the Corporation at Cinram International Inc.,
2255 Markham Road, Toronto, Ontario, M1B 2W3, Phone(416) 298-8190, Fax: (416)
298-0612:
(a) the latest Annual Information Form of the Corporation together with
any document, or the pertinent pages of any document, incorporated
by reference;
(b) the comparative financial statements of the Corporation for the
financial year ended December 31, 2002 together with the
accompanying report of the auditors thereon and any interim
financial statements of the Corporation for periods subsequent to
December 31, 2002, and
(c) this management proxy circular.
OTHER BUSINESS
Management of the Corporation knows of no matters to come before the Meeting
other than the matters referred to in the notice of Meeting. However, if matters
not now known to management should come before the Meeting, Common Shares
represented by proxies solicited by management will be voted on each such matter
in accordance with the best judgement of the nominees voting same.
Unless otherwise noted, the information contained herein is given as of May 12,
2003. The contents of this management information circular and the mailing
thereof to shareholders of the Corporation have been approved by the Board.
By Order of the Board
(signed)
May 12, 2003 HENRI A. ABOUTBOUL
Non-Executive Chairman
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SCHEDULE "A"
GOVERNANCE PROCEDURES
In this Schedule, the Corporation's governance procedures are compared with The
TSX's Guidelines for effective corporate governance. The amendments to the
Guidelines in the TSX's Proposal are in italics.
CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
1 The board should explicitly assume yes The Board is responsible for the supervision
responsibility for stewardship of of the management of the Corporation and
the Corporation and specifically for approving the overall direction of the
for: Corporation, in a manner which is in the best
interests of the Corporation. The Board has
explicitly confirmed its stewardship
responsibility for reviewing and approving
the Corporation's strategy, and for
implementing, or requiring management to
implement, procedures and systems for: (1)
adopting a strategic planning process; (2)
identifying and managing principal risks to
the Corporation's business; (3) planning for
succession; (4) adopting a communications
policy; and (5) adopting internal control and
management information systems. There were
ten meetings of the Board last year.
Frequency of meetings as well as the nature
of agenda items changes depending upon the
state of the Corporation's affairs and in
light of opportunities or risks which the
Corporation faces from time to time.
(i) adoption of a strategic yes The Board participates fully in assessing and
planning process approving strategic plans and prospective
decisions proposed by management.
(ii) identification of the yes To ensure that the principal business risks
principal risks of the that are borne by the Corporation are
Corporation's business and appropriate, the Board regularly monitors the
ensuring implementation of financial performance of the Corporation's
appropriate systems to individual units. This monitoring function
manage those risks often entails review and comment by the
Board on various management reports.
(iii) succession planning, yes In respect of senior management succession
including appointing, planning, the Board has been involved in
training and monitoring identifying candidates from within and
senior management outside the Corporation to fill senior
management positions, as required. Management
of the Corporation also makes recommendations
to the Board as to various senior management
positions for their consideration and
appointment.
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CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
(iv) communications policy yes The Board has established policies and
procedures to ensure effective corporate
communications between the Corporation, its
shareholders, other stakeholders and the
public. These practices include the
dissemination of information to shareholders
on a regular and timely basis, which
accommodates feedback from shareholders, and
are factored into the Corporation's business
decisions. The Chief Financial Officer of the
Corporation, as well as other members of
management, dedicate a portion of their time
to deal with shareholders and potential
investors.
(v) integrity of internal control yes The Board, directly and through its Audit
and management Committee, assesses the integrity of the
information systems Corporation's internal control and
management information systems. The Committee
meets with the Corporation's Auditor and
management to assess the adequacy and
effectiveness of these systems.
2 The board should adopt a formal no The Board intends to adopt a formal
mandate that sets out its mandate that sets out its responsibility for
responsibility for stewardship of stewardship of the Corporation should the
the corporation. Proposal become effective.
3 A majority of directors should be no Only one of the six directors are "unrelated".
"unrelated". The Board continues to consider the
composition of the Board and search for
additional nominees to increase the number
of "unrelated" directors.
4 The board of directors must at all no Based on information provided by directors
times be comprised of at least two as to their individual circumstances, the
"unrelated" directors. Board has determined that only one of the six
persons proposed for election to the Board
for 2003 are "unrelated". The Board continues
to consider the composition of the Board and
search for additional nominees to increase
the number of "unrelated" directors.
5 The board has responsibility for yes Based on information provided by directors
applying the definition of as to their individual circumstances, the
"unrelated director" to each Board has determined that five of the six
individual director and for persons proposed for election to the Board
disclosing annually the analysis for 2003 is "related". Messrs. Philosophe,
of the application of the principles Ritchie and Rubenstein are members of
supporting this definition and management and Mr. May is a partner in a
whether the board has a majority law firm which has provided legal services to
of unrelated directors. the Corporation.
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CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
6 The board must adopt a formal no The Board intends to adopt a business ethics
code of business ethics that code and comply with the requirements if the
governs the behaviour of its Proposal becomes effective.
directors, officers and employees
and that the board must monitor
compliance with the code and be
responsible for the granting of
any waivers. Disclosure of any
waivers granted to directors or
officers must be made in the
issuer's next quarterly report.
7 The board should appoint a no The Board does not have a nominating
committee of directors composed committee as suggested by the Guidelines.
exclusively of outside, i.e., non- All members of the Board are encouraged to
management directors, a majority bring forward their recommendations for
of whom are "unrelated" directors, nominees for elections thereto. Nominations
with responsibility for proposing are made after extensive discussion involving
new nominees to the board and for the CEO and other members of the Board.
assessing directors on an ongoing
basis.
8 The board should implement a partial The Board has not established a formal
process, to be carried out by an process to assess the effectiveness of the
appropriate committee, for Board, its committees and the contribution of
assessing the effectiveness of the individual directors. The Board utilizes the
board, its committees and the informal test based on the increase in
contribution of individual shareholder value. Participation of directors
directors. is expected at all Board and committee
meetings. Directors are asked to notify the
Corporation if they are unable to attend, and
attendance at meetings is duly recorded. The
Board will assess the need for modifications
appropriate to the Corporation and with
reference to the TSX recommended procedures.
9 The board should provide an yes New directors to the Corporation have
orientation and education program generally been executives with extensive
for new directors business experience. Orientation for these
individuals is provided through a review of
past Board materials and other private and
public documents concerning the Corporation.
Given the level of experience and familiarity
with the Corporation of those joining the
Board, it is not viewed that an orientation
education program as contemplated by the
Guidelines is necessary.
- 19 -
CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
10 The board should examine its size yes The number of directors on the Board
with the view to determining the currently is set at six. The Board continues
impact upon effectiveness and to consider the composition of the Board and
should undertake, where search for additional nominees to increase
appropriate, a program to reduce the number of "unrelated" directors.
the number of directors to a
number which facilitates more
effective decision-making.
11 The board of directors should yes The Compensation Committee periodically
review the adequacy and form of reviews the adequacy and form of directors'
compensation of directors in light compensation. Directors have been, and may
of the risks and responsibilities in the future be, granted incentive stock
involved in being an effective options to encourage their serving on the
director. Board and to afford the opportunity to be
compensated appropriately and to have a
share holding interest.
12 Committees of the board should partial All Board committees are composed solely
generally be composed of outside of outside directors, however two of the three
directors, a majority of whom are members of the Audit Committee and one of
unrelated. the two members of the Compensation
Committee are related. Norman May is
considered "related" because he is a partner
of a law firm that provides legal services to
the Corporation and Henri Aboutboul is
considered "related" because he received
consulting fees from the Corporation for
assisting with the management of the
Corporation's operations in England.
13 The board should assume yes The Board oversees the implementation of
responsibility for, or assign to a the Guidelines and, where it deems
committee of directors appropriate, will develop modifications to
responsibility for developing the same as appropriate to the Corporation and
approach to corporate governance with reference to the TSX recommended
issues. procedures.
- 20 -
CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
14 The board of directors, together no The Board has no formal policy with respect
with the chief executive officer, to which matters, other than those required
should develop position by statute, must be brought by the Chief
descriptions for the board and for Executive Officer ("CEO") of the
the chief executive officer, Corporation or other senior management to
involving the definition of the the Board for approval; however, there is a
limits to management's clear understanding between senior
responsibilities. management and the Board, which understanding
is based upon a long period of historical
practice and precedent, that all major
strategic decisions, including any change in
the strategic direction of the Corporation
and acquisitions and/or divestitures of a
material nature, will be presented by
management to the Board for approval. As part
of its ongoing activity, the Board regularly
receives and comments upon reports of
management as to the performance of the
Corporation's business units and management's
expectations and planned actions in respect
thereto. The Board is committed to continuing
to examine and develop the processes which
the Board follows in its deliberations for
ensuring that the Board continues to fulfil
its mandate. The Board has not developed a
formal position description for the CEO, nor
has it approved formal corporate objectives
which the CEO is responsible for meeting;
however, the Board and the CEO engage in
regular dialogue regarding the performance of
the senior management team, including the
CEO, in achieving the Corporation's strategic
objectives as determined by management and
the Board.
15 The board should have in place yes Henri Aboutboul, the Chairman of the Board,
appropriate structures and is not a member of management. The Board
procedures to ensure that it can does not feel that it is necessary to add
function independently of structures or procedures to those currently in
management. An appropriate place to ensure its independence from
structure would be (i) appoint a management. All directors are expected to
chair of the board who is not a exercise critical judgement at all times and
member of management with the outside directors have unrestricted, direct
responsibility to ensure that the access to both Corporation executives and
board discharges its the external auditors.
responsibilities or (ii) adopt
alternate means such as assigning
this responsibility to a committee
of the board or to a director,
sometimes referred to as the "lead
director".
- 21 -
CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
16 Appropriate procedures may no The Board has not met without management
involve the board meeting on a present. If the board believed it was
regular basis without management appropriate and meaningful, it would have
present or may involve expressly formalized the process by which the Board
assigning responsibility for would meet without management and for
administering the board's handling the Board's overall relationship with
relationship to management to a management.
committee of the board.
17 The audit committee should be yes The Audit Committee is composed only of
composed only of outside outside directors.
directors.
18 The audit committee should be no The Audit Committee is composed of two
composed only of unrelated related directors and one unrelated director.
directors. Norman May and Henri Aboutboul, the
related directors, bring a wealth of
knowledge and experience to their function
and their contributions are considered
valuable by the Board and important to
fulfilling their roles.
19 The roles and responsibilities of no The Board believes the audit committee
the audit committee should be understands its roles and responsibilities and
specifically defined so as to accordingly, they are not required to be
provide appropriate guidance to specifically defined in an Audit Committee
audit committee members as to Charter.
their duties.
20 The audit committee must adopt a no If the Proposal becomes effective, the Board
formal charter which sets out its intends to adopt an Audit Committee Charter
role and responsibilities and the which will set out the role and
charter must be published either responsibilities of the Audit Committee and
once every three years in the will address the approval of any non-audit
issuer's annual report or mandates of the external auditor and
information circular or following determine which non-audit services the
material amendments to the external auditor is prohibited from
charter, or on its website. The providing. The Board would publish the
audit committee charter must charter as required by the Proposal if it
address the approval of any non- becomes effective.
audit mandates of the external
auditor and determine which non-
audit services the external auditor
is prohibited from providing.
21 All members of the audit committee partial The Board believes that the two members of
should be financially literate and the Audit Committee have financial literacy.
at least one member should have The Corporation would consider adding a
financial accounting or related new director with financial accounting or
experience. related experience as defined in the Proposal
to be a member of the Audit Committee
should the Proposal become effective.
- 22 -
CORPORATION'S
THE TSX GUIDELINES/PROPOSAL ALIGNMENT CORPORATION'S GOVERNANCE PROCEDURES
- --------------------------- --------- -----------------------------------
22 The audit committee should have yes The Audit Committee communicates directly
direct communication channels with the Corporation's internal and external
with the internal and the external auditors in order to discuss audit and related
auditors to discuss and review matters whenever appropriate.
specific issues as appropriate.
23 The audit committee duties should yes The Audit Committee is responsible for
include oversight responsibility for ensuring that the financial performance of
management reporting on internal the Company is properly reported on and
control. While it is management's monitored, the review and assessment of the
responsibility to design and audit practices, internal controls, enquiry of
implement an effective system of the auditors as to co-operating access and
internal control, it is the disclosure by management and ultimate
responsibility of the audit approval of the financial statements for
committee to ensure that submission to the Board and to the
management has done so. shareholders.
24. The Board should implement a yes No situation has arisen to date in which an
system to enable an individual individual member of the Board has
director to engage an outside expressed an interest in retaining, or has
advisor at the Corporation's actually retained, an outside advisor at the
expense in appropriate expense of the Corporation. The Board
circumstances. The engagement of would consider any such request by an
the outside advisor should be individual member of the Board on its merits
subject to the approval of an at the time it was made.
appropriate committee of the
board.
- 23 -
SCHEDULE "B"
RESOLUTION OF THE
SHAREHOLDERS OF
CINRAM INTERNATIONAL INC.
(THE "CORPORATION")
CONFIRMATION OF NEW BY-LAW
RESOLVED AS A RESOLUTION THAT:
1. By-law No. 41 of the Corporation, as enacted by the Board of Directors on May
12, 2003 and attached as Appendix 1 to this Schedule "B", is hereby approved and
confirmed; and
2. any officer or director of the Corporation is hereby authorized and directed
for, in the name of, and on behalf of, the Corporation to execute, or to cause
to be executed, whether under the corporate seal of the Corporation or
otherwise, and to deliver, or to cause to be delivered, all such documents and
instruments, and to do, or to cause to be done, all such other acts and things
as, in the opinion of such director or officer, may be necessary or desirable in
order to give effect to the foregoing resolutions or the matters contemplated
thereby.
- 24 -
APPENDIX 1 TO SCHEDULE "B"
CINRAM INTERNATIONAL INC.
CONFIRMATION OF NEW BY-LAW
BY-LAW NO. 41
A by-law relating generally to the conduct of the business and affairs of
CINRAM INTERNATIONAL INC.
(herein called the "CORPORATION")
Effective as of May 12, 2003
ARTICLE 1
REGISTERED OFFICE
1.1 The registered office of the Corporation shall be in the province or
territory of Canada specified in the articles of the Corporation and at such
location in that province or territory as the directors may from time to time
determine.
ARTICLE 2
CORPORATE SEAL
2.1 Until changed by the directors the corporate seal of the Corporation
shall be in the form impressed in the margin hereof.
ARTICLE 3
DIRECTORS
3.1 Number and Quorum.
(a) The number of directors shall be determined by the directors but
shall be not fewer than the minimum and not more than the maximum
provided in the articles.
(b) A majority of directors or such greater or lesser number as the
directors may from time to time determine shall constitute a quorum
for the transaction of business at any meeting of directors and
notwithstanding any vacancy among the directors, a quorum of
directors may exercise all the powers of the directors.
3.2 Qualification. No person shall be qualified to be a director if that
person is less than eighteen years of age, is of unsound mind and has been so
found by a court in Canada or elsewhere, or has the status of a bankrupt. At
least twenty-five per cent of the directors shall be resident Canadians.
However, if the Corporation has less than four directors, at least one director
must be a resident Canadian as defined in the Act.
3.3 Election and Term of Office. The directors shall be elected at each
annual meeting of shareholders of the Corporation and each director shall hold
office until the close of the first annual meeting following the director's
election; provided that if an election of directors is not held at an annual
meeting of shareholders, the directors then in office shall continue in office
until their successors are elected.
3.4 Vacation of Office. A director ceases to hold office if the director
dies, is removed from office by the shareholders, ceases to be qualified for
election as a director or resigns by a written resignation received by the
Corporation. A written resignation of a director becomes effective at the time
it is received by the Corporation, or at the time specified in the resignation,
whichever is later.
- 25 -
3.5 Removal of Directors. The shareholders may by ordinary resolution at
a special meeting of shareholders remove any director or directors from office
provided that where the holders of any class or series of shares have an
exclusive right to elect one or more directors, a director so elected may only
be removed by an ordinary resolution at a meeting of the shareholders of that
class or series. A vacancy created by the removal of a director may be filled at
the meeting of the shareholders at which the director is removed.
3.6 Vacancies. Subject to the provisions of the Act, a quorum of the
Board may fill a vacancy in the Board, except a vacancy resulting from an
increase in the number or minimum number of directors or from failure for
shareholders to elect the number or minimum number of directors required by the
articles. If there is not a quorum of directors, or if there has been a failure
for shareholders to elect the number or minimum number of directors required by
the articles, the directors then in office shall forthwith call a special
meeting of shareholders to fill the vacancy, and, if they fail to do so or if
there are no directors then in office, the meeting may be called by any
shareholder. A director appointed or elected to fill a vacancy holds office for
the unexpired term of the director's predecessor. Notwithstanding any vacancy
among the directors, a quorum of directors may exercise all the powers of the
directors unless the vacancy is caused by failure for shareholders to elect the
number or minimum number of directors required by the articles.
3.7 Validity of Acts. An act by a director or officer is valid
notwithstanding an irregularity in his election or appointment or a defect in
his qualification.
3.8 Action by Directors. The directors shall manage, or supervise the
management of, the business and affairs of the Corporation. Subject to sections
3.9 and 3.10, the powers of the directors may be exercised at a meeting at which
a quorum is present or by resolution in writing signed by all the directors
entitled to vote on that resolution at a meeting of the directors. Where there
is a vacancy in the Board of directors the remaining directors may exercise all
the powers of the Board so long as a quorum remains in office.
3.9 Canadian Residents Required at Meetings.
(a) Directors shall not transact business at a meeting of directors
unless,
(i) at least twenty-five percent of the directors present are
resident Canadians, or
(ii) if the Corporation has less than four directors, at least one
of the directors present is a resident Canadian.
(b) Notwithstanding Section 3.9(a), directors may transact business at a
meeting of directors where the required number of resident Canadian
directors is not present if:
(i) a resident Canadian director who is unable to be present
approves in writing or by telephone or other communications
facilities the business transacted at the meeting; and
(ii) the required number of resident Canadian directors would have
been present had that director been present at the meeting.
3.10 Meeting by Telephonic or Electronic Facility. If all the directors
of the Corporation consent, a meeting of directors or of a committee of
directors may be held by means of a telephonic, electronic or other
communication facility that permits all persons participating in the meeting to
communicate adequately with each other, and a director participating in a
meeting by such means is deemed to be present at that meeting.
3.11 Place of Meetings. Meetings of directors may be held at any place
within or outside of Canada.
3.12 Calling of Meetings. Meetings of the directors shall be held at such
time and place as the Chair of the Board, the President or any two directors may
determine.
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3.13 Notice of Meeting. Notice of the time and place of each meeting of
directors shall be given to each director by telephone not less than 48 hours
before the time of the meeting or by written notice not less than four days
before the day of the meeting and, subject to the Act, need not specify the
purpose of or the business to be transacted at the meeting. Meetings of the
directors may be held at any time without notice if all the directors have
waived or are deemed to have waived notice.
3.14 First Meeting of New Board. No notice shall be necessary for the
first meeting of newly-elected directors held immediately following their
election at a meeting of shareholders.
3.15 Adjourned Meeting. Notice of an adjourned meeting of directors is
not required if the time and place of the adjourned meeting is announced at the
original meeting.
3.16 Regular Meetings. The directors may appoint a day or days in any
month or months for regular meetings and shall designate the place and time at
which such meetings are to be held. A copy of any resolution of directors fixing
the place and time of regular meetings of the Board shall be sent to each
director forthwith after being passed, and no other notice shall be required for
any such regular meeting.
3.17 Chair. The Chair of the Board, or in the Chair's absence the
President if a director, or in the President's absence a director chosen by the
directors at the meeting shall be the Chair of any meeting of directors.
3.18 Voting at Meetings. Questions arising at any meeting of directors
shall be decided by a majority of votes. In the case of an equality of votes,
the Chair of the meeting shall not have a second or casting vote.
3.19 Conflict of Interest. A director or officer who is a party to, or
who is a director or officer or is acting in a similar capacity of, or has a
material interest in, a party to a material contract or material transaction,
whether entered into or proposed, with the Corporation shall disclose the nature
and extent of the director's or officer's interest at the time and in the manner
provided by the Act.
3.20 Remuneration and Expenses. The directors shall be paid such
remuneration as the directors may from time to time by resolution determine. The
directors shall also be entitled to be paid their travelling and other expenses
properly incurred by them in going to, attending and returning from meetings of
directors or committees of directors. A director or officer of the Corporation
may be employed by or perform services for the Corporation otherwise than as a
director or officer, and may be a member of a firm or a shareholder, director or
officer of a body corporate which is employed by or performs services for the
Corporation, and such a director, officer, firm or body corporate may receive
proper remuneration for this employment or services.
ARTICLE 4
COMMITTEES
4.1 Committees of Directors. The directors may appoint from among their
number one or more committees of directors and delegate to them any of the
powers of the directors except those which under the Act a committee of
directors has no authority to exercise.
4.2 Audit Committee. The directors shall appoint from among their number
an audit committee composed of not fewer than three directors, a majority of
whom are not officers or employees of the Corporation or any affiliate of the
Corporation. The audit committee shall review the financial statements of the
Corporation and shall report thereon to the directors of the Corporation before
such financial statements are approved by the directors. The auditor of the
Corporation is entitled to receive notice of every meeting of the audit
committee and, at the expense of the Corporation, to attend and be heard
thereat; and, if so requested by a member of the audit committee, shall attend
every meeting of the committee held during the term of office of the auditor.
The auditor of the Corporation or any member of the audit committee may call a
meeting of the committee.
4.3 Transaction of Business. Subject to section 3.10, the powers of a
committee appointed by the directors may be exercised at a meeting at which a
quorum is present or by resolution in writing signed by all members
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of the committee entitled to vote on that resolution at a meeting of the
committee. Meetings of a committee may be held at any place in or outside
Canada.
4.4 Procedure. Unless otherwise determined by the directors, each
committee shall have the power to fix its quorum and to regulate its procedure.
ARTICLE 5
OFFICERS
5.1 General. The directors may from time to time appoint a Chair of the
Board, a President, one or more Vice-Presidents, a Secretary, a Treasurer and
such other officers as the directors may determine, including one or more
assistants to any of the officers so appointed. The officers so appointed may
but need not be members of the Board of directors except as provided in sections
5.3 and 5.4.
5.2 Term of Office. The terms of employment and remuneration of all
officers elected or appointed by the Board (including the President) shall be
determined from time to time by resolution of the Board. The fact that any
officer or employee is a director or shareholder of the Corporation shall not
disqualify him from receiving such remuneration as may be determined. All
officers, in the absence of agreement to the contrary, shall be subject to
removal by resolution of the Board at any time with or without cause.
5.3 The Chair of the Board. The Chair of the Board, if any, shall be
appointed from among the directors and shall, when present, be Chair of meetings
of shareholders and directors and shall have such other powers and duties as the
directors may determine.
5.4 The President. Unless the directors otherwise determine, the
President shall be the chief executive officer of the Corporation and shall have
general supervision of its business and affairs and in the absence of the Chair
of the Board shall be Chair at meetings of shareholders and directors when
present.
5.5 Vice-President. A Vice-President shall have such powers and duties
as the directors or the President may determine.
5.6 Secretary. The Board may from time to time appoint a Secretary. The
Secretary shall give, or cause to be given, all notices required to be given to
shareholders, directors, auditors and members of committees; shall attend and be
secretary of all meetings of shareholders, directors and committees appointed by
the directors and shall enter or cause to be entered in books kept for that
purpose minutes of all proceedings at such meetings; shall be the custodian of
the corporate seal of the Corporation and of all records, books, documents and
other instruments belonging to the Corporation; and shall have such other powers
and duties as the directors or the President may determine.
5.7 Treasurer. The Board may from time to time appoint a Treasurer. The
Treasurer shall keep proper books of account and accounting records with respect
to all financial and other transactions of the Corporation; shall be responsible
for the deposit of money, the safe-keeping of securities and the disbursement of
the funds of the Corporation; shall render to the directors when required an
account of all the Treasurer's transactions and of the financial position of the
Corporation; and the Treasurer shall have such other powers and duties as the
directors or the President may determine.
5.8 Other Officers. The powers and duties of all other officers shall be
such as the directors or the President may determine. Any of the powers and
duties of an officer to whom an assistant has been appointed may be exercised
and performed by such assistant, unless the directors or the President otherwise
direct.
5.9 Variation of Duties. The directors may, from time to time, vary, add
to or limit the powers and duties of any officer.
5.10 Conflict of Interest. An officer shall disclose the officer's
interest in any material contract or material transaction, whether entered into
or proposed, in accordance with section 3.19.
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5.11 Agents and Attorneys. The directors shall have power from time to
time to appoint agents or attorneys for the Corporation within or outside Canada
with such powers (including the power to sub-delegate) of management,
administration or otherwise as the directors may specify.
ARTICLE 6
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
6.1 Indemnification of Directors and Officers. The Corporation shall
indemnify a director or officer, a former director or officer or a person who
acts or acted at the Corporation's request as a director or officer, or in a
similar capacity of another entity, and the heirs and legal representatives of
such a person to the extent permitted by the Act.
6.2 Insurance. The Corporation may purchase and maintain insurance for
the benefit of any person referred to in section 6.1 to the extent permitted by
the Act.
ARTICLE 7
MEETINGS OF SHAREHOLDERS
7.1 Annual Meetings. The annual meeting of the shareholders shall be
held at the registered office of the Corporation or at such other place within
Canada as the directors may determine, or at any place outside Canada specified
in the articles of the Corporation or agreed to by all the shareholders entitled
to vote at that meeting, at such time in each year as the directors may
determine, for the purpose of receiving the reports and statements required to
be placed before the shareholders at an annual meeting, electing directors,
appointing an auditor or auditors, and for the transaction of such other
business as may properly be brought before the meeting.
7.2 Special Meetings. The directors shall have power at any time to call
a special meeting of shareholders to be held at such place within Canada as the
directors may determine, or at any place outside Canada specified in the
articles of the Corporation or agreed to by all the shareholders entitled to
vote at that meeting, at such time as may be determined by the Board of
directors. All business transacted at an annual meeting of shareholders, except
consideration of the financial statements, auditor's report, election of
directors and re-appointment of the incumbent auditor, is deemed to be special
business.
7.3 Notice of Meetings. Notice of the time and place of a meeting of
shareholders shall be given not less than 21 days nor more than 60 days before
the meeting to each holder of shares carrying voting rights at the close of
business on the record date for notice, to each director and to the auditor of
the Corporation. Notice of a meeting of shareholders at which special business
is to be transacted shall state the nature of that business in sufficient detail
to permit the shareholder to form a reasoned judgement thereon and shall include
the text of any special resolution to be submitted to the meeting. All business
transacted at a special meeting of shareholders and all business transacted at
an annual meeting of shareholders, except consideration of the financial
statements, auditor's report, election of directors and reappointment of the
incumbent auditor, shall be deemed to be special business.
7.4 Record Date for Notice. For the purpose of determining shareholders
entitled to receive notice of a meeting of shareholders, the directors may fix
in advance a date as the record date for such determination of shareholders, but
the record date shall not precede by more than 60 days or by less than 21 days
the date on which the meeting is to be held. Where no record date is fixed, the
record date for the determination of shareholders entitled to receive notice of
a meeting of shareholders shall be at the close of business on the day
immediately preceding the day on which the notice is given, or, if no notice is
given, shall be the day on which the meeting is held. If a record date is fixed,
unless notice of the record date is waived in writing by every holder of a share
of the class or series affected whose name is set out in the securities register
at the close of business on the day the directors fix the record date, notice
thereof shall be given, not less than seven days before the date so fixed, by
advertisement in a newspaper published or distributed in the place where the
Corporation has its registered office and in each place in Canada where it has a
transfer agent or where a transfer of its shares may be recorded and by written
notice to each stock exchange in Canada on which the shares of the Corporation
are listed for trading.
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7.5 Record Date for Voting. For the purpose of determining shareholders
entitled to vote at a meeting of shareholders, the directors may fix in advance
a date as the record date for such determination of shareholders, but the record
date shall not precede by more than 60 days or by less than 21 days the date on
which the meeting is to be held. If a record date is fixed, unless notice of the
record date is waived in writing by every holder of a share of the class or
series affected whose name is set out in the securities register at the close of
business on the day the directors fix the record date, notice thereof shall be
given, not less than seven days before the date so fixed, by advertisement in a
newspaper published or distributed in the place where the Corporation has its
registered office and in each place in Canada where it has a transfer agent or
where a transfer of its shares may be recorded and by written notice to each
stock exchange in Canada on which the shares of the Corporation are listed for
trading.
7.6 Persons Entitled to be Present. The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote thereat,
the directors, the auditor and other persons who are entitled or required under
any provision of the Act or the articles or by-laws of the Corporation to attend
a meeting of shareholders of the Corporation. Any other person may be admitted
only on the invitation of the Chair of the meeting or with the consent of the
meeting.
7.7 Chair. The Chair of the Board, or in the Chair's absence the
President, or in the President's absence a person chosen by a vote at the
meeting shall be Chair of meetings of shareholders.
7.8 Scrutineers. At each meeting of shareholders one or more
scrutineers, who need not be shareholders, may be appointed by a resolution or
by the Chair with the consent of the meeting.
7.9 Quorum. Two persons present in person and each being entitled to
vote thereat shall constitute a quorum for the transaction of business at any
meeting of shareholders.
7.10 Right to Vote. The Corporation shall prepare a list of shareholders
entitled to vote at a meeting, arranged in alphabetical order and showing the
number of shares held by each shareholder, which list shall be prepared,
(a) if a record date for voting is fixed under section 7.5, not later
than ten days after that record date; and
(b) if no record date for voting is fixed, not later than 10 days after
the record date for notice fixed under section 7.4 or, if no record
date for notice was so fixed, then not later than the record date
for notice established under section 7.4, and in both cases the list
shall be prepared as of the record date for notice. A shareholder
whose name appears in the list prepared under this section 7.10 is
entitled to vote the shares shown opposite that shareholder's name
at the meeting to which the list relates.
7.11 Joint Shareholders. Where two or more persons hold shares jointly,
one of those holders present at a meeting of shareholders may in the absence of
the others vote the shares, but if two or more of those persons are present, in
person or by proxy, they shall vote as one on the shares jointly held by them.
7.12 Representatives. Where a body corporate or association is a
shareholder of the Corporation, the Corporation shall recognize any individual
authorized by a resolution of the directors or governing body of the body
corporate or association to represent it at meetings of shareholders of the
Corporation. An individual so authorized may exercise on behalf of the body
corporate or association the individual represents all the powers it could
exercise if it were an individual shareholder.
7.13 Executors and Others. An executor, administrator, committee of a
mentally incompetent person, guardian or trustee and, where a corporation is
such executor, administrator, committee, guardian or trustee of a testator,
intestate, mentally incompetent person, ward or cestui que trust, any duly
appointed representative of such corporation, upon filing with the secretary of
the meeting sufficient proof of the person's appointment, shall represent the
shares in the person's or its hands at all meetings of shareholders of the
Corporation and may vote accordingly as a shareholder in the same manner and to
the same extent as the shareholder of record. If there be more than one
executor, administrator, committee, guardian or trustee, the provisions of this
by-law respecting joint shareholders shall apply.
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7.14 Proxyholders. Every shareholder entitled to vote at a meeting of
shareholders may by means of a proxy appoint a proxyholder or one or more
alternate proxyholders, who need not be shareholders, as the shareholder's
nominee to attend and act at the meeting in the manner, to the extent and with
the authority conferred by the proxy. A proxyholder or an alternative
proxyholder has the same rights as the shareholder who appointed the proxyholder
to speak at a meeting of shareholders in respect of any matter, to vote by way
of ballot at the meeting and, except where a proxyholder or an alternative
proxyholder has conflicting instructions from more than one shareholder, to vote
at such meeting in respect of any matter by way of any show of hands. A proxy
shall be executed by the shareholder or the shareholder's attorney authorized in
writing or, if the shareholder is a body corporate, by an officer or attorney
thereof duly authorized and shall be valid only at the meeting in respect of
which it is given or any adjournment thereof. A proxy shall be in such form as
may be prescribed from time to time by the directors or in such other form as
the Chair of the meeting may accept and as complies with all applicable laws and
regulations.
7.15 Time for Deposit of Proxies. The directors may by resolution fix a
time not exceeding forty-eight hours, excluding Saturdays and holidays,
preceding any meeting or adjourned meeting of shareholders before which time
proxies to be used at that meeting must be deposited with the Corporation or an
agent thereof, and any period of time so fixed shall be specified in the notice
calling the meeting.
7.16 Votes to Govern. Subject to the Act and the articles of the
Corporation, at all meetings of shareholders every question shall be decided,
either on a show of hands (or its functional equivalent) or by ballot, by a
majority of the votes cast on the question. In case of an equality of votes, the
Chair of the meeting shall have a second or casting vote.
7.17 Electronic Meetings and Voting. If the directors or shareholders
call a meeting of shareholders, the directors or shareholders, as the case may
be, may determine that the meeting of shareholders shall be held entirely by
means of a telephonic, electronic or other communication facility that permits
all participants to communicate adequately with each other during the meeting,
and any vote at that meeting of shareholders shall be held entirely by means of
that communication facility. A meeting of shareholders may also be held at which
some, but not all, persons entitled to attend may participate and vote by means
of a telephonic, electronic or other communication facility that permits all
participants to communicate adequately with each other during the meeting/such a
communication facility, if the Corporation makes one available. A person
participating in a meeting by such means is deemed to be present at the meeting.
Any vote at a meeting of shareholders may be also held entirely by means of a
telephonic, electronic or other communication facility, if the Corporation makes
one available, even if none of the persons entitled to attend otherwise
participates in the meeting by means of a communication facility. For the
purpose of voting, a communication facility that is made available by the
Corporation must enable the votes to be gathered in a manner that permits their
subsequent verification and permits the tallied votes to be presented to the
Corporation without it being possible for the Corporation to identify how each
shareholder or group of shareholders voted.
7.18 Show of Hands. Voting at a meeting of shareholders shall be by show
of hands, or the functional equivalent of a show of hands by means of
electronic, telephonic or other communication facility, except where a ballot is
demanded by a shareholder or proxyholder entitled to vote at the meeting or
where required by the Chair. A ballot may be demanded either before or after any
vote by show of hands, or its functional equivalent. Upon a show of hands, or
its functional equivalent, every person who is present and entitled to vote
shall have one vote. Whenever a vote by show of hands, or its functional
equivalent, shall have been taken upon a question, unless a ballot thereon be
required or demanded, an entry in the minutes of a meeting of shareholders to
the effect that the Chair declared a motion to be carried is admissible in
evidence as prima facie proof of the fact without proof of the number or
proportion of the votes recorded in favour of or against the motion. A demand
for a ballot may be withdrawn at any time prior to taking of a poll on the
ballot.
7.19 Ballots. If a ballot is demanded or required, the vote upon the
question shall be taken in such manner as the Chair of the meeting shall direct,
or as provided by the electronic, telephonic or other communication facility
through which votes may be cast. Each person present and entitled to vote at the
meeting shall, unless the articles of the Corporation otherwise provide, be
entitled to one vote for each share in respect of which that person is entitled
to vote at the meeting.
7.20 Adjournment. The Chair of any meeting of shareholders may, with the
consent of the meeting and subject to such conditions as the meeting may decide,
adjourn the same from time to time and from place to place. If a
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meeting of shareholders is adjourned for less than thirty days it is not
necessary to give notice of the adjourned meeting other than by announcement at
the earliest meeting that is adjourned. If a meeting of shareholders is
adjourned by one or more adjournments for an aggregate of thirty days or more,
notice of the adjourned meeting shall be given as for an original meeting. Any
business may be brought before or dealt with at any adjourned meeting which
might have been brought before or dealt with at the original meeting in
accordance with the notice calling such original meeting.
7.21 Resolution in Lieu of Meeting. A resolution in writing signed by all
the shareholders entitled to vote on that resolution at a meeting of
shareholders is as valid as if it had been passed at a meeting of shareholders
except where a written statement in respect thereof has been submitted by a
director or where representations in writing are submitted by the auditor of the
Corporation, in either case, in accordance with the Act.
ARTICLE 8
SHARES
8.1 Issue. Subject to the Act and the articles of the Corporation,
shares of the Corporation may be issued at such times and to such persons and
for such consideration as the directors may determine, provided that no shares
may be issued until it is fully paid as provided in the said Act.
8.2 Commissions. The directors may authorize the Corporation to pay a
reasonable commission to any person in consideration of the person purchasing or
agreeing to purchase shares of the Corporation from the Corporation or from any
other person, or procuring or agreeing to procure purchasers for any such
shares.
8.3 Share Certificate. Every shareholder is entitled at the
shareholder's option to a share certificate in respect of the shares held by the
shareholder that complies with the Act or to a non-transferable written
acknowledgement ("WRITTEN ACKNOWLEDGEMENT") of the shareholder's right to obtain
a share certificate from the Corporation in respect of the shares of the
Corporation held by the shareholder, but the Corporation is not bound to issue
more than one share certificate or written acknowledgement in respect of a share
or shares held jointly by several persons and delivery of a share certificate or
written acknowledgement to one of several joint holders is sufficient delivery
to all. Written acknowledgements shall be in such form or forms as the directors
shall from time to time by resolution determine. The Corporation may charge a
fee in accordance with the Act for a share certificate issued in respect of a
transfer. Subject to the provisions of the Act and to the requirements of any
stock exchange on which shares of the Corporation may be listed, share
certificates shall be in such form or forms as the directors shall from time to
time approve. Unless otherwise determined by the directors, share certificates
shall be signed by the Chair of the Board, the President, or a Vice-President or
a director and by the Secretary or an Assistant Secretary and need not be under
the corporate seal and certificates for shares in respect of which a transfer
agent and/or registrar has been appointed shall not be valid unless
countersigned on behalf of such transfer agent and/or registrar. Share
certificates shall be signed manually, or signatures shall be printed or
otherwise mechanically reproduced on the certificate, and shall include the
signature of at least one director or officer of the Corporation or by or on
behalf of a registrar, transfer agent or branch transfer agent of the
Corporation. If a share certificate contains a printed or mechanically
reproduced signature of a person, the Corporation may issue the share
certificate, even though the person has ceased to be a director or an officer of
the Corporation, and the share certificate is as valid as if the person were a
director or an officer at the date of its issue.
8.4 Transfer Agents and Registrars. For each class of shares issued by
it, the Corporation may appoint one or more agents to keep the securities
register and the register of transfers and one or more branch registers. Such an
agent may be designated as a transfer agent or registrar according to functions
and one agent may be designated both transfer agent and registrar. The
securities register, the register of transfers and the branch register or
registers (the "REGISTERS") shall be kept at the registered office of the
Corporation or at such other place inside or outside Canada designated by the
directors. If the registers are kept outside Canada, the Corporation will make
them available for inspection in compliance with the Act.
8.5 Transfer of Shares. Subject to the Act, no transfer of a share shall
be registered except upon presentation of the certificate representing such
share with an endorsement which complies with the Act, together with
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such reasonable assurance that the endorsement is genuine and effective as the
directors may prescribe, upon payment of all applicable taxes and fees and upon
compliance with the articles of the Corporation.
8.6 Non-Recognition of Trust. Subject to the Act, the Corporation may
treat the registered holder of any share as the person exclusively entitled to
vote, to receive notices, to receive any dividend or other payment in respect of
the share, and to exercise all the rights and powers of an owner of the share.
8.7 Replacement of Share Certificates. Where the owner of a share
certificate claims that the share certificate has been lost, apparently
destroyed or wrongfully taken, the Corporation shall issue or cause to be issued
a new certificate in place of the original certificate if the owner (i) so
requests before the Corporation has notice that the share certificate has been
acquired by a bona fide purchaser; (ii) files with the Corporation an indemnity
bond sufficient in the Corporation's opinion to protect the Corporation and any
transfer agent, registrar or other agent of the Corporation from any loss that
it or any of them may suffer by complying with the request to issue a new share
certificate; and (iii) satisfies any other reasonable requirements imposed from
time to time by the Corporation.
ARTICLE 9
DIVIDENDS AND RIGHTS
9.1 Declaration of Dividends. Subject to the Act, the directors may from
time to time declare dividends payable to the shareholders according to their
respective rights and interest in the Corporation.
9.2 Cheques. A dividend payable in money shall be paid by cheque to the
order of each registered holder of shares of the class or series in respect of
which it has been declared and mailed by prepaid ordinary mail to such
registered holder at the address of such holder in the Corporation's securities
register, unless such holder otherwise directs. In the case of joint holders the
cheque shall, unless such joint holders otherwise direct, be made payable to the
order of all such joint holders and mailed to them at their address in the
Corporation's securities register. The mailing of such cheque as aforesaid,
unless the same is not paid on due presentation, shall satisfy and discharge the
liability for the dividend to the extent of the sum represented thereby plus the
amount of any tax which the Corporation is required to and does withhold.
9.3 Non-Receipt of Cheques. In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses and evidence of non-receipt and of title as
the directors may from time to time prescribe, whether generally or in any
particular case.
9.4 Record Date for Dividends and Rights. The directors may fix in
advance a date, preceding by not more than 60 days the date for payment of any
dividend or the date for the issue of any warrant or other evidence of the right
to subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such securities, and notice of any such
record date shall be given not less than seven days before such record date in
the manner provided by the Act. If no record date is so fixed, the record date
for the determination of the persons entitled to receive payment of any dividend
or to exercise the right to subscribe for securities of the Corporation shall be
at the close of business on the day on which the resolution relating to such
dividend or right to subscribe is passed by the directors.
9.5 Unclaimed Dividends. Any dividend unclaimed after a period of six
years from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
ARTICLE 10
NOTICES
10.1 General. A notice or document required by the Act, the regulations
thereunder, the articles or the by-laws of the Corporation to be sent to a
shareholder or director of the Corporation may be sent by prepaid mail addressed
to, or may be delivered personally to, the shareholder or director at the
shareholder's or director's latest address as shown in the records of the
Corporation. A notice or document if mailed to a shareholder or director of the
Corporation shall be deemed to have been received at the time it would be
delivered in the ordinary course of mail
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unless there are reasonable grounds for believing that the shareholder or
director did not receive the notice or the document at that time or at all.
10.2 Electronic Delivery. Provided the addressee has consented in writing
or electronically in accordance with the Act and the regulations thereunder, the
Corporation may satisfy the requirement to send any notice or document referred
to in section 10.1 by creating and providing an electronic document in
compliance with the Act and the regulations under the Act. An electronic
document is deemed to have been received when it enters the information system
designated by the addressee or, if the document is posted on or made available
through a generally accessible electronic source, when the addressee receives
notice in writing of the availability and location of that electronic document,
or, if such notice is sent electronically, when it enters the information system
designated by the addressee.
10.3 Undelivered Notices. If the Corporation sends a notice or document
to a shareholder in accordance with this section and the notice or document is
returned on two consecutive occasions because the shareholder cannot be found,
the Corporation is not required to send any further notices or documents to the
shareholder until the shareholder informs the Corporation in writing of the
shareholder's new address.
10.4 Computation of Time. In computing the time when a notice or document
must be given or sent under any provision requiring a specified number of days'
notice of any meeting or other event, the day on which the notice or document is
given or sent shall be excluded and the day on which the meeting or other event
occurs shall be included.
10.5 Omission and Errors. The accidental omission to give any notice or
send any document to any shareholder, director or other person or the
non-receipt of any notice or document by any shareholder, director or other
person or any error in any notice or document not affecting the substance
thereof shall not invalidate any action taken at any meeting held pursuant to
such notice or otherwise founded on such notice or document.
10.6 Notice to Joint Shareholders. All notices or documents with respect
to any shares registered in more than one name may, if more than one address
appears on the securities register of the Corporation in respect of such joint
holding, be given to such joint shareholders at the first address so appearing,
and all notices so given or documents so sent shall be sufficient notice to all
the holders of such shares.
10.7 Proof of Service. A certificate of the Secretary or other duly
authorized officer of the Corporation, or of any agent of the Corporation, as to
facts in relation to the mailing or delivery or sending of any notice or
document to any shareholder or director of the Corporation or to any other
person or publication of any such notice or document, shall be conclusive
evidence thereof and shall be binding on every shareholder or director or other
person as the case may be.
10.8 Signature to Notice. The signature to any notice or document given
by the Corporation, if not in electronic form, may be printed or otherwise
mechanically reproduced thereon or partly printed or otherwise mechanically
reproduced thereon.
10.9 Waiver of Notice. Notice may be waived or the time for the sending
of a notice or document may be waived or abridged at any time with the consent
in writing of the person entitled thereto. Attendance of any director at a
meeting of the directors or of any shareholder at a meeting of shareholders is a
waiver of notice of such meeting, except where the director or shareholder
attends for the express purpose of objecting to the transaction of any business
on the grounds that the meeting is not lawfully called.
ARTICLE 11
BUSINESS OF THE CORPORATION
11.1 Voting Shares and Securities in Other Corporations. All of the
shares or other securities carrying voting rights of any other body corporate or
bodies corporate held from time to time by the Corporation may be voted at any
and all meetings of holders of such securities of such other body corporate or
bodies corporate in such manner and by such person or persons as the directors
of the Corporation shall from time to time determine or failing such
determination the proper signing officers of the Corporation may also from time
to time execute and deliver for and on
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behalf of the Corporation instruments of proxy and arrange for the issue of
voting certificates and other evidence of the right to vote in such names as
they may determine.
11.2 Bank Accounts, Cheques, Drafts and Notes. The Corporation's bank
accounts shall be kept in such chartered bank or banks, trust company or trust
companies or other firm or corporation carrying on a banking business as the
directors may by resolution from time to time determine. Cheques on bank
accounts, drafts drawn or accepted by the Corporation, promissory notes given by
it, acceptances, bills of exchange, orders for the payment of money and other
instruments of a like nature may be made, signed, drawn, accepted or endorsed,
as the case may be, by such officer or officers, person or persons as the
directors may by resolution from time to time name for that purpose. Cheques,
promissory notes, bills of exchange, orders for the payment of money and other
negotiable paper may be endorsed for deposit to the credit of any one of the
Corporation's bank accounts by such officer or officers, person or persons, as
the directors may by resolution from time to time name for that purpose, or they
may be endorsed for such deposit by means of a stamp bearing the Corporation's
name.
11.3 Execution of Instruments. The Chair of the Board, the President, a
Vice-President or any director, together with the Secretary, the Treasurer,
Assistant Secretary, Assistant Treasurer or any other director, shall have
authority to sign in the name and on behalf of the Corporation all instruments
in writing and any instruments in writing so signed shall be binding upon the
Corporation without any further authorization or formality. The Board of
directors shall have power from time to time by resolution to appoint any other
officer or officers or any person or persons on behalf of the Corporation either
to sign instruments in writing generally or to sign specific instruments in
writing. Any signing officer may affix the corporate seal to any instrument
requiring the same. The term "instruments in writing" as used herein shall,
without limiting the generality thereof, include contracts, documents, powers of
attorney, deeds, mortgages, hypothecs, charges, conveyances, transfers and
assignments of property (real or personal, immovable or movable), agreements,
tenders, releases, receipts and discharges for the payment of money or other
obligations, conveyances, transfers and assignments of shares, stocks, bonds,
debentures or other securities, instruments of proxy and all paper writing.
11.4 Financial Year. The financial year of the Corporation shall
be as determined from time to time by the Board.
ARTICLE 12
INTERPRETATION
12.1 In this by-law and all other by-laws and resolutions of the
Corporation, unless the context otherwise requires:
(a) "Act" means the Canada Business Corporations Act together with the
Regulations made pursuant thereto and any statute or regulations
that may be substituted therefor as amended from time to time;
(b) "articles" means the articles of incorporation of the Corporation as
amended or restated from time to time;
(c) "Board" means the board of directors of the Corporation;
(d) "by-laws" means this by-law and all other by-laws of the Corporation
as amended from time to time, and from time to time in force and
effect;
(e) "Corporation" means this Corporation;
(f) "meeting of shareholders" means any meeting of shareholders, whether
annual or special; and "special meeting of shareholders" means a
special meeting of all shareholders entitled to vote at an annual
meeting of shareholders and a meeting of any class or classes of
shareholders entitled to vote on the question at issue;
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(g) "person" includes an individual, partnership, association, body
corporate, trustee, executor, administrator or legal representative;
(h) "recorded address" means, in the case of a shareholder, his address
as recorded in the shareholders' register; and, in the case of joint
shareholders, the address appearing in the shareholders' register in
respect of such joint holding or the first address so appearing if
there are more than one; and, in the case of a director, officer,
auditor or member of a committee of the Board, his latest address
recorded in the records of the Corporation; and
(i) "unanimous shareholder agreement" shall have the meaning ascribed to
such term under the Act.
12.2 In this by-law where the context requires, words importing the
singular include the plural and vice versa and words importing gender include
the masculine, feminine and neuter genders.
12.3 Save as aforesaid, words and expressions defined in the Act shall
have the same meanings when used herein.
ARTICLE 13
REPEAL
13.1 Repeal. The by-law No. 40 of the Corporation enacted on the 19th day
of November, 1986 is repealed upon the coming into force of this by-law but such
repeal shall not affect the previous operation of any by-law. All officers and
other persons acting under any by-law so repealed shall continue to act as if
appointed under this by-law and all resolutions with continuing effect passed
under any by-law so repealed shall continue in force until amended or repealed
except to the extent inconsistent with this by-law. All rights, privilege, duty
or obligations accrued under by-law No. 40 of the Corporation enacted on the
19th day of November, 1986 on and after the effective date of this by-law shall
be deemed to have accrued under this by-law.
ARTICLE 14
EFFECTIVE DATE
14.1 Effective Date. This by-law shall come into force as of May
12, 2003, subject to the provisions of the Act.
* * * * *
Approved by the Board of Directors of the Corporation on May 12, 2003.
Confirmed by the shareholders of the Corporation on .
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Lewis Ritchie
Secretary