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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SMARTIRE SYSTEMS INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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SMARTIRE SYSTEMS INC.
Suite #150, 13151 Vanier Place
Richmond, British Columbia, Canada V6V 2J1
NOTICE OF ANNUAL AND EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
On Friday, December 14, 2001, SmarTire Systems Inc. (the "Company") will hold
its 2001 Annual and Extraordinary General Meeting of Shareholders (the
"Meeting") at the offices of Clark, Wilson, 7th Floor Boardroom, 885 West
Georgia Street, Vancouver, British Columbia, Canada. The Meeting will begin at
9:00 a.m., Vancouver time.
At the Meeting, the Shareholders will be asked:
1. To receive and consider the Report of the Directors to the Shareholders;
2. To receive and consider the financial statements of the Company together
with the auditor's report thereon for the fiscal year ended July 31,
2001;
3. To appoint the auditor for the Company to hold office until the next
annual general meeting of the Company;
4. To authorize the directors to fix the remuneration to be paid to the
auditors;
5. To consider and, if thought fit, to approve an ordinary resolution to
set the number of directors at six (6);
6. To elect directors to hold office until the next annual general meeting
of the Company;
7. To consider, and if thought fit, to approve a special resolution that:
(a) pursuant to Section 37 of the Company Act (British Columbia), the
directors be authorized to apply for a Certificate of Continuance
under Section 190 of the Business Corporations Act (Yukon
Territory);
(b) the Memorandum of the Company be amended by substituting for all
the provisions thereof the provisions set out in the Articles of
Continuance;
(c) any one of the directors or officers be authorized to execute all
documents necessary to complete the application for a Certificate
of Continuance under Section 190 of the Business Corporations Act
(Yukon Territory);
(d) upon enactment by the directors, By-law No. 1, being a by-law
relating generally to the transaction of the business and affairs
of the Company, be sanctioned and confirmed;
ii
8. To consider, and if thought fit, to approve an ordinary resolution
approving the sale and issuance of a number of Common Shares (and/or
securities convertible into Common Shares calculated on an as converted
basis) equal to not more than 40% of the issued and outstanding Common
Shares on the date hereof, at a price per share equal to not less than
80% of the fair market value of the Common Shares, calculated in
accordance with the standards related to Rule 4350 of the Nasdaq
Marketplace Rules, on such terms and conditions as the Board of Directors
deems appropriate.
Your Board of Directors recommends that you vote in favor of the proposals
outlined in this Proxy Statement and Information Circular.
At the Meeting, the Company will also report on its fiscal 2001 business results
and other matters of interest to Shareholders.
A Proxy Statement and Information Circular and Proxy Form accompany this Notice
of Meeting. These documents provide additional information relating to the
matters to be dealt with at the Meeting and form part of this Notice of Meeting.
The share transfer books of the Company will not be closed, but the Board of
Directors has fixed November 5, 2001 as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting and at any
adjournment or postponement thereof. Each registered Shareholder at the close of
business on that date is entitled to such notice and to vote at the Meeting in
the circumstances set out in the accompanying Proxy Statement and Information
Circular.
If you are unable to attend the Meeting in person, please complete, sign and
date the enclosed Proxy Form and return the same in the enclosed return envelope
provided for that purpose. If you receive more than one Proxy Form because you
own shares registered in different names or addresses, each Proxy Form should be
completed and returned. The completed form of proxy must be received by Pacific
Corporate Trust Company not later than 48 hours prior to the commencement of the
Meeting (or if adjourned or postponed, any reconvening thereof), at 10th Floor,
625 Howe Street, Vancouver, British Columbia, V6C 3B8, or by fax at (604)
689-8144.
You may also vote your shares not later than 48 hours prior to the commencement
of the Meeting (or if adjourned or postponed, any reconvening of thereof)
through Pacific Corporate Trust Company's Internet or Telephone Voting Services.
Internet voting can be completed online at http://www.stocktronics.com/webvote.
Telephone voting can be completed by calling 1-888-Tel-Vote (1-888-835-8683). If
you choose to vote your shares through the Internet or Telephone Voting
Services, you will be required to provide your confidential personal
identification number (PIN) specified on the enclosed Proxy Form.
The Chairman of the Meeting has the discretion to accept proxies filed, or votes
effected through the Internet or Telephone Votive Services, less than 48 hours
prior to the commencement of the Meeting (or, if adjourned or postponed, any
reconvening thereof).
iii
DATED at Richmond, British Columbia, this 5th day of November, 2001.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT V. RUDMAN
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ROBERT V. RUDMAN,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PLEASE VOTE.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED.
SMARTIRE SYSTEMS INC.
#150, 13151 VANIER PLACE,
RICHMOND, BRITISH COLUMBIA, CANADA V6V 2J1
PROXY STATEMENT AND INFORMATION CIRCULAR
IN CONNECTION WITH THE ANNUAL AND
EXTRAORDINARY GENERAL MEETING TO BE HELD ON
DECEMBER 14, 2001
(As at October 15, 2001 except as otherwise indicated)
MANAGEMENT SOLICITATION
This Proxy Statement and Information Circular is furnished to the members (the
"Shareholders") by the Board of Directors of SmarTire Systems Inc. (the
"Company") in connection with the solicitation by the Board of Directors of
proxies to be voted at the Annual and Extraordinary General Meeting (the
"Meeting") of the Shareholders to be held at 9:00 a.m. (Vancouver time) on
Friday, December 14, 2001, at the offices of Clark, Wilson, 7th Floor Board
Room, 885 West Georgia Street, Vancouver, British Columbia, Canada, or at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual and Extraordinary General Meeting of Shareholders
(the "Notice of Meeting").
The solicitation will be conducted by mail and may be supplemented by telephone
or other personal contact to be made without special compensation by regular
officers and employees of the Company. The Company does not reimburse
Shareholders, nominees or agents for the cost incurred in obtaining from their
principal authorization to execute forms of proxy; except that the Company has
requested brokers and nominees who hold stock in their respective names to
furnish this proxy material to their customers, and the Company will reimburse
such brokers and nominees for their related out of pocket expenses. No
solicitation will be made by specifically engaged employees or soliciting
agents. The cost of solicitation will be borne by the Company.
References in this Proxy Statement and Information Circular to "member" or
"Shareholder" or "Shareholders" are references to the holder or holders of
record of shares of common stock without par value of the Company (the "Common
Shares").
This Proxy Statement and Information Circular and the accompanying Proxy Form
are being delivered to Canadian and United States intermediaries holding Common
Shares on behalf of another person or corporation, and are being mailed on or
about November 9, 2001 to all registered Shareholders as of the close of
business on November 5, 2001 (the "Record Date").
The principal executive offices of the Company are located at Suite #150, 13151
Vanier Place, Richmond, British Columbia, Canada, V6V 2J1.
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All references in this Proxy Statement and Information Circular to dollars or $
are to United States dollars, unless otherwise specified.
VOTING AND REVOCABILITY OF PROXIES
The authorized capital of the Company consists of: 200,000,000 Common Shares
without par value, and 20,000 Preferred Shares with a par value of CDN$1,000 per
share. As of October 15, 2001, there were 15,159,369 issued and outstanding
Common Shares and no issued or outstanding Preferred Shares. The record date for
determining the names of Shareholders entitled to receive the Notice of Meeting
and to vote at the Meeting is the close of business on November 5, 2001.
Holders of Common Shares are entitled to vote at the Meeting. A Shareholder is
entitled to one vote for each Common Share that such Shareholder holds on the
Record Date on the proposals to be acted upon at the Meeting and any other
matter to come before the Meeting.
Shareholders personally present, being not less than two and who hold or
represent by proxy in the aggregate not less than one-tenth of the issued
capital of the Company entitled to vote, constitute a quorum. Abstentions are
considered present for purposes of determining whether the quorum requirement is
met. All proposals, other than a special resolution, require the affirmative
vote by a simple majority of the votes cast in person or by proxy at the
Meeting.
The persons named as proxyholders (the "designated persons") in the enclosed
form of proxy were designated by the directors of the Company. A SHAREHOLDER HAS
THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER) (WHICH MAY BE A
CORPORATION) TO ATTEND AND ACT FOR AND ON BEHALF OF THAT SHAREHOLDER AT THE
MEETING, OTHER THAN THE DESIGNATED PERSONS IN THE ENCLOSED FORM OF PROXY. TO
EXERCISE THIS RIGHT, THE SHAREHOLDER MAY DO SO BY STRIKING OUT THE PRINTED NAMES
AND INSERTING THE NAME OF SUCH OTHER PERSON AND, IF DESIRED, AN ALTERNATE TO
SUCH PERSON IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY.
In order to be voted, the completed form of proxy must be received by Pacific
Corporate Trust Company not later than 48 hours prior to the commencement of the
Meeting (or if adjourned or postponed, any reconvening thereof), at 10th Floor,
625 Howe Street, Vancouver, British Columbia, V6C 3B8, or by fax at (604)
689-8144. However, the Chairman of the Meeting has the discretion to accept
proxies filed less than 48 hours prior to the commencement of the Meeting (or if
adjourned or postponed, any reconvening thereof).
A proxy may not be valid unless it is dated and signed by the Shareholder who is
giving it or by that Shareholder's attorney-in-fact duly authorized by that
Shareholder in writing or, in the case of a corporation, dated and executed by
any duly authorized officer of, or attorney-in-fact for, the corporation. If a
form of proxy is executed by an attorney-in-fact for an individual Shareholder
or joint Shareholders or by an officer or attorney-in-fact for a corporate
Shareholder, the instrument so empowering the
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officer or attorney-in-fact, as the case may be, or a notarial copy thereof,
should accompany the form of proxy.
A Shareholder who has given a proxy may revoke it at any time, before it is
exercised, by an instrument in writing (a) executed by that Shareholder or by
that Shareholder's attorney-in-fact authorized in writing or, where that
Shareholder is a corporation, by a duly authorized officer of, or
attorney-in-fact for, the corporation; and (b) delivered either (i) to the
registered office of the Company at Suite 800 - 885 West Georgia Street,
Vancouver, British Columbia, V6C 3H1 (Attention: Bernard Pinsky) at any time up
to and including the last business day preceding the day of the Meeting or, if
adjourned or postponed, any reconvening thereof, or (ii) to the Chairman of the
Meeting prior to the vote on matters covered by the proxy on the day of the
Meeting or, if adjourned or postponed, any reconvening thereof; or in any other
manner provided by law. Also, a proxy will automatically be revoked by either
(i) attendance at the Meeting and participation in a poll (ballot) by a
Shareholder or (ii) submission of a subsequent proxy in accordance with the
foregoing procedures. A revocation of a proxy does not affect any matter on
which a vote has been taken prior to the revocation.
IN THE ABSENCE OF ANY INSTRUCTIONS, THE DESIGNATED PERSONS OR OTHER PROXY AGENT
NAMED ON THE PROXY FORM WILL CAST THE SHAREHOLDER'S VOTES ON ANY POLL (BALLOT)
FOR THE APPROVAL OF ALL THE MATTERS IN THE ITEMS SET OUT IN THE FORM OF PROXY
AND IN FAVOR OF EACH OF THE NOMINEES NAMED THEREIN FOR ELECTION AS DIRECTORS.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to other matters which may properly come before the
Meeting, including any amendments or variations to any matters identified in the
Notice of Meeting and with respect to other matters which may properly come
before the Meeting. At the date of this Proxy Statement and Information
Circular, management of the Company knew of no such amendments, variations, or
other matters to come before the Meeting.
In the case of abstentions from or withholding of the voting of shares on any
matter, the shares which are the subject of the abstention or withholding
("non-voted shares") will be counted for determination of a quorum, but will not
be counted as affirmative or negative on the matter to be voted upon.
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement and
Information Circular in connection with the solicitation of proxies and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company. The delivery of this Proxy Statement and
Information Circular shall not create, under any circumstances, any implication
that there has been no change in the information set forth herein since the date
of this Proxy Statement and Information Circular. This Proxy Statement and
Information Circular does not constitute the solicitation of a proxy by anyone
in any jurisdiction in which such solicitation is not authorized or in which the
person making such solicitation is not
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qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
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PROPOSAL 1
APPOINTMENT OF AUDITOR
Unless otherwise instructed, the proxies given pursuant to this solicitation
will be voted for the appointment of KPMG LLP, Chartered Accountants, of
Vancouver, British Columbia, as the auditor of the Company to hold office for
the ensuing year. Shares represented by proxies which are marked "Withhold" with
respect to the appointment of the auditor will be counted for determination of a
quorum, but will not be counted as either an affirmative vote for or a negative
vote against such appointment.
KPMG LLP were first appointed auditor of the Company on April 29, 1994.
Representatives of KPMG LLP are expected to be present at the Meeting but not
expected to make a statement. However, they are expected to be available to
respond to appropriate questions.
The Audit Committee has considered whether the provision of the services with
respect to financial information systems design and implementation, and all
other services provided by the auditor are compatible with maintaining the
principal accountant's independence.
AUDIT FEES
The aggregate fees billed by KPMG L.L.P. for professional services rendered for
the audit of our annual financial statements included on Form 10-KSB for the
fiscal year ended July 31, 2001, and for the review of our financial statements
included on Form 10-QSB for the quarters ended October 31, 2000, January 31,
2001 and April 30, 2001, were CDN$109,070.
FINANCIAL INFORMATION SYSTEM DESIGN AND IMPLEMENTATION FEES
During the fiscal year ended July 31, 2001, our principal accountant did not
render any non-audit professional services in respect of financial information
system design and implementation, such as directly or indirectly operating or
supervising the operation of the Company's information system, managing the
Company's local area network or implementing its hardware or software system.
ALL OTHER FEES
For the fiscal year ended July 31, 2001, the aggregate fees billed by KPMG
L.L.P. for other non-audit professional services, other than those services
listed above, totalled CDN$133,952.
PROPOSAL 2
AUTHORIZATION FOR BOARD OF DIRECTORS TO FIX AUDITOR REMUNERATION
Under the Company Act (British Columbia), the remuneration of the auditor of the
Company must be set by ordinary resolution of the Shareholders or, if the
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Shareholders so resolve, by the Board of Directors. In order to provide the
Company with the necessary flexibility to effectively manage the engagement of
the auditor, it is important that the Board of Directors have the authority to
negotiate and fix the remuneration to be paid to the auditor in connection with
the services to be provided to the Company. Accordingly, the following ordinary
resolution will be presented for approval at the Meeting:
"BE IT RESOLVED THAT:
(a) the Board of Directors be and is hereby authorized to fix the
remuneration to be paid to the auditor, as appointed by ordinary
resolution of the Shareholders, in connection with the services
to be provided to the Company by such auditor; and
(b) the Board of Directors be and is hereby authorized to delegate to
any one senior officer of the Company the authority to negotiate
and enter into an agreement with the Company's auditor with
respect to the services to be provided by it to the Company, and
the remuneration to be paid to the auditor for such services, on
such terms and conditions as the senior officer deems fair and
reasonable."
PROPOSAL 3
DETERMINATION OF NUMBER OF DIRECTORS
Under the Company's Articles, the Company may have not less than three (3) and
not more than twenty (20) directors. Unless the number of directors is fixed by
ordinary resolution of the Shareholders, the number of directors may be
determined within this range by resolution of the Board of Directors. By
Shareholders' resolution adopted at the last annual general meeting of the
Company, the number of directors was set at six (6). There are currently six (6)
members of the Board of Directors. Management proposes that the number of
directors be set at six (6). Accordingly, the following ordinary resolution will
be presented for approval by the Shareholders at the Meeting:
"BE IT RESOLVED THAT the number of directors be and is hereby set at six (6)."
PROPOSAL 4
ELECTION OF DIRECTORS
The directors of the Company are elected at each annual general meeting and hold
office until the next annual general meeting or until their successors are
appointed. In the absence of instructions to the contrary, the enclosed proxy
will be voted for all of the six current directors, each of whom management
proposes to nominate. Shares represented by proxies which are marked "Withhold"
with respect to the election of any nominee will be counted for determination of
a quorum, but will not be counted as either an affirmative vote for such nominee
or a negative vote against the nominee.
Advance notice of the Meeting inviting nominations for directors of the Company
was published in The Province newspaper in Vancouver, British Columbia, on
October
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18, 2001 in accordance with Section 111 of the Company Act (British Columbia),
and delivered to the British Columbia Securities Commission on October 18, 2001
in accordance with National Policy No. 41 of the Canadian Securities
Administrators. The following information regarding the Company's directors is
relevant to your consideration of the nominees proposed by management:
DATE ON WHICH
THE NOMINEE
BECAME A
NAME, COUNTRY OF ORDINARY PRINCIPAL OCCUPATION OR EMPLOYMENT AGE AS AT DIRECTOR OF
RESIDENCE AND POSITION AND, IF NOT AN ELECTED DIRECTOR, OCTOBER 15, THE
HELD WITH THE COMPANY OCCUPATION DURING THE PAST FIVE YEARS 2001 COMPANY
- ---------------------------- --------------------------------------------- ----------------- ----------------
LAWRENCE BECERRA (1) Principal and founder of West Sussex 49 March 30/98
United Kingdom Trading, Inc.
DIRECTOR
JOHN BOLEGOH Technical Support Manager, SmarTire Systems 57 Dec. 2/93
Canada Inc.
TECHNICAL SUPPORT MANAGER
and DIRECTOR
KEVIN CARLSON (1) Chief Financial Officer, Managing Director 40 Dec 17/98
Canada and Corporate Secretary, SmarTire Systems
CHIEF FINANCIAL OFFICER, Inc.
MANAGING DIRECTOR,
CORPORATE SECRETARY and
DIRECTOR
BERNARD PINSKY (2) Lawyer and partner at Clark, Wilson. 47 Aug. 19/98
Canada
DIRECTOR
ROBERT RUDMAN (2) President, Chairman and Chief Executive 54 Sept. 22/93
Canada Officer, SmarTire Systems Inc.
PRESIDENT, CHAIRMAN, CHIEF
EXECUTIVE OFFICER and
DIRECTOR
WILLIAM Cronin (1)(2) Owner of Madison Financial Services 54 June 7/01
United States
DIRECTOR
(1) Member of the Compensation Committee
(2) Member of the Audit Committee.
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OF DIRECTORS, EXECUTIVE OFFICERS
AND SIGNIFICANT EMPLOYEES
The present and principal occupations of the Company's directors and executive
officers during the last five years are set forth below:
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LAWRENCE BECERRA:
Mr. Becerra has been a Director of the Company since March 30, 1998. He
has an extensive background in international finance. Since 1996, he has
been the principal and founder of West Sussex Trading, Inc. which is
involved in corporate finance activities. Between 1992 and 1995 Mr.
Becerra was the Senior Proprietary Trader promoted from the position of
Manager of European Money Market Trading for Goldman Sachs International
in London, England. Between 1987 and 1992 Mr. Becerra was the Managing
Director for Czarnikow Financial Futures. Between 1984 and 1987, he held
the position of Senior Trader with TransMarket Group, Inc. Between 1976
and 1984, Mr. Becerra worked for Continental Bank in London and ended
his tenure as the Executive Director representing all trading activities
for the company. He attended Middlebury College in Middlebury, Vermont
between 1970 and 1974 and Hackley School in Tarrytown, New York between
1968 and 1970.
JOHN BOLEGOH:
Mr. Bolegoh has held a number of positions with the Company and has been
a Director since 1993. Mr. Bolegoh has an extensive background in tire
product engineering, including twenty years with Michelin Technical
Services Canada Limited in positions of increasing responsibility. Mr.
Bolegoh joined the Company in 1991. His responsibilities include
defining necessary product capabilities and designs for entering various
markets; establishing contacts to promote awareness of the Company's
technologies; locating and exploring business possibilities with
potential distributors; and providing customer relations, problem
solving, training and sales assistance. Mr. Bolegoh specialized in
mechanical technology at the Hamilton Institute of Technology in
Hamilton, Ontario.
KEVIN CARLSON:
Mr. Carlson joined the Company as Chief Financial Officer in November
1998 and has served as a Director since December, 1998. Mr. Carlson is
responsible for all of the Company's financial and related functions,
including Finance, Treasury, Accounting, Taxation, Legal, Management
Information Systems and Administration. Effective April 1, 2000 Mr.
Carlson assumed the additional responsibilities of General Manager and
is responsible for all operating activities of the Company's Richmond
office. As of December 2000, Mr. Carlson became the Managing Director
responsible for all North American operations. Prior to joining the
Company, Mr. Carlson was Chief Financial Officer of ID Biomedical
Corporation, a publicly traded biotechnology company. Previously, he was
Chief Financial Officer for three other publicly traded companies. Mr.
Carlson spent eight years with KPMG in Calgary, Alberta. In addition to
his Chartered Accountancy designation, Mr. Carlson holds a Bachelor of
Commerce degree from the University of Calgary.
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WILLIAM CRONIN:
Mr. Cronin has been a Director since June 7, 2001 and previously served
as a Director from November 17, 1995 to April 25, 1998. He is the owner
of Madison Financial Services, a registered investment adviser firm
located in Madison, CT, specializing in tax, pension investing planning
strategies and portfolio management. Mr. Cronin has a degree in
political science and has been in the financial services field for over
20 years.
BERNARD PINSKY:
Mr. Pinsky has served as a Director since August 19, 1998. He is a
partner practicing corporate/securities law at Clark, Wilson, one of
Vancouver's most established and respected law firms. Mr. Pinsky was
called to the British Columbia Bar in 1980, and was admitted to practice
law in California in 1999. He has advised a variety of public and
private companies on legal matters related to acquisitions, mergers,
takeovers, initial public offerings, secondary financings, public
company disclosure requirements and stock exchange practice. Mr. Pinsky
has been corporate and securities counsel for the Company since 1993.
ROBERT RUDMAN:
Mr. Rudman has served as a Director since September 22, 1993. He is a
Chartered Accountant with 15 years of experience assisting public
companies, especially on the Vancouver Stock Exchange (now the Canadian
Venture Exchange). Mr. Rudman joined the Company in March 1993 as the
Chief Financial Officer after serving as an independent financial
consultant for several months. He was appointed Chief Executive Officer
of the Company on January 19, 1996, and served as President from January
19, 1996 to June 4, 1999, when he was appointed Chairman of the Board.
Mr. Rudman was reappointed President of the Company effective April 1,
2000. Prior to joining the Company, Mr. Rudman was manager of a
California based sales contract financing firm. Previously, he was a
partner in a consulting firm providing professional assistance to
publicly traded companies. Mr. Rudman became a Chartered Accountant in
1974 and worked with Laventhol & Horwath and Price Waterhouse & Co. in
Winnipeg, Manitoba. In addition to his Chartered Accountancy
designation, Mr. Rudman holds a Bachelor of Arts degree and graduate
business diploma from Lakehead University in Thunder Bay, Ontario.
ERWIN BARTZ:
Mr. Bartz is a Professional Engineer with 16 years of engineering
experience. Mr. Bartz joined the Company as Director, Technical
Operations in January 2001 and is responsible for the Company's overall
technical operations including engineering and manufacturing. Prior to
joining the Company, Mr. Bartz spent ten years as Manager of Engineering
and Manufacturing at Finning (Canada), the Caterpillar dealer for
British Columbia, Alberta, United Kingdom and Chile, with corporate
responsibility for engineering, product review, heavy manufacturing and
new equipment preparation. Previously, he held the Engineering Manager
role at Weldco Beales, a custom attachment
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manufacturer for the mobile equipment market, and also worked as a
design engineer for the Chapman Industries, a Hitachi distributor and
general manufacturer of purpose built machinery and equipment. Mr. Bartz
holds a Bachelor of Applied Science degree in Mechanical Engineering
from the University of British Columbia.
IAN BATEMAN:
Mr. Bateman is the Managing Director for SmarTire (Europe) Limited. He
is a U.K. resident and has extensive sales, marketing and senior
managerial experience in a variety of facets of European automotive
industries. From 1966 to 1973 he was a manager with Mid Bucks Automotive
Limited. During 1973 to 1979 Mr. Bateman was a manager with Renault U.K.
Limited, and was instrumental in the formation of a direct sales company
in the U.K. with a sales budget of pound sterling 100 million per year.
Between 1979 and 1991 he operated his own marketing company which
expanded to supply every European car manufacturer/importer, with the
exception of just three, with an overall turnover of pound sterling 10
million per year. From 1991 and prior to joining SmarTire (Europe)
Limited, Mr. Bateman carried out independent consulting services, most
importantly with Otter Controls Limited, which was implementing a
marketing program for a tire-monitoring system.
SHAWN LAMMERS:
Mr. Lammers is the Vice President, Engineering. Mr. Lammers is a
professional engineer, with a Bachelor of Applied Science degree from
the University of British Columbia, specializing in computer
engineering. He has developed software for MS-DOS, Windows, UNIX
Workstations and Amiga platforms. Mr. Lammers has been with the Company
since its inception and is responsible for the development of the
patented remote sensing technology utilized in SmarTire's products. He
has been the chief engineer in respect to the design, development and
production of the Company's passenger car TMS, the commercial vehicle
TMS and the industrial equipment TMS.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held five formal meetings during the year
ended July 31, 2001. All other proceedings of the Board of Directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions consented
to in writing by all the directors are, according to the Company Act (British
Columbia) and the Articles of the Company, as valid and effective as if they had
been passed at a meeting of the directors duly called and held.
During 2001, with the exception of Mr. Dana Stonerook, each incumbent director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held during the period for which he was a director and
(ii) the total number of meetings held by all committees of the Board of
Directors during the period on which he served. Mr. Stonerook attended two of
the five formal meetings of the Board of Directors during the year ended July
31, 2001, and resigned as a
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director effective as of August 31, 2001; Mr. Stonerook did not serve on any
committees of the Board of the Directors during the fiscal year.
AUDIT COMMITTEE
Pursuant to the requirements of the Company Act (British Columbia), the Company
has an Audit Committee of its Board of Directors presently consisting of William
Cronin, Bernard Pinsky and Robert Rudman. The Audit Committee is governed by a
written charter, a copy of which is appended to this proxy statement as Exhibit
"A". The function of the Audit Committee is to review and approve the scope of
audit procedures employed by our independent auditors and to review the results
of our independent auditors' examination, the scope of audits, our independent
auditors' opinions on the adequacy of internal controls and quality of financial
reporting, and our company's accounting and reporting principles, policies and
practices, as well as our accounting, financial and operating controls. The
Audit Committee also reports to our Board of Directors with respect to such
matters and recommends the selection of independent auditors. The Audit
Committee met one time during the fiscal year ended July 31, 2001 and each
member attended the meeting. Other business of the Audit Committee was conducted
by resolutions consented to in writing by all the members and filed with the
minutes of the proceedings of the Audit Committee.
REPORT OF THE AUDIT COMMITTEE
The following is the Report of the Audit Committee. For the year ended July 31,
2001, the Audit Committee has:
1. reviewed and discussed the audited financial statements with our
Company's management;
2. discussed with the independent accountants the matters described
in Statement of Auditing Standards, SAS No. 61;
3. received the written disclosures and the letter from the
independent accountants required by Independence Standards Board
Standard No. 1 and has discussed with the independent accountants
its independence; and
4. recommended to our Board of Directors that the audited financial
statements be included in our company's annual report on Form
10-KSB for the period ended July 31, 2001, based on the review
and discussions referred to above.
With the exception of Robert Rudman, who also serves as the Company's President
and Chief Executive Officer, the members of our Audit Committee are independent,
as that term is defined by Nasdaq Marketplace Rule 4200(a)(14).
AUDIT COMMITTEE
William Cronin
Bernard Pinsky
Robert Rudman
- 12 -
COMPENSATION COMMITTEE
The Company has a Compensation Committee made up of Kevin Carlson, William
Cronin and Lawrence Becerra. The function of the Compensation Committee is to
investigate and recommend to the directors appropriate levels and types of
compensation for directors, officers and employees of the Company. During fiscal
2001, there were four meetings held by this Committee. Other business of the
Compensation Committee was conducted by resolutions consented to in writing by
all the members and filed with the minutes of the proceedings of the
Compensation Committee.
NO STANDING NOMINATING COMMITTEE
The Company does not have a standing Nominating Committee.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following tables set forth specified information with respect to the
beneficial ownership of the Company's common stock as of October 15, 2001 by:
- each person or affiliated group which, to the knowledge of the
Company, beneficially owns five percent (5%) or more of the
outstanding common stock;
- each of the Company's directors,
- each of the Named Executive Officers (as hereinafter defined);
and
- all of the Company's executive officers and directors as a group.
Shares and percentages beneficially owned are based upon 15,159,369 issued and
outstanding shares of common stock on October 15, 2001, together with options
and warrants that are exercisable for common stock within 60 days from October
15, 2001 for each Shareholder. Under the rules of the United States Securities
and Exchange Commission, beneficial ownership includes shares over which the
named shareholder exercises voting control and or investment power. Shares of
common stock subject to options or warrants that are currently exercisable or
will become exercisable within sixty days from October 15, 2001 are deemed
outstanding for computing the respective percentage ownership of each person
holding the option or warrant, but are not deemed outstanding for purposes of
computing the respective ownership percentage of any other person. Unless
otherwise indicated in the footnotes below, the Company believes that the
persons and entities named in the tables have sole voting and investment power
with respect to all shares beneficially owned, subject to applicable community
property laws.
- 13 -
================================================================================
BENEFICIAL OWNERS OF FIVE PERCENT (5%) OR MORE OF
THE COMPANY'S OUTSTANDING COMMON STOCK
- --------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
- -------------------------- ---------------------- ----------------
Simon Archdale(1) 1,500,000 9.9%
TRW Inc.(2) 1,390,042 9.2%
Andersen Maria Burrows(3) 840,000 5.5%
================================================================================
(1) Mr. Archdale's address is Chalet Trois Nicholas, Courtavet, Crans
Montana, Valais, Switzerland.
(2) TRW Inc.'s address is 1900 Richmond Road, Cleveland, Ohio 44124, USA.
(3) Andersen Maria Burrows' address is Le Corail, 17 Rue Sadi, Carrot,
F-06600 Antibes, France.
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK BY
DIRECTORS AND NAMED EXECUTIVE OFFICERS
===================================================================================================
TOTAL NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
- -------------------- ---------------------- ----------------
Directors
Lawrence Becerra(1) 152,303 1.00%
John Bolegoh(2) 50,238 *
Kevin Carlson(3) 96,237 *
William Cronin(4) 160,660 1.06%
Bernard Pinsky(5) 46,500 *
Robert Rudman(6) 322,837 2.13%
Named Executive Officers who are not Directors or Nominees
Ian Bateman(7) 78,000 *
Shawn Lammers(8) 56,852 *
Directors and Executive Officers, as a Group
Total Directors / Executive Officers 1,000,294 6.60%
(9 persons)(9)
===================================================================================================
* Represents less than 1% of the Company's outstanding stock.
(1) Mr. Becerra has incentive stock options for the right to purchase up to
an aggregate of 70,000 Common Shares and warrants for the right to
purchase up to an aggregate of 28,803 Common Shares. The options and
warrants are immediately exercisable.
(2) Includes 12,990 Common Shares owned by Mr. Bolegoh's wife and children.
Mrs. Bolegoh has sole voting and dispositive power with respect to her
shares, and Mr. Bolegoh disclaims beneficial ownership of such shares.
Mr. Bolegoh has incentive stock options for the right to purchase up to
an aggregate of 15,900 Common Shares. All options vest over time and
currently 13,634 are immediately exercisable.
(3) Mr. Carlson is also a Named Executive Officer. Mr. Carlson has incentive
stock options for the right to purchase an aggregate of 205,000 Common
Shares. The options vest over time and currently 85,667 options are
immediately exercisable.
(4) Mr. Cronin has incentive stock options for the right to purchase an
aggregate of 63,750 Common Shares. The options are immediately
exercisable.
(5) Mr. Pinsky has incentive stock options for the right to purchase an
aggregate of 40,000 Common Shares. The options are immediately
exercisable.
(6) Mr. Rudman is also a Named Executive Officer. Mr. Rudman has incentive
stock options for the right to purchase an aggregate of 415,000 Common
Shares. The options vest over time, and currently 294,500 options are
immediately exercisable.
(7) Mr. Bateman has incentive stock options for the right to purchase an
aggregate of 162,500 Common Shares. The options vest over time, and
currently 78,000 options are immediately exercisable.
(8) Mr. Lammers has incentive stock options for the right to purchase an
aggregate of 112,500 Common Shares. The options vest over time, and
currently 55,333 options are immediately exercisable.
(9) Includes 36,667 immediately exercisable incentive stock options
beneficially owned by Mr. Erwin Bartz, Managing Director Technical
Operations, who is not a Named Executive Officer. Mr. Bartz holds an
additional 73,333 incentive stock options that vest over time.
- 14 -
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The services of Mr. Robert Rudman, Director, President, Chairman and Chief
Executive Officer of the Company, are provided to the Company pursuant to a
Management Agreement dated August 1, 1999. See "Management Agreements and
Termination of Employment and Change in Control Arrangements."
The services of Mr. Kevin Carlson, Director, Chief Financial Officer, Managing
Director and Corporate Secretary, are provided to the Company pursuant to a
Management Agreement dated August 1, 1999. See "Management Agreements and
Termination of Employment and Change in Control Arrangements."
The services of Mr. Erwin Bartz, Director, Technical Operations, are provided to
the Company pursuant to a Management Agreement dated January 3, 2001. See
"Management Agreements and Termination of Employment and Change in Control
Arrangements."
The services of Mr. Ian Bateman, Managing Director of SmarTire (Europe) Limited,
are provided to the Company pursuant to a Management Agreement dated August 1,
1999. See "Management Agreements and Termination of Employment and Change in
Control Arrangements."
The services of Mr. Shawn Lammers, Vice President of Engineering, are provided
to the Company pursuant to a Management Agreement dated August 1, 1999. See
"Management Agreements and Termination of Employment and Change in Control
Arrangements."
The services of Mr. Bernard Pinsky, Director, are provided through the law firm
of Clark, Wilson of which Mr. Pinsky is a partner. Clark, Wilson renders
accounts to the Company for Mr. Pinsky's time expended. During the year ended
July 31, 2001 the Company paid $79,858 to Clark, Wilson for legal services.
Mr. Becerra is a principal of West Sussex Trading Inc. During the year ended
July 31, 2001 the Company paid $78,510 for consulting services.
SUMMARY OF EXECUTIVE COMPENSATION
Particulars of compensation awarded to, earned by or paid to:
(a) the Company's chief executive officer (the "CEO");
(b) each of the Company's four most highly compensated executive
officers who were serving as executive officers at the end of the
most recently completed financial year and whose total salary and
bonus exceeds US$100,000 per year; or
(c) any additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as an executive officer of the Company at the end of the
most recently completed financial year;
- 15 -
(all such persons are referred to as the "Named Executive Officers") are set out
in the summary compensation table below. Except as indicated, all dollar amounts
set forth below with respect to the applicable year ended July 31, are expressed
in United States dollars.
During fiscal year ended July 31, 2001, five (5) individuals served as executive
officers of the Company at various times: Robert Rudman, Kevin Carlson, Erwin
Bartz, Shawn Lammers, and Ian Bateman. All except Mr. Bartz qualify as "Named
Executive Officers" as defined above.
================================================================================================================================
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION(1)
---------------------------------- -----------------------------------
AWARDS PAYOUTS
------------------------- --------
OTHER
ANNUAL SECURITIES RESTRICTED
COMPEN- UNDERLYING SHARES OR
NAME AND PRINCIPAL SATION OPTIONS/SARs RESTRICTED LTIP ALL OTHER
POSITION YEAR SALARY BONUS (1) GRANTED SHARE UNITS PAYOUTS COMPENSATION
- ---------------------- ---- -------- ------- ------ ------------ ----------- ------- --------------
Robert V. Rudman 2001 $191,058 Nil Nil 150,000 Nil Nil Nil
President, Chairman 2000 $185,826 Nil Nil 17,500 Nil Nil $44,730(2)
and Chief Executive 1999 $163,732 $59,587 Nil Nil Nil Nil Nil
Officer
Ian Bateman(3) 2001 $102,810 Nil Nil 35,000 Nil Nil Nil
Managing Director 2000 $107,517 Nil Nil 57,500 Nil Nil Nil
SmarTire (Europe) 1999 $ 89,613 $24,518 Nil 10,000 Nil Nil Nil
Limited
Kevin Carlson(4) 2001 $131,764 Nil Nil 50,000 Nil Nil Nil
Chief Financial 2000 $102,201 Nil Nil 60,000 Nil Nil $15,406
Officer, General
Manager, Corporate
Secretary and Director
Shawn Lammers(5) 2001 $ 83,802 Nil Nil 15,000 Nil Nil $17,017(6)
VIP Engineering
================================================================================================================================
(1) The value of perquisites and other personal benefits, securities and
property for the Named Executive Officers that do not exceed the lesser
of $50,000 or 10% of the total of the annual salary and bonus is not
reported herein.
(2) Amount relates to accumulated vacation pay paid to Mr. Rudman.
(3) Mr. Bateman commenced employment with the company on February 2, 1998.
(4) Mr. Carlson commenced employment with the Company on November 16, 1998.
Mr. Carlson was paid a signing bonus consisting of 10,000 shares of the
Company's common stock valued at $15,406.
(5) Mr. Lammers commenced employment with the company in October 1988.
(6) Amount relates to accumulated vacation pay paid to Mr. Lammers.
The following table sets out the details of all stock options granted to the
Named Executive Officers during the most recently completed fiscal year:
- 16 -
=======================================================================================
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARs
OPTIONS/ GRANTED TO EXERCISE
SARs EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE
- ---------------- ----------- ------------ --------- -----------------
Robert Rudman(1) 150,000 30.1% $3.33 January 17, 2006
Ian Bateman(2) 35,000 7.0% $3.65 January 17, 2006
Kevin Carlson(2) 50,000 10.1% $3.65 January 17, 2006
Shawn Lammers(2) 15,000 3.0% $3.65 January 17, 2006
=======================================================================================
(1) Average price of $3.33 over the term of options. 75,000 of the options
granted to Mr. Rudman were in recognition of past service and were
immediately exercisable.
(2) Average price of $3.65 over the term of options.
The following table sets out the details of all stock options exercised during
the most recently completed fiscal year by the Named Executive Officers:
===========================================================================================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
- ---------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARs AT IN-THE-MONEY OPTIONS/SARs AT
FY-END(#) FY-END($)(1)
SHARES AGGREGATE EXERCISABLE / UNEXERCISEABLE EXERCISEABLE / UNEXERCISEABLE
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE(#) REALIZED EXERCISEABLE UNEXERCISEABLE EXERCISEABLE UNEXERCISEABLE
- ------------- ----------- --------- ------------ -------------- ------------ --------------
Robert Rudman Nil Nil 264,500 60,500 14,460 Nil
Ian Bateman Nil Nil 64,667 57,833 4,140 Nil
Kevin Carlson Nil Nil 70,667 89,333 4,320 Nil
Shawn Lammers Nil Nil 52,000 50,500 4,860 Nil
===========================================================================================================================
(1) The closing price of the Company's common stock on July 31, 2001 was
$2.36 per share.
There were no options held by the Named Executive Officers that were re-priced
during the most recently completed fiscal year.
MANAGEMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
No management functions of the Company are performed to any substantial degree
by a person other than the directors or senior officers of the Company.
- 17 -
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Robert Rudman, regarding his position with the
Company. The management agreement calls for payment of a base salary of
CDN$273,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
Effective August 1, 2000 Mr. Rudman's salary was increased to CDN$290,000 per
annum.
The agreement with Mr. Rudman requires the Company to pay a termination
allowance in the event of the termination of Mr. Rudman's employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Kevin Carlson, regarding his position with the
Company. The management agreement calls for payment of a base salary of
CDN$140,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
Effective April 1, 2000 Mr. Carlson's salary was increased to CDN$170,000 per
annum due to the assumption of General Manager responsibilities. Effective
August 1, 2000 Mr. Carlson's salary was increased to CDN$200,000 per annum due
to the assumption of additional responsibilities.
The agreement with Mr. Carlson requires the Company to pay a termination
allowance in the event of the termination of Mr. Carlson's employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Ian Bateman, regarding his position with the Company.
The management agreement calls for payment of a base salary of pound sterling
Pound Sterling 67,000 per annum subject to increase as from time to time plus
incentive compensation as determined by the Company's incentive compensation
plan. Effective August 1, 2000, Mr. Bateman's salary was increased to Pound
Sterling 71,000 per annum.
The agreement with Mr. Bateman requires the Company to pay a termination
allowance in the event of the termination of Mr. Bateman's employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Shawn Lammers, regarding his position with the
Company. The management agreement calls for payment of a base salary of
CDN$120,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
Effective August 1, 2000, Mr. Lammers salary was increased to CDN$127,200 per
annum.
- 18 -
The agreement with Mr. Lammers requires the Company to pay a termination
allowance in the event of the termination of Mr. Lammers' employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective January 3, 2001, the Board of Directors of the Company approved a new
management contract with Erwin Bartz regarding his position with the Company.
The management agreement calls for payment of a base salary of CDN$150,000 per
annum subject to increase from time to time plus incentive compensation as
determined by the Company's incentive compensation plan.
The agreement with Mr. Bartz requires the Company to pay a termination allowance
in the event of the termination of Mr. Bartz' employment by the Company except
for just cause. The termination allowance is equal to the annual salary.
Other than as discussed above, the Company has no plans or arrangements in
respect of remuneration received or that may be received by Named Executive
Officers of the Company in fiscal 2001 to compensate such officers in the event
of termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds $100,000 per Named Executive Officer.
OTHER COMPENSATION PLANS APPLICABLE TO DIRECTORS AND EXECUTIVE OFFICERS
Directors and executive officers have received from time to time incentive stock
options to purchase Common Shares as awarded by the Board of Directors in
consultation with the Compensation Committee.
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors. The Board of Directors may award special remuneration to any
director undertaking any special services on behalf of the Company other than
services ordinarily required of a director. Other than indicated below, no
director received and/or accrued any compensation for his services as a
director, including committee participation and/or special assignments.
There are no arrangements or plans in which the Company provides pension,
retirement or similar benefits for directors or executive officers.
The Company has adopted four formal stock incentive plans (collectively, the
"Stock Incentive Plans"), two of which were approved by the Shareholders at the
1998 Annual General Meeting of the Company and two of which were approved by the
Shareholders at the 2000 Annual and Extraordinary General Meeting of the
Company. Two of the Stock Incentive Plans (the "US Stock Incentive Plans")
provide for Awards to employees, directors, officers and consultants of the
Company or of its affiliates (collectively, the "Eligible Employees") who are
resident in the United States and/or subject to taxation in the United States;
the other two (the "Stock Incentive Plan") provide for Awards to all other
Eligible Employees.
- 19 -
The Company has also adopted a formal incentive compensation plan (the "1999
Incentive Compensation Plan") which was approved by the Shareholders at the 2000
Annual and Extraordinary General Meeting of the Company. The 1999 Incentive
Compensation Plan is intended to complement the Company's existing Stock
Incentive Plans and any subsequent stock incentive plans that may be approved by
the Shareholders of the Company. Accordingly, the 1999 Incentive Compensation
Plan does not specify a maximum number of Common Shares of the Company that will
be issuable pursuant to all awards granted under the 1999 Incentive Compensation
Plan, and all options granted under the 1999 Incentive Compensation Plan shall
be subject to the provisions of the Company's existing Stock Incentive Plans and
any subsequent stock incentive plans that may be approved by the Shareholders of
the Company. In granting awards under the 1999 Incentive Compensation Plan, the
Board of Directors follow certain guidelines which take into account after-tax
operating profits after accounting for the cost of capital employed to create
such profits, as suggested by an Economic Value Added ("EVA(TM)") model
developed by Stern, Stewart & Co., a global consulting firm. There are no
incentive awards under the 1999 Incentive Compensation Plan for fiscal 2001
based on the audited consolidated financial statements of the Company for the
financial year ended July 31, 2001.
To date, the Company has granted to Eligible Employees incentive stock options
to purchase Common Shares subject to and in accordance with the prevailing
policies of the stock exchange on which the Company's shares were then listed.
Options are granted based on the assessment by the Company's Board of Directors
and/or Compensation Committee of the optionee's past and present contribution to
the success of the Company. The Company's Common Shares are presently listed for
trading on the Nasdaq Small Cap Market. These options are not transferable and
are exercisable from the date granted until the earliest of (i) such number of
years (up to ten years) from the date of the grant, (ii) 30 days after the
option holder leaves his position with the Company, and (iii) such number of
days following the death of the optionee as is specified in each optionee's
option agreement.
Other than the management agreements, the advisory agreements and the Stock
Incentive Plans and the 1999 Incentive Compensation Plan discussed herein, the
Company presently has no material bonus or profit sharing plans pursuant to
which cash or non-cash compensation is or may be paid to the Company's directors
or executive officers.
SECTION 16(a) REPORTING
Since the Company is a "foreign private issuer", its insiders are exempt from
the reporting requirements of Section 16(a) of the United States Securities
Exchange Act of 1934, as amended (the "1934 Act"). Among other things, Section
16(a) of the 1934 Act requires certain "reporting persons" of any issuer with
any class of equity securities registered under Section 12 of the 1934 Act to
file with the United States Securities and Exchange Commission reports of
ownership and changes in ownership of securities of the registered class.
Reporting persons consist of directors, executive officers and beneficial owners
of more than 10% of the securities of the registered class. The Company is aware
that certain persons who would be subject to such reporting requirements, but
for the fact that the Company is a
- 20 -
"foreign private issuer", have voluntarily filed reports under Section 16(a) of
the 1934 Act during the year ended July 31, 2001. However, the Company is not in
a position to comment on the completeness of such filings.
INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
As at the end of the most recently completed fiscal year, no directors,
executive officers or senior officers were indebted to the Company.
PROPOSAL 5
CONTINUANCE INTO THE YUKON TERRITORY
Shareholder approval as evidenced by a majority of not less than 3/4 of the
votes cast at the Meeting will be sought to approve a special resolution to
continue the Company into the Yukon Territory (the "Continuance") pursuant to
the Business Corporations Act (Yukon Territory). Accordingly, the following
special resolution will be presented for approval at the meeting:
"RESOLVED, AS A SPECIAL RESOLUTION, THAT:
(a) pursuant to Section 37 of the Company Act (British Columbia), the
directors are hereby authorized to apply for a Certificate of
Continuance under Section 190 of the Business Corporations Act
(Yukon Territory);
(b) the Memorandum of the Company be amended by substituting for all
the provisions thereof the provisions set out in the Articles of
Continuance;
(c) any one of the directors or officers be authorized to execute all
documents necessary to complete the application for a Certificate
of Continuance under Section 190 of the Business Corporations Act
(Yukon Territory);
(d) upon enactment by the directors, By-law No. 1, being a by-law
relating generally to the transaction of the business and affairs
of the Company, be and it is hereby sanctioned and confirmed."
In connection with the Continuance, the Company is proposing to adopt Articles
of Continuance that will authorize the Company to issue 200,000,000 Common
Shares without par value and 100,000 Preferred Shares without par value.
Consistent with the current rights attaching to the Common Shares of the
Company, the Articles of Continuance will provide that the holders of the Common
Shares shall be entitled:
(a) to vote at all meetings of shareholders of the Company except
meetings at which only holders of a specified class of shares are
entitled to vote;
- 21 -
(b) to receive, subject to the rights of the holders of another class
of shares, any dividend declared by the Company; and
(c) to receive, subject to the rights of the holders of another class
of shares, the remaining property of the Company on the
liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.
The Articles of Continuance specify the following rights, restrictions,
conditions and limitations for the Preferred Shares:
(a) the Preferred Shares shall be issuable in one or more series;
(b) the directors may by resolution authorize Articles of Amendment of
the Company fixing the number of shares in, and determining the
designation of the shares of, each series of Preferred Shares; and
(c) the directors may by resolution authorize Articles of Amendment of
the Corporation creating, defining and attaching special rights
and restrictions to the shares of each series.
In contrast, under the existing Memorandum and Articles of the Company, the
Company is authorized to issue 200,000,000 Common Shares without par value and
20,000 Preferred Shares with a par value of CDN$1,000 per share. The rights,
restrictions, conditions and limitations attaching to the Preferred Shares under
the existing Articles of the Company were adopted in connection with a specific
equity financing transaction that is no longer relevant as none of the Preferred
Shares remain outstanding.
Management anticipates that the rights, restrictions, conditions and limitations
for the Preferred Shares contemplated by the proposed Articles of Continuance
will provide the Company with considerably more flexibility in negotiating
equity financing for the Company in the future, than currently exists under the
existing Preferred Share structure.
Copies of draft Articles of Continuance and draft By-law No. 1 are attached as
Exhibits "B" and "C" hereto, and shall be available for inspection at the
Registered Office of the Company, 800 - 885 West Georgia Street, Vancouver,
British Columbia, during normal business hours up to and including the date of
the meeting.
The principal purpose for the Company seeking to continue into the Yukon
Territory is that unlike the Company Act (British Columbia) (the "Company Act"),
which requires one director of a company to be ordinarily resident in British
Columbia and a majority of the directors of a company to be residents of Canada,
the Business Corporations Act (Yukon Territory) (the "Yukon Act") has no
residency requirements for directors. The Company wishes to have the flexibility
to attract the best directors possible, without regard to the constraints
imposed by residency requirements.
Management of the Company is of the view that the Yukon Act will provide to
shareholders of the Company substantively the same rights as are available to
- 22 -
shareholders under the Company Act, including rights of dissent and appraisal
and rights to bring derivative actions and oppression actions, and is consistent
with corporate legislation in most other Canadian jurisdictions. The following
is a summary of the differences between the Company Act and the Yukon Act. This
summary is not intended to be exhaustive and shareholders should consult their
legal advisors regarding all of the implications of the Continuance. A copy of
the Yukon Act will be available at the Company's registered office, 800 - 885
West Georgia Street, Vancouver, B.C. V6C 3H1 prior to the meeting and will also
be available at the meeting.
(a) Sale of Company's Undertaking
Under the Company Act the directors of a company may dispose of all or
substantially all of the business or undertaking of the Company only with
shareholder approval by no less than 3/4 of the votes cast by those shareholders
voting in person or by proxy at a general meeting of the Company.
The Yukon Act requires approval of the holders of shares of each class or series
of a corporation represented at a duly called meeting to which are attached not
less than 2/3 of the votes cast by those shareholders voting in person or by
proxy at a general meeting convened to vote upon a sale, lease or exchange of
all or substantially all of the property of the corporation.
(b) Amendments to the Charter Documents of the Company
Any substantive change to the corporate charter of a company under the Company
Act, such as alteration of the restrictions, if any, of the business carried on
by the company, a change in name of the company or an increase or reduction of
the authorized capital of the company requires a special resolution passed by
not less than 3/4 of the votes cast by shareholders voting in person or by proxy
at a general meeting of the company. Other fundamental changes such as an
alteration of the special rights and restrictions attached to issued shares or a
proposed amalgamation or continuation of a company out of the jurisdiction
require a special resolution passed by not less than 3/4 of the votes cast by
the holders of shares of each class entitled to vote at a general meeting of the
company and the holders of all classes of shares adversely affected by an
alteration of special rights and restrictions. As well, the holders of not less
than 10% of a class of shares affected by a change in the special rights and
restrictions attached to a class of shares may apply to the court to have the
resolutions approving the change set aside.
Under the Yukon Act such changes require a resolution passed by not less than
2/3 of the votes cast by shareholders voting on the resolution authorizing the
alteration and, where the rights of the holders of a class of shares are
affected differently by the alteration than those of the holders of other
classes of shares, a resolution passed by not less than 2/3 of the votes cast by
the holders of shares of each class. A resolution to amalgamate a Yukon Act
corporation requires a special resolution passed by the holders of each class of
shares.
- 23 -
(c) Rights of Dissent and Appraisal
The Company Act provides that shareholders who dissent to certain actions being
taken by a company may exercise a right of dissent and require the company to
purchase the shares held by such shareholder at the fair value of such shares.
The dissent right is applicable where the company proposes to:
(i) continue out of the jurisdiction;
(ii) provide financial assistance to a person for the purchase of the
company's shares;
(iii) sell the whole or substantially the whole of the company's
undertaking;
(iv) enter into a statutory amalgamation; or
(v) sell the whole or part of its business or property on
liquidation.
The Yukon Act contains a similar dissent remedy, although the procedure for
exercising this remedy is different than that contained in the Company Act.
(d) Oppression Remedies
Under the Company Act a shareholder of a company has the right to apply to Court
on the grounds that the company is acting or proposes to act in a way that is
prejudicial to the shareholder. On such an application the Court may make such
order as it sees fit including an order to prohibit any act proposed by the
company.
The Yukon Act contains rights that are substantially broader in that they are
available to a larger class of complainants. Under the Yukon Act a shareholder,
former shareholder, director, former director, officer or former officer of a
corporation or any of its affiliates, or any other person who, in the discretion
of a court, is a proper person to seek an oppression remedy may apply to a court
for an order to rectify the matters complained of where in respect of a
corporation or any of its affiliates, any act or omission of the corporation or
its affiliates effects a result, the business or affairs of the corporation or
any of its affiliates are or have been carried on or conducted in a manner, or
the powers of the directors of the corporation or its affiliates are or have
been exercised in a manner that is oppressive or unfairly prejudicial to, or
that unfairly disregards the interests of, any security holder, creditor,
director or officer.
(e) Shareholders Derivative Actions
Under the Company Act a shareholder or director of a company may, with leave of
the Court, bring an action in the name and on behalf of the company to enforce
an obligation owed to the company that could be enforced by the company itself
or to obtain damages for any breach of such obligation.
A broader right to bring a derivative action is contained in the Yukon Act and
this right extends to a shareholder, former shareholder, director, former
director, officer
- 24 -
or former officer of a corporation or its affiliates, and any person who, in the
discretion of the Court, is a proper person to make an application to Court to
bring a derivative action. In addition, the Yukon Act permits derivative actions
to be commenced in the name and on behalf of a corporation or any of its
subsidiaries.
(f) Requisition of Meetings
The Company Act provides that one or more shareholders of a company holding not
less than 5% of the issued voting shares of the company may give notice to the
directors requiring them to call and hold a general meeting within four months.
The Yukon Act permits the holders of not less than 5% of the issued shares that
carry the right to vote at a meeting sought to be held to require the directors
to call and hold a general meeting of a corporation.
(g) Form of Proxy and Information Circular
The Company Act requires a reporting company, such as the Company, to provide
with notice of a general meeting a form of proxy for use by every shareholder
entitled to vote at such meeting as well as an information circular containing
prescribed information regarding the matter to be dealt with at and conduct of
the general meeting.
The Yukon Act contains provisions which likewise require the mandatory
solicitation of proxies and delivery of a management proxy circular.
(h) Place of Meetings
The Company Act of British Columbia requires all meetings of shareholders to be
held in British Columbia unless consent of the Registrar of Companies is
otherwise obtained.
The Yukon Act provides that meetings of shareholders may be held outside the
Yukon where the Articles so provide.
Pursuant to sections 37 and 207 of the Company Act, a shareholder of the Company
may, until two days before the meeting at which the special resolution to
approve the Continuance is proposed to be passed, give the Company a notice of
dissent by registered mail or by delivery addressed to the Company at 800 - 885
West Georgia Street, Vancouver, British Columbia V6C 3H1, Attention: The
President. As a result of giving a notice of dissent, a shareholder may, on
receiving a notice of intention to act from the Company in accordance with
section 207 of the Company Act, require that the Company purchase the shares of
such shareholder in respect of which the notice of dissent was given for their
fair market value.
A vote against the special resolution to approve the Continuance, an abstention
or the execution or exercise of a proxy to vote against the special resolution
to approve the Continuance does not constitute a written objection, but a
shareholder need not vote against such special resolution in order to object.
However, a shareholder who consents to or votes, other than as a proxy for a
shareholder whose proxy required
- 25 -
an affirmative vote, in favour of such special resolution or otherwise acts
inconsistently with the dissent will cease to be entitled to exercise any rights
of dissent.
Prior to the Continuance becoming effective, the Company will send a notice of
intention to act to each of its shareholders who has filed a notice of dissent
stating that the special resolution to approve the Continuance has been passed
and informing the shareholder of its intention to act on such special
resolution. A notice of intention need not be sent to any shareholder who voted
in favour of the special resolution to approve the Continuance or who has
withdrawn his notice of dissent.
Within 14 days of the Company giving notice of intention to act, the dissenting
shareholder is required to send a written notice that he required the Company to
purchase all of the shares of the Company of such shareholder together with the
certificates representing those shares to the Company. Upon delivery of a demand
for payment in accordance with the Company Act, a shareholder is bound to sell
and the Company is bound to purchase the shares subject to the demand for
payment for their fair value, including any appreciation or depreciation in
anticipation of the vote, as of the day before the day on which the special
resolution to approve the Continuance was passed.
A dissenting shareholder who has sent a demand for payment, may apply to the
Court which may:
(a) require the dissenting shareholder to sell and the Company to
purchase the shares in respect of which a demand for payment has
been given;
(b) fix the price and terms of the purchase and sale, or order that
the price and terms be established by arbitration, in either
case, having due regard for the rights of creditors;
(c) join in the application of any other dissenting shareholder who
has delivered a demand for payment; and
(d) make consequential orders and give such directions as it
considers appropriate.
No dissenting shareholder who has delivered a demand for payment may vote or
exercise or assert any rights of a shareholder in respect of the shares for
which a demand for payment has been given, other than the rights to receive
payment for those shares. Until a holder of shares who has delivered a demand
for payment is paid in full, that shareholder may exercise and assert all the
rights of a creditor of the Company. No dissenting shareholder may withdraw his
demand for payment unless the Company consents.
Section 207 of the Company Act requires strict adherence to the procedures set
forth therein and failure to do so may result in the loss of all dissenters'
rights. Accordingly, each shareholder who might desire to exercise dissenter's
rights should
- 26 -
carefully consider and comply with the provisions of that section and consult
his legal advisor.
Management of the Company reserves the right to not submit the resolution
relating to Continuance of the Company under the Yukon Act to the Registrar of
Corporations if management determines that, in the circumstances, it would not
be in the best interests of the Company to do so.
PROPOSAL 6
SHAREHOLDER APPROVAL OF PRIVATE PLACEMENT
Shareholder approval as evidenced by a majority of the votes cast at the Meeting
will be sought to approve the issuance of Common Shares equal to or in excess of
20% of the number of issued and outstanding Common Shares and at a price per
share less than market value, pursuant to Rule 4350 of the Nasdaq Marketplace
Rules ("Rule 4350"). As disclosed in the Company's Annual Report on Form 10-KSB,
the Company expects that it will need to obtain additional debt or equity
financing in order to fund its operations. Management is currently exploring
several possible alternative financing structures, including the possible
issuance and sale of shares of Common Stock, warrants and other convertible
securities. Under certain of the alternatives being considered, the Company may
need to seek shareholder approval pursuant to Rule 4350.
BACKGROUND
Management is currently evaluating the merits of several alternative financing
structures, including the issuance and sale of Common Stock, warrants, and or
other securities which may be convertible into Common Stock. Management cannot
make any assurance that such financing will be available on commercially
reasonable terms, if at all. Management is particularly concerned about the
current uncertainty of the capital markets and the time and expense associated
with attempting to secure financing. Accordingly, to the extent that any such
financing is available at commercially reasonable terms, Management believes it
is appropriate to seek the maximum amount of financing available.
Seeking the maximum amount of financing available at commercially reasonable
terms will provide the Company with several advantages. First it will provide
the greatest flexibility in pursuing various product lines and strategic
relationships. Second, it will allow Management the greatest amount of time to
focus on executing the Company's business plan without the added task of seeking
additional funding. Third, it will maximise the Company's negotiating position
with suppliers, customers and strategic partners by limiting the financial
constraints on the Company's bargaining parameters.
In order to induce one or more investors to purchase a large block of Common
Stock or any security which may be converted into Common Stock, Management
believes that it will need to offer its securities at a discount to the trading
price of the Common Stock, calculated on an as converted basis. After
discussions with the company's financial advisors and a review of prior similar
transactions recently completed by other entities, Management believe that this
discount will be in the range of 10-20%.
- 27 -
There can be no assurances that the financing will be completed in whole or in
part. It is possible that the financing, if successfully consummated, might
close in several tranches over the next two to six months, although the
financing may take more time given the prevailing market conditions. The Company
intends to use the proceeds primarily for general corporate purposes, including
working capital.
RULE 4350 OF THE NASDAQ MARKETPLACE RULES
Rule 4350 sets forth certain corporate governance standards for issuers, such as
the Company, whose shares are listed on the Nasdaq SmallCap Market. Rule 4350
requires, among other things, that the Company obtain shareholder approval for
the sale or issuance in a transaction, other than a public offering for cash, of
a number of shares of common stock (or securities convertible into or
exchangeable for common stock, such as the warrants) equal to or in excess of
20% of the number of shares of common stock outstanding prior to such
transaction at a price per share less than market value. Accordingly, in any
transaction other than a public offering, unless the Company obtains shareholder
approval, the Company will be limited to issuing not more than 3,030,357 Common
Shares at a price of less than market value. Such amount represents 19.99% of
the 15,159,369 issued and outstanding Common Shares as at October 15, 2001. If
the Company sells convertible securities, such as warrants, the Company must
include the maximum number of shares of Common Stock that could be issued for
less than market value together all Common Shares issued for less than market
value. For example, if the Company sold units consisting of one Common Share and
one warrant, both at a price less than market value, the total number of such
units will be limited to 1,515,178, unless shareholder approval is obtained.
RECOMMENDATION OF THE BOARD OF DIRECTORS
As indicated above, the affirmative vote of a majority of the votes cast for and
against this proposal by the Shareholders at the Meeting, in person or by proxy,
may be required depending on the final terms of the possible. In order to
maximise Management's flexibility in negotiating the best possible terms,
consistent with the Company's financing requirements, the Board of Directors
proposes that the Shareholders approve of a transaction within an estimated
range. To the extent that the terms of the financing have been finalized or
narrowed prior to the Meeting, Management will present such final terms or
narrowed estimates. In such event, the resolution to be presented to the
Shareholders for consideration may be modified to reflect such final terms or
narrowed estimates.
The Board of Directors believes that the approval by the Shareholders of the
issuance of the Common Stock will be in the best interests of the Company and
its Shareholders, as the private placement financing is critical to the Company,
in order to fund operations. The Board of Directors recommends a vote "FOR"
approval of the resolution below. This will allow Management the flexibility to
negotiate the most advantageous structure, terms and conditions to the extent a
financing is available at commercially reasonable terms.
- 28 -
"BE IT RESOLVED THAT: As required by Nasdaq Rule 4350, the Shareholders hereby
approve of the sale and issuance of a number of shares Common Stock (and/or
securities convertible into Common Stock calculated on an as converted basis)
equal to not more than 40% of the issued and outstanding Common Stock on the
date hereof, at a price per share (calculated on an as converted basis) equal to
not less than 80% of the fair market value of the Common Stock, calculated in
accordance with the standards related to Rule 4350, on such terms and conditions
as the Board of Directors deems appropriate; provided, however that such sale
and issuance be completed in one or more tranches prior to the general meeting
of the Shareholders next following the Meeting to be held on December 14, 2001
or any adjournment thereof."
INTEREST OF CERTAIN PERSONS AND OTHERS IN MATTERS TO BE ACTED UPON
Save and except the foregoing, or as disclosed elsewhere in this Proxy Statement
and Information Circular, since August 1, 2000, being the commencement of the
Company's last completed fiscal year, none of the following persons has any
material interest, direct or indirect, in any transaction or proposed
transaction which has materially affected or will materially affect the Company
or any of its subsidiaries:
(a) any director or senior officer of the Company;
(b) any proposed nominee for election as a director of the Company;
(c) any Shareholder holding, directly or indirectly, more than 10% of
the voting rights attached to all the shares of the Company; and
(d) any associate or affiliate of any of the foregoing persons.
AVAILABLE DOCUMENTS
A copy of each of the following documents is available on request from the
Corporate Secretary of the Company at the Company's principal executive office
at #150 - 13151 Vanier Place, Richmond, British Columbia, Canada, V6V 2J1,
telephone (604) 276-9884:
(1) the Company's latest Annual Report on Form 10-KSB filed under the
United States Securities Exchange Act of 1934 which report is
also filed with the British Columbia Securities Commission and
serves as an annual information form pursuant to British Columbia
securities laws and policies;
(2) the comparative financial statements of the Company for the
Company's most recently completed fiscal year in respect of which
such financial statements have been issued together with the
accompanying report of the auditors and any interim financial
statements of the Company required by law and issued subsequent
to such comparative financial statements; and
- 29 -
(3) the Information Circular of the Company dated as of October 27,
2000 in connection with the Annual and Extraordinary General
Meeting of Shareholders held on December 5, 2000;
subject to (i) in the case of persons who are not securities holders of the
Company, the payment of a reasonable charge and (ii) in any event, that the
Company may require payment of a reasonable charge for exhibits to the annual
Report on Form 10-KSB.
APPROVAL OF THE BOARD OF DIRECTORS
The contents of this Proxy Statement and Information Circular have been approved
and the mailing thereof to the Shareholders of the Company has been authorized
by the Board of Directors of the Company.
ANNUAL REPORT
The Annual Report to the Shareholders of the Company for the fiscal year ended
July 31, 2001, is being mailed to the Shareholders concurrently herewith, but
such report is not incorporated into this Proxy Statement and Information
Circular and is not deemed to be part of the proxy solicitation materials.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware of
any matters other than those set forth herein and in the Notice of Annual and
Extraordinary General Meeting of Shareholders that will come before the Meeting.
Should any other matters arise requiring the vote of Shareholders, it is
intended that proxies will be voted in respect thereto in accordance with the
best judgement of the person or persons voting the proxies.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
All proposals of Shareholders intended to be included in our proxy statement and
form of proxy relating to our annual meeting of Shareholders for the year ending
July 31, 2002 (the "2002 Annual Meeting") must be received by the Company no
later than July 8, 2002 (assuming that the 2002 Annual Meeting is held on a date
that is within 30 days from the anniversary date of our annual and special
meeting of shareholders to be held on December 14, 2001). All such proposals
must comply with the requirements of Regulation 14A of the Securities Exchange
Act of 1934, as amended. Further, assuming that the Company is continued under
the laws of the Yukon Territory, Shareholders should refer to section 138 of the
Business Corporations Act (Yukon) which sets forth specific requirements and
limitations applicable to nominations and proposals at annual meetings of
Shareholders.
If the Company does not proceed with the proposed continuance under the laws of
the Yukon Territory, the Company and its Shareholders will remain subject to the
requirements and limitations applicable to nominations and proposals at annual
- 30 -
general meetings of Shareholders set forth in sections 147 and 156 of the
Company Act (British Columbia).
For any shareholder proposal that is not submitted for inclusion in our proxy
statement and form of proxy relating to the 2002 Annual Meeting pursuant to the
processes of Rule 14a-8 of the Securities Exchange Act of 1934, notice of such
proposal must be received by our company no later than June 10, 2002 (assuming
that the 2002 Annual Meeting is held on a date that is within 30 days from the
date of our annual and special meeting of shareholders to be held on December
14, 2001); otherwise, we may exercise, pursuant to Rule 14a-4(c)(1) under the
Securities Exchange Act of 1934, discretionary voting authority under proxies it
solicits for the 2002 Annual Meeting.
All shareholder proposals, notices and requests should be made in writing and
sent via registered, certified or express mail, to our company's principal
offices at Suite #150, 13151 Vanier Place, Richmond, British Columbia, Canada
V6V 2J1.
With respect to business to be brought before the 2001 Annual Meeting to be held
on December 14, 2001, we have not received any notices from shareholders that we
were required to include in this proxy statement.
Please return your proxy as soon as possible. Unless a quorum, consisting of at
least one tenth of the outstanding shares entitled to vote, is represented at
the meeting no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed envelope. Please act promptly to ensure that you will
be represented at this important Meeting.
DATED at Richmond, British Columbia this 5th day of November, 2001.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT V. RUDMAN
- --------------------
ROBERT V. RUDMAN
PRESIDENT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
EXHIBIT "A"
SMARTIRE SYSTEMS INC.
(the "Company")
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Board of Directors to be known as the Audit
Committee. The Audit Committee shall be composed of a majority of directors who
are independent of the management of the Company and are free of any
relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a committee member.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Company's directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate internal controls and accounting,
internal and financial reporting practices of the Company, and the quality and
integrity of the financial reports of the Company. In so doing, it is the
responsibility of the Audit Committee to maintain free and open means of
communication between the directors, the independent auditors, and the financial
management of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the Company are in accordance with all
requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
- - Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its divisions
and subsidiaries as required.
- - Meet with the independent auditors and financial management of the Company
to review the scope of the proposed audit for the current year and the
audit procedures to be utilized, and at the conclusion thereof review such
audit, including any comments or recommendations of the independent
auditors.
- - Review with the independent auditors, and the Company's financial and
accounting personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company, and elicit any recommendations for the
improvement of such internal control procedures or particular areas where
new or more detailed controls or procedures are desirable. Particular
emphasis should be given to the adequacy of such internal controls to
expose any payments, transactions, or procedures that might be deemed
illegal or otherwise improper. Further, the Committee periodically should
review Company policy statements to determine their adherence to the code
of conduct.
- 2 -
- - Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the shareholders. Any changes
in accounting principles should be reviewed.
- - Provide sufficient opportunity for the independent auditors to meet with
the members of the Audit Committee without members of management present.
Among the items to be discussed in these meetings are the independent
auditors' evaluation of the Company's financial, accounting, and auditing
personnel, and the cooperation that the independent auditors received
during the course of the audit.
- - Review accounting and financial human resources and succession planning
within the Company.
- - Submit the minutes of all meetings of the Audit Committee to, or discuss
the matters discussed at each committee meeting with, the Board of
Directors.
- - Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
- - Review accounting practices and policies and any changes or proposed
changes to such practices and policies to determine appropriateness,
conformity to GAAP and compliance with the laws and regulations.
- - Review drafts of all financial statements and management discussion and
analysis section of all regulatory filings before submission to the Board.
- - Review compliance with applicable laws, regulations and guidelines related
to financial reporting.
EXHIBIT "B"
YUKON FORM 3-01
JUSTICE ARTICLES OF CONTINUANCE
BUSINESS CORPORATIONS ACT
(SECTION 190)
- --------------------------------------------------------------------------------
1. Name of Corporation:
SMARTIRE SYSTEMS INC.
- --------------------------------------------------------------------------------
2. The classes and any maximum number of shares that the Corporation is
authorized to issue:
See attached Schedule "A".
- --------------------------------------------------------------------------------
3. Restrictions, if any, on share transfers:
N/A
- --------------------------------------------------------------------------------
4. Number (or minimum or maximum number) of Directors:
Minimum of three and a maximum of twenty.
- --------------------------------------------------------------------------------
5. Restrictions if any on businesses the Corporation may carry on:
The Corporation is restricted from carrying on the business of a
railway, steamship, air transport, canal, telegraph, telephone or
irrigation company.
- --------------------------------------------------------------------------------
6. If change of name effected, previous name:
Name change from TTC/Truck Tech Corp. to UniComm Signal Inc. effective
April 13, 1995; Name change from UniComm Signal Inc. to SmarTire Systems
Inc. effective December 24, 1997
- --------------------------------------------------------------------------------
7. Details of Incorporation:
British Columbia, September 8, 1987, Incorporation Number 332869
- --------------------------------------------------------------------------------
8. Other provisions if any:
(a) Shareholders meetings may be held in Vancouver or Richmond,
British Columbia; and
(b) The directors may, between annual meetings, appoint one or more
additional directors of the Corporation, to serve until the next
annual meeting, but the number of additional directors shall not
at any time exceed one-third of the number of directors who held
office at the expiration of the last annual meeting of the
Corporation.
- --------------------------------------------------------------------------------
9. Date Signature Title
- --------------------------------------------------------------------------------
SCHEDULE "A"
TO THE ARTICLES OF CONTINUANCE OF
SMARTIRE SYSTEMS INC.
The Corporation is authorized to issue 200,000,000 common shares without par
value and 100,000 Preferred Shares without par value, which have the following
rights and conditions:
COMMON SHARES
The holders of the common shares shall be entitled:
(a) To vote at all meetings of shareholders of the Corporation except
meetings at which only holders of a specified class of shares are
entitled to vote;
(b) To receive, subject to the rights of the holders of another class of
shares, any dividend declared by the Corporation; and
(c) To receive, subject to the rights of the holders of another class of
shares, the remaining property of the Corporation on the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary.
PREFERRED SHARES ISSUABLE IN SERIES
The Preferred Shares of the Corporation shall have the rights and shall be
subject to the restrictions, conditions and limitations as follows:
(a) The Corporation may issue Preferred Shares in one or more series;
(b) The directors may by resolution authorize Articles of Amendment of the
Corporation fixing the number of shares in, and determining the
designation of the shares of, each series of Preferred Shares;
(c) The directors may by resolution authorize Articles of Amendment of the
Corporation creating, defining and attaching special rights and
restrictions to the shares of each series.
EXHIBIT "C"
BY-LAW NO. 1
A BY-LAW RELATING GENERALLY TO
THE TRANSACTION OF THE BUSINESS AND AFFAIRS OF
SMARTIRE SYSTEMS INC.
CONTENTS
ONE INTERPRETATION
TWO BUSINESS OF THE CORPORATION
THREE BORROWING AND SECURITY
FOUR DIRECTORS
FIVE COMMITTEES
SIX OFFICERS
SEVEN CONFLICT OF INTEREST AND PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
EIGHT SHARES
NINE DIVIDENDS AND RIGHTS
TEN MEETINGS OF SHAREHOLDERS
ELEVEN DIVISIONS AND DEPARTMENTS
TWELVE INFORMATION AVAILABLE TO SHAREHOLDERS
THIRTEEN NOTICES
FOURTEEN EFFECTIVE DATE AND REPEAL
BE IT ENACTED AS A BY-LAW OF
SMARTIRE SYSTEMS INC.
(hereinafter called the "Corporation") as follows:
SECTION ONE
INTERPRETATION
1.01 Definitions
In the by-laws of the Corporation, unless the context otherwise
requires:
"Act" means the Business Corporations Act of the Yukon Territory and any
statute that may be substituted therefor, as from time to time amended;
"appoint" includes "elect" and vise versa;
"Articles" means the Articles of Continuance of the Corporation as from
time to time amended or restated;
"board" means the board of Directors of the Corporation;
"by-laws" mean this by-law and all other by-laws of the Corporation from
time to time in force and effect;
"meeting of shareholders" includes an annual meeting of shareholders and
a special meeting of shareholders;
"special meeting of shareholders" includes a meeting of any class or
classes of shareholders and a special meeting of all shareholders
entitled to vote at an annual meeting of shareholders;
"non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act Yukon Territory;
"ordinary resolution" means a resolution passed by a majority of the
votes cast by the shareholders who voted, either in person or by proxy,
in respect of the resolution;
"recorded address" means in the case of a shareholder his or her address
as recorded in the securities register; and in the case of joint
shareholders the address appearing in the securities register in respect
of such joint holding or the first address so appearing if there is more
than one; and in the case of a director, officer, auditor or member of a
committee of the board, his or her latest address as recorded in the
records of the Corporation;
"signing officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the Corporation by Clause 2.03
or by a resolution passed pursuant thereto.
- 2 -
Save as aforesaid, words and expressions defined in the Act have the same
meaning when used herein; and words importing the singular number include the
plural and vice versa; words importing gender include the masculine, feminine
and neuter genders, and words importing persons include individuals, bodies
corporate, partnerships, trust and unincorporated organizations.
SECTION TWO
BUSINESS OF THE CORPORATION
2.01 REGISTERED OFFICE, RECORDS OFFICE AND ADDRESS FOR SERVICE
Until changed in accordance with the Act, the registered office of the
Corporation, the designated records office (if separate from the registered
office) of the Corporation and the post office box (if any) designated as the
address for service upon the Corporation by mail shall initially be at the
address or addresses in the Yukon Territory specified in the notice thereof
filed with the Articles and thereafter as the board may from time to time
determine.
2.02 FINANCIAL YEAR
The financial year of the Corporation shall end on such date in each
year as the board may from to time by resolution determine.
2.03 EXECUTION OF INSTRUMENTS
Deeds, transfers, assignments, contracts, obligations, certificates and
other instruments may be signed on behalf of the Corporation by at least one
person holding the office of chairman of the board, president, director,
secretary or any other office created by by-laws or by resolution of the board.
In addition, the board may from time to time direct the manner in which the
person or persons by whom any particular instrument or class of instrument may
or shall be signed. Any signing officer may affix the corporate seal to any
instrument requiring the same.
2.04 BANKING ARRANGEMENTS
The banking business of the Corporation including, without limitation,
the borrowing of money and the giving of security therefor, shall be transacted
with such banks, trust companies or other bodies corporate or organizations as
may from time to time be designated by or under the authority of the board. Such
banking business or any part thereof shall be transacted under such agreements,
instructions and delegations of powers as the board may from time to time
prescribe or authorize.
2.05 VOTING RIGHTS IN OTHER BODIES CORPORATE
The signing officers of the Corporation may execute and deliver proxies
and arrange for the issuance of voting certificates or other evidence of the
right to exercise the voting rights attaching to any securities held by the
Corporation. Such instruments, certificates or other evidence shall be in favour
of such person or persons as may be determined by the officers executing such
proxies or arranging for the issuance of voting certificates or such other
evidence of the right to exercise such voting rights. In addition, the board, or
failing the board, the signing officers of the Corporation, may from time to
time
- 3 -
direct the manner in which and the person or persons by whom any particular
voting rights or class of voting rights may or shall be exercised.
SECTION THREE
BORROWING AND SECURITY
3.01 BORROWING POWER
Without limiting the borrowing powers of the Corporation as set forth in
the Act, but subject to the Articles the board may from time to time on behalf
of the Corporation, without authorization of the shareholders:
(a) borrow money upon the credit of the Corporation in such amounts and
on such terms as may be deemed expedient by obtaining loans or
advances or by way of overdraft or otherwise;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether
secured or unsecured, for such sums and at such prices as may be
deemed expedient;
(c) to the extent permitted by the Act, give a guarantee on behalf of
the Corporation to secure performance of any past, present or future
indebtedness, liability or obligation of the Corporation, present or
future; and
(d) delegate to a committee of the board, a director or an officer of
the Corporation all or any of the powers conferred aforesaid or by
the Act to such extent and in such manner as the directors may
determine.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
SECTION FOUR
DIRECTORS
4.01 NUMBER OF DIRECTORS AND QUORUM
Until changed in accordance with the Act, the board shall consist of not
fewer than the minimum and not more than the maximum number of directors
provided in the Articles. The number of directors shall be determined by
ordinary resolution of the shareholders passed at the meeting of shareholders at
which directors are to be elected; provided that the number of directors may not
be less than the minimum number nor more than the maximum number of directors
set out in the Articles. The quorum for the transaction of business at any
meeting of the board shall consist of a majority of the directors.
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4.02 QUALIFICATION
No person shall be qualified for election as a director if he or she is
less than nineteen years of age; if he or she is a minor as defined in the Age
of Majority Act (Yukon Territory); if he or she is a mentally disordered person
as defined in the Mental Health Act (Yukon Territory); if he or she has been
found to be a person of unsound mind by a court elsewhere than in the Yukon
Territory; if he or she is not an individual; or if he or she has the status of
a bankrupt. A director need not be a shareholder.
4.03 CONSENT TO ACT
A person who is elected or appointed a director is not a director
unless:
(a) he or she was present at the meeting when he or she was elected
or appointed and did not refuse to act as a director, or
(b) if he or she was not present at the meeting when he or she was
elected or appointed, he or she consented to act as director in
writing before his or her election or appointment or within 10
days after it, or he or she has acted as a director pursuant to
the election or appointment.
4.04 ELECTION AND TERM
Subject to the Articles or a unanimous shareholder agreement and the
Act, shareholders of the Corporation shall, by ordinary resolution at the first
meeting of shareholders and at each succeeding annual meeting at which an
election of directors is required, elect directors to hold office for a term
expiring not later than the close of the next annual meeting of shareholders
following the election. At each annual meeting of shareholders, all directors
whose term of office has expired or then expires shall retire but, if qualified,
shall be eligible for re-election. A director not elected for an expressly
stated term ceases to hold office at the close of the first annual meeting of
shareholders following his or her election. Notwithstanding the foregoing, if
directors are not elected at a meeting of shareholders, the incumbent directors
continue in office until their successors are elected. The number of directors
to be elected at any such meeting shall be the number of directors whose term of
office has expired or expires unless the directors or the shareholders otherwise
determine. It is not necessary that all the directors elected at a meeting of
shareholders hold office for the same term. If the Articles so provide, the
directors may, between annual meetings of shareholders, appoint one or more
additional directors of the Corporation to serve until the next annual meeting
of shareholders, but the number of additional directors shall not at any time
exceed one-third of the number of directors who held office at the expiration of
the last annual meeting of the Corporation.
4.05 REMOVAL OF DIRECTORS
Subject to the provisions of the Act, the shareholders may by ordinary
resolution passed at a special meeting remove any director or directors from
office and the vacancy created by such removal may be filled at the same meeting
failing which it may be filled by the directors.
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4.06 VACATION OF OFFICE
A director ceases to hold office when: he or she dies; he or she is
removed from office by the shareholders; he or she ceases to be qualified for
election as a director; or his or her written resignation is sent or delivered
to the Corporation; or if a time is specified in such resignation, at the time
so specified, whichever is later.
4.07 VACANCIES
Subject to the Act, a quorum of the board may fill a vacancy in the
board. In the absence of a quorum of the board, the directors then in office
shall forthwith call a special meeting of shareholders to fill the vacancy and
if they fail to call such meeting or if there are no directors then in office,
any shareholder may call the meeting.
4.08 ACTION BY THE BOARD
The board shall manage the business and affairs of the Corporation.
Subject to the Articles, the powers of the board may be exercised by resolution
passed at a meeting at which a quorum is present or by resolution in writing
signed by all the directors who would be entitled to vote on the resolution at a
meeting of the board. Where there is a vacancy in the board, a quorum of
directors may exercise all the powers of the board.
4.09 MEETING BY TELEPHONE
A director may participate in a meeting of the board or of a committee
of the board by means of telephone or other communications facilities that
permit all persons participating in the meeting to hear each other, and a
director participating in a meeting by those means is deemed to be present at
the meeting.
4.10 CALLING OF MEETINGS
(1) Unless all directors waive their right to notice or otherwise agree,
the secretary or a director will give not less than twenty-four hours notice of
any meeting of Directors. Any director may requisition a meeting of Directors by
giving notice. In addition to notices sent out pursuant to Clause 13.01 herein,
notice may be delivered to a director at his or her usual business address
during normal business hours (in which case, such notice will be deemed to have
been received upon delivery), or by e-mail to an e-mail address given by the
Director to the Company.
(2) A Notice of a meeting of directors need not specify the purpose of
or the business to be transacted at the meeting, except where the Act requires
such purpose or business to be specified including any proposal to:
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(a) submit to the shareholders any question or matter requiring
approval of the shareholders;
(b) fill a vacancy among the directors or in the office of auditor;
(c) issue securities;
(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares of the corporation;
(f) pay a commission for the sale of shares of the Corporation;
(g) approve a management proxy circular;
(h) approve any annual financial statements; or
(i) adopt, amend or repeal by-laws.
(3) A director may in any manner waive notice of or otherwise consent to
the meeting of the board; and attendance of a director at a meeting of directors
is a waiver of notice of the meeting, except when a director attends a meeting
for the express purpose of objecting to the transaction of business on the
grounds that the meeting is not lawfully called.
4.11 FIRST MEETING OF NEW BOARD
Provided a quorum of directors is present, the board may without notice
hold a meeting immediately following an annual meeting of shareholders.
4.12 ADJOURNED MEETING
Notice of an adjourned meeting of the board is not required if the time
and place of the adjourned meeting is announced at the original meeting.
4.13 REGULAR MEETING
The board may from time to time appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named. A copy
of any resolution of the board fixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, or
forthwith after such director's appointment, whichever is later, but no other
notice shall be required for any such regular meeting except where the Act or
this by-law requires the purpose thereof or the business to be transacted
thereat to be specified.
4.14 CHAIRMAN
The Chairman of any meeting of the board shall be the first mentioned of
such of the following officers as have been appointed and who is a director and
is present at the meeting: chairman of the board or president. If no such
officer is present, the directors present shall choose one of their number to be
chairman.
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4.15 VOTES TO GOVERN
At all meetings of the board every question shall be decided by a
majority of the votes cast on the question. In case of an equality of votes the
chairman of the meeting shall be entitled to a second or casting vote.
4.16 REMUNERATION AND EXPENSES
The directors shall be paid such remuneration for their services as the
board may from time to time determine. The directors shall also be entitled to
be reimbursed for travelling and other expenses properly incurred by them in
attending meetings of the board or any committee thereof. Nothing herein
contained shall preclude any director from serving the Corporation in any other
capacity and receiving remuneration therefor.
SECTION FIVE
COMMITTEES
5.01 COMMITTEE OF DIRECTORS
The board may appoint a committee of directors, however designated, and
delegate to such committee any of the powers of the board except those which,
under the Act, a committee of directors has no authority to exercise.
5.02 TRANSACTION OF BUSINESS
The powers of a committee of directors may be exercised by meeting at
which a quorum is present or by resolution in writing signed by all members of
such committee who would have been entitled to vote on the resolution at a
meeting of the committee. Meetings of such committee may be held at any place in
or outside Canada.
5.03 PROCEDURE
Unless otherwise determined by the board, each committee shall have the
power to fix its quorum, to elect its chairman and to regulate its procedure.
SECTION SIX
OFFICERS
6.01 APPOINTMENT
Subject to the Articles the board may from time to time appoint a
president, a secretary and such other officer or officers as the board may
determine, including one or more assistants to any of the officers so appointed.
The chairman of the board and the president are required to be directors. One
person may hold more than one office. The board may specify the duties of, and,
in accordance with this by-law and subject to the Act, delegate powers to manage
the business and affairs of the Corporation to such officers.
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6.02 CHAIRMAN OF THE BOARD
The chairman of the board, if any, or in his or her absence, the
president, shall preside as chairman at every meeting of the directors, or if
there is no chairman of the board or neither the chairman of the board nor the
president is present within fifteen minutes of the time appointed for holding
the meeting or is willing to act as chairman or, if the chairman of the board if
any, and the president have advised the secretary that they will not be present
at the meeting, the directors present shall choose one of their number to be
chairman of the meeting.
6.03 PRESIDENT
If appointed, the president shall be the chief operating officer and,
subject to the authority of the board, shall have general supervision of the
business of the Corporation; and he or she shall, subject to the Act have such
other powers and duties as the board may specify.
6.04 SECRETARY
The secretary shall attend and be the secretary of all meetings of the
board, shareholders and committees of the board and shall enter or cause to be
entered in records kept for that purpose in minutes of all proceedings there at;
he or she shall give or cause to be given, as and when instructed, all notices
to shareholders, directors, officers, auditors and members of committees of the
board; he or she shall be the custodian of the stamp or mechanical device
generally used for affixing the corporate seal of the Corporation and of all
books, papers, records, documents and instruments belonging to the Corporation,
except when some other officer or agent has been appointed for that purpose; and
he or she shall, subject to the Act, have such other powers and duties as the
board or the chief executive officer may specify.
6.05 POWERS AND DUTIES OF OTHER OFFICERS
The powers and duties of all other officers shall, subject to the Act,
be such as the terms of their engagement shall for or as the board or (except
for those powers and duties are specified only by the board) the chief executive
officer may specify. 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 board or the chief executive officer otherwise directs.
6.06 VARIATION OF POWERS AND DUTIES
The board and (except as aforesaid) the chief executive officer may from
time to time and subject to the provisions of the Act, vary, add to or limit the
powers and duties of any officer.
6.07 TERM OF OFFICE
The board, in its discretion, may remove any officer of the Corporation,
without prejudice to such officer's rights under any employment contract.
Otherwise each officer appointed by the board shall hold office until his or her
successor is appointed or until his or her earlier resignation.
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6.08 TERMS OF EMPLOYMENT AND REMUNERATION
The terms of employment and the remuneration of officers appointed by
the board shall be settled by the board from time to time.
6.09 AGENTS AND ATTORNEYS
The board shall have power from time to time to appoint agents or
attorneys for the Corporation in or outside Canada with such powers of
management or otherwise (including the power to subdelegate) as may be thought
fit.
6.10 FIDELITY BONDS
The board may require such officers, employees and agents of the
Corporation as the board deems advisable to furnish bonds for the faithful
discharge of their powers and duties, in such form and with such surety as the
board may from time to time determine.
SECTION SEVEN
CONFLICT OF INTEREST AND PROTECTION
OF DIRECTORS, OFFICERS AND OTHERS
7.01 CONFLICT OF INTEREST
A director or officer who is a party to, or who is a director or officer
of or has a material interest in any person who is a party to, a material
contract or proposed material contract with the Corporation shall disclose the
nature and extent of his or her interest at the time and in the manner provided
by the Act. Any such contract or proposed contract shall be referred to the
board or shareholders for approval even if such contract is one that in the
ordinary course of the Corporation's business would not require approval by the
board or shareholders, and a director whose interest in a contract is so
referred to the board shall not vote on any resolution to approve the same
except as provided by the Act.
7.02 LIMITATION OF LIABILITY
Subject to the Act, no director or officer for the time being of the
Corporation shall be liable for the acts, receipts, neglects or defaults of any
other director or officer or employee, or for the joining in any receipt or act
for conformity, or for any loss or damage or expense happening to the
Corporation through the insufficiency or deficiency of title to any property
acquired by the Corporation or for or on behalf of the Corporation or for the
insufficiency or deficiency of any security in or upon which any of the money of
or belonging to the Corporation shall be placed or invested, or for any loss or
damage arising from the bankruptcy, insolvency or tortious act of any person,
firm or corporation including any person, firm or corporation with whom or with
which any moneys, securities or effects shall be lodged or deposited, or for any
loss, conversion, misapplication or misappropriation of or any damage resulting
from any dealing with any moneys, securities or other assets of or belonging to
the Corporation or for any other loss, damage or misfortune whatsoever which may
happen in the execution of the duties of his or her respective office or trust
or in relation thereto unless the same shall happen by or through his or her
failure to exercise the powers and to discharge the duties of his or her office
honestly and in good faith with a view
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to the best interest of the Corporation and to exercise the care, diligence and
skill that a reasonably prudent person would exercise in comparable
circumstances.
7.03 INDEMNITY
Subject to the Act, the Corporation shall indemnify a director or
officer, a former director or officer, and a person who acts or acted at the
Corporation's request as a director or officer of a body corporate of which the
Corporation is or was a shareholder or creditor, and his or her heirs and legal
representatives, against all costs, charges and expenses, including any amount
paid to settle an action or satisfy a judgement, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he or she is made a party by reason of being or having been a director or
officer of the Corporation or such body corporate, if:
(a) he or she acted honestly and in good faith with a view to the
best interests of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she had reasonable
grounds for believing his or her conduct was lawful.
7.04 INSURANCE
The Corporation may, subject to and in accordance with the Act, purchase
and maintain insurance for the benefit of any director or officer as such
against any liability incurred by him.
SECTION EIGHT
SHARES
8.01 ALLOTMENT
Subject to the Articles the board may from time to time allot, or grant
options to purchase, and issue the whole or any part of the authorized and
unissued shares of the Corporation at such time and to such persons and for such
consideration as the board shall determine, provided that no share shall be
issued until it is fully paid as provided by the Act.
8.02 COMMISSIONS
The board may from time to time authorize the Corporation to pay a
reasonable commission to any person in consideration of his or her purchasing or
agreeing to purchase shares of the Corporation, whether from the Corporation or
from any other person, or procuring or agreeing to procure purchaser(s) for such
shares.
8.03 SECURITIES REGISTER
The Corporation shall maintain a securities register in which it records
the securities issued by it in registered form, showing with respect to each
class or series of securities:
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(a) the names, alphabetically arranged, and the latest known address
of each person who is or has been a security holder,
(b) the number of securities held by each security holder, and
(c) the date and particulars of the issue and transfer of each
security.
8.04 TRANSFER AGENTS AND REGISTRARS
The board may from time to time appoint one or more trust companies as
its agent or agents to maintain the central securities register or registers,
and an agent or agents to maintain branch securities registers. Such a person
may be designated as transfer agent or registrar according to his or her
functions and one person may be appointed both registrar and transfer agent. The
board may at any time terminate any such appointment.
8.05 REGISTRATION OF TRANSFER
Subject to the provisions of the Act, no transfer of shares shall be
registered in a securities register except upon presentation of the certificate
representing such shares with a transfer endorsed thereon or delivered therewith
duly executed by the registered holder or by his or her attorney or successor
duly appointed, together with such reasonable assurances or evidence of
signature, identification and authority to transfer as the board may from time
to time prescribe, upon payment of all applicable taxes and any fees prescribed
by the board, upon compliance with such restrictions on transfer as are
authorized by the Articles and upon satisfaction of any lien referred to in
Clause 8.11.
8.06 NON-RECOGNITION OF TRUSTS
Subject to the provisions of the Act, the Corporation may treat as the
absolute owner of a share the person in whose name the share is registered in
the securities register as if that person had full legal capacity and authority
to exercise all rights of ownership, irrespective of any indication to the
contrary through knowledge or notice or description in the Corporation's records
or on the share certificate.
8.07 SHARE CERTIFICATES
Every holder of one or more shares of the Corporation shall be entitled,
at his or her option, to a share certificate, or to a non-transferable written
acknowledgement of his or her right to obtain a share certificate, stating the
name of the person to whom the certificate or acknowledgement was issued, and
the number and class or series of shares held by him as shown on the securities
register. Share certificates and acknowledgments of a shareholder's right to a
share certificate, shall subject to the Act, be in such form as the board shall
from time to time approve. Any share certificate shall be signed in accordance
with Clause 2.03 and need not be under the corporate seal; provided that, unless
the board otherwise determines, certificates representing shares in respect of
which a transfer agent and/or registrar has been appointed shall not be valid
unless countersigned by or on behalf of such transfer agent and/or registrar.
The signature of one other signing officers or, in the case of share
certificates which are not valid unless countersigned by or on behalf of a
transfer agent and/or registrar, the signatures of both signing officers, may be
printed or mechanically reproduced in facsimile upon share certificates and
every such facsimile signature shall for all purposes be deemed to be the
signature of the officer whose
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signature it reproduces and shall be binding upon the Corporation. A share
certificate executed as aforesaid shall be valid notwithstanding that one or
both of the officers whose facsimile signatures appears thereon no longer holds
office at the date of issue of the certificate.
8.08 REPLACEMENT OF SHARE CERTIFICATE
The board or any officer or agent designated by the board may in its or
his or her discretion direct the issue of a new share certificate in lieu of and
upon cancellation of a share certificate that has been mutilated or in
substitution for a share certificate claimed to have been lost, destroyed or
wrongfully taken on payment of a reasonable fee, and on such terms as to
indemnity, reimbursement of expenses and evidence of loss and of title as the
board may from time to time prescribe, whether generally or in any particular
case.
8.09 JOINT SHAREHOLDERS
If two or more persons are registered as joint holders of any share, the
Corporation shall not be bound to issue more than one certificate in respect
thereof, and delivery of such certificate to one of such persons shall be
sufficient delivery to all of them. Any one of such person may give effectual
receipts for the certificate issued in respect thereof or for any dividend,
bonus, return of capital or other money payable or warrant issuable in respect
of such share.
8.10 DECEASED SHAREHOLDER
In the event of the death of a holder, or of one of the joint holders,
of any share, the Corporation shall not be required to make any entry in the
securities register in respect thereof or to make payment of any dividends
thereon except upon production of all such documents as may be required by law
and upon compliance with the reasonable requirements of the Corporation and its
transfer agents.
8.11 LIEN FOR INDEBTEDNESS
If the Articles provide that the Corporation has a lien on shares
registered in the name of a shareholder or his or her legal representative for a
debt of that shareholder to the Corporation, such lien may be enforced, subject
to the Act and to any other provision of the Articles by the sale of the shares
thereby affected or by any other action, suit, remedy or proceeding authorized
or permitted by law or by equity and, pending such enforcement, the Corporation
may refuse to register a transfer of the whole or any part of such shares.
SECTION NINE
DIVIDENDS AND RIGHTS
9.01 DIVIDENDS
Subject to the provisions of the Act, the board may from time to time
declare dividends payable to the shareholders according to their respective
rights and interest in the Corporation. Dividends may be paid in money or
property or by issuing fully paid shares of the Corporation.
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9.02 DIVIDEND CHEQUES
A dividend payable in cash shall be paid by cheque drawn on the
Corporation's banks or one of them 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 his or her recorded
address, 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 recorded address.
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.
9.03 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 or expenses and evidence of non-receipt and of title as the board
may from time to time prescribe, whether generally or any particular case.
9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS
The board may fix in advance a date, preceding by not more than 50 days
the date for the payment of any dividend or the date for the issue of any
warrant or other evidence of 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 receive the right to subscribe for such
securities, provided that if the Corporation is a distributing corporation,
notice of any such record date is given, not less than seven days before such
record date, in the manner provided in the Act. Where no record date is fixed in
advance as aforesaid, the record date for the determination of the persons
entitled to receive payment of any dividend or to receive 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 board.
9.05 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.
SECTION TEN
MEETING OF SHAREHOLDERS
10.01 ANNUAL MEETINGS
Subject to the Act, the annual meeting of shareholders shall be held at
such time in each year as the board may from time to time determine, for the
purpose of consideration of the financial statements and reports required by the
Act to be placed before the annual meeting, electing directors if required,
appointing auditors if required and transacting such other business as may
properly be brought before the meeting.
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10.02 SPECIAL MEETINGS
The board shall have power to call a special meeting of shareholders at
any time.
10.03 PLACE OF MEETINGS
Subject to the Articles of the Corporation, meetings of the shareholders
shall be held at that place determined by the directors.
10.04 NOTICE OF MEETINGS
Notice of the time and place of each meeting of shareholders shall be
given in the manner provided in Clause 13.01 not less than 21 nor more than 50
days before the date of the meeting to each director, to the auditor and to each
shareholder who at the close of business on the record date for notice is
entered in the securities register as the holder of one or more shares carrying
the right to vote at the meeting. Notice of a meeting of shareholders called for
any purpose other than consideration of the financial statements and auditor's
report, election of directors and re-appointment of incumbent auditor shall
state the nature of such business in sufficient detail to permit the shareholder
to form a reasoned judgement thereon and shall state the text of any special
resolution to be submitted to the meeting. A shareholder may in any manner waive
notice of or otherwise consent to a meeting of shareholders.
10.05 RECORD DATE FOR NOTICE
The board may fix in advance a date, preceding the date of any meeting
of shareholders by not more than 50 days and not less than 21 days, a record
date for the determination of the shareholders entitled to notice of meeting,
provided that if the Corporation is a distributing corporation notice of any
such record date shall be given not less than seven days before such record date
in the manner provided in the Act. If no such record date is so fixed, the
record date for the determination of the shareholders entitled to receive notice
of the meeting shall be at the close of business on the day immediately
preceding the day on which the notice is sent or, if no notice is sent, shall be
the day on which the meeting is held.
10.06 LIST OF SHAREHOLDERS ENTITLED TO NOTICE
(1) The Corporation shall prepare a list of shareholders entitled to
receive notice of a meeting, arranged in alphabetical order and showing the
number and class of shares held by each shareholder,
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(a) if a record date with respect to such meeting is fixed under
Section 10.05, not later than ten days after that date; or
(b) if no record date with respect to such meeting is so fixed,
(i) at the close of business on the day immediately preceding
the day on which notice is given, or,
(ii) where no notice is given, the day on which such meeting is
held.
(2) A shareholder may examine any list of shareholders prepared under
subsection (1) of this Section
(a) during usual business hours at the registered office of the
Corporation or at the place where its central securities register
is maintained; and
(b) at the meeting of shareholders to which the list relates.
10.07 MEETINGS WITHOUT NOTICE
A meeting of shareholders may be held without notice at any time and
place permitted by the Act:
(a) if all shareholders entitled to vote thereat are present in
person or represented or if those not present or represented
waive notice of or otherwise consent to such meeting being held,
and
(b) if the auditors and the directors are present or waive notice of
or otherwise consent to such meeting being held;
so long as such shareholders, auditors or directors present are not attending
for the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called. At such a meeting any business
may be transacted which the Corporation at a meeting of shareholders may
transact. If the meeting is held at a place outside the Yukon Territory,
shareholders not present or represented by proxy, but who have waived notice of
or otherwise consented to such meeting, shall also be deemed to have consented
to the meeting being held at such place.
10.08 CHAIRMAN AND SECRETARY
(1) The chairman of the board or, in his or her absence, the president
of the Company, will preside as chairman at every meeting of shareholders.
(2) If, at any meeting:
(a) there is no chairman or president;
(b) the chairman or president is not present within fifteen minutes
after the time appointed for holding the meeting; or
(c) the chairman or president is unwilling to act as chairman,
the shareholders present may choose a chairman for the meeting.
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(3) If the secretary of the Corporation is absent, the chairman shall
appoint some person, who need not be a shareholder, to act as secretary of the
meeting.
10.09 PERSONS ENTITLED TO PRESENT
The only persons entitled to be present at a meeting of shareholders
shall be those entitled to vote thereat, the directors and auditors of the
Corporation and others who, although not entitled to vote, are entitled or
required under any provision of the Act or the Articles or by-laws to be present
at the meeting. Any other person may be admitted only on the invitation of the
Chairman of the meeting or with consent of the meeting.
10.10 QUORUM
Shareholders personally present or represented by proxy, being not less
than two (or, if the Corporation has only one shareholder, one), and who hold or
represent by proxy in the aggregate not less than one-twentieth of the issued
capital of the Corporation entitled to vote, constitute a quorum for the
transaction of business at any meeting of shareholders. If a quorum is present
at the opening of any meeting of shareholders, the shareholders present or
represented may proceed with the business of the meeting notwithstanding that a
quorum is not present throughout the meeting. If a quorum is not present at the
opening of any meeting of shareholders, the shareholders present or represented
may adjourn the meeting to a fixed time and place but may not transact any other
business until a quorum is present.
10.11 RIGHT TO VOTE
Every person named in the list referred to in Clause 10.06 shall be
entitled to vote the shares shown thereon opposite his or her name at the
meeting to which such list relates, except to the extent that:
(a) where the Corporation has fixed a record date in respect of such
meeting, such person has transferred any of his or her shares
after such record date or, where the Corporation has not fixed a
record date in respect of such meeting, such person has
transferred any of his or her shares after the date on which such
list is prepared, and
(b) the transferee, having produced properly endorsed certificates
evidencing such shares or having otherwise established that he or
she owns such shares, has demanded not later than 10 days before
the meeting that his or her name be included in such list.
In any such excepted case the transferee shall be entitled to vote the
transferred shares at such meeting. If the Corporation is not required to
prepare a list under Clause 10.06, subject to the provisions of the Act and this
by-law as to proxies and representatives, at any meeting of shareholders every
person shall be entitled to vote at the meeting who at the time is entered in
the securities register as the holder of one or more shares carrying the right
to vote at such meeting.
10.12 PROXIES AND REPRESENTATIVES
Every shareholder entitled to vote at a meeting of shareholders may
appoint a proxyholder, or one or more alternate proxyholders, who need not be
shareholders, to
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attend and act at the meeting in the manner and to the extent authorized and
with the authority conferred by the proxy. A proxy shall be in writing executed
by the shareholder or his or her attorney and shall conform with the
requirements of the Act. Alternately, every such shareholder which is a body
corporate or association may authorize by resolution of its directors or
governing body an individual, who need not be a shareholder, to represent it at
a meeting of shareholders and such individual may exercise on the shareholders
behalf all the powers it could exercise if it were an individual shareholder.
The authority of such an individual shall be established by depositing with the
Corporation a certified copy of such resolution, or in such other manner as may
be satisfactory to the secretary of the Corporation or the chairman of the
meeting.
10.13 TIME FOR DEPOSIT OF PROXIES
The board may specify in a notice calling a meeting of shareholders a
time, preceding, the time of such meeting or an adjournment thereof by not more
than 48 hours exclusive of non-business days, before which proxies to be used at
such meeting must be deposited. A proxy shall be acted upon only if, prior to
the time so specified, it shall have been deposited with the Corporation or an
agent thereof specified in such notice or, if no such time is specified in such
notice, it has been received by the secretary of the Corporation or by the
chairman of the meeting or any adjournment thereof prior to the time of voting.
10.14 JOINT SHAREHOLDERS
If two or more persons hold shares jointly, any one of them present in
person or represented at a meeting of shareholders may, in the absence of the
other or others, vote the shares; but if two or more of those persons are
present in person or represented and vote, they shall vote as one on the shares
jointly held by them.
10.15 VOTES TO GOVERN
At any meeting of shareholders every question shall, unless otherwise
required by the Articles or by-laws, be determined by the majority of the votes
cast on the question. In the case of an equality of votes either upon show of
hands or upon a poll, the chairman of the meeting shall not be entitled to a
second or casting vote.
10.16 SHOW OF HANDS
Subject to the provisions of the Act, any question at a meeting of
shareholders shall be decided by a show of hands unless a ballot thereon is
required or demanded as hereinafter provided. Upon a show of hands every person
who is present and entitled to vote shall have one vote. Whenever a vote by show
of hands shall have been taken upon a question, unless a ballot thereon is so
required or demanded, a declaration by the chairman of the meeting that the vote
upon the question has been carried or carried by a particular majority or not
carried and an entry to that effect in the minutes of the meeting shall be prima
faci evidence of the fact without proof of the number or proportion of the votes
recorded in favour of or against any resolution or other proceeding in respect
of the said question, and the result of the vote so taken shall be the decision
of the shareholders upon the said question.
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10.17 BALLOTS
On any question proposed for consideration at a meeting of shareholders,
any shareholder or proxyholder entitled to vote at the meeting may require or
demand a ballot, either before or on the declaration of the result of any vote
by show of hands. A ballot so required or demanded shall be taken in such manner
as the chairman shall direct. A requirement or demand for a ballot may be
withdrawn at any time prior to the taking of the ballot. If a ballot is taken
each person present shall be entitled, in respect of the shares which he or she
is entitled to vote at a meeting upon the question, to that number of votes
provided by the Act or the Articles, and the result of the ballot so taken shall
be the decision of the shareholders upon the said question.
10.18 ADMISSION OR REJECTION OF A VOTE
In case of any dispute as to the admission or rejection of a vote, the
chairman shall determine the same and such determination made in good faith
shall be final and conclusive.
10.19 ADJOURNMENT
If a meeting of shareholders is adjourned by one or more adjournments
for an aggregate of less than 30 days, it shall not be necessary to give notice
of the adjourned meeting, other than by announcement at the time of an
adjournment. If a meeting of shareholders is adjourned by one or more
adjournments for an aggregate of 30 days or more, notice of the adjourned
meeting shall be given as for an original meeting.
10.20 RESOLUTION IN WRITING
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.
10.21 ONLY ONE SHAREHOLDER
Where the Corporation has only one shareholder, or only one holder of
any class or series of shares, the shareholder present in person or by proxy
constitutes a meeting.
SECTION ELEVEN
DIVISIONS AND DEPARTMENTS
11.01 CREATION AND CONSOLIDATION OF DIVISIONS
The board may cause the business and operations of the Corporation or
any part thereof to be divided or to be segregated into one or more divisions
upon such basis, including without limitation, character or type of operation,
geographical territory, product manufactured or service rendered, as the board
may consider appropriate in each case. The board may also cause the business and
operations of any such division to be further divided into sub-units to be
consolidated upon such basis as the board may consider appropriate in each case.
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11.02 NAME OF DIVISION
Subject to law, any division or its sub-units may be designated by such
name as the board may from time to time determine and may transact business,
enter into contracts, sign cheques and other documents of any kind and do all
acts and things under such name, Any such contract, cheque or document shall be
binding upon the Corporation as if it has been entered into or signed in the
name of the Corporation.
11.03 OFFICERS OF DIVISION
From time to time the board or, if authorized by the board, the chief
executive officer, may appoint one or more officers for any division, prescribe
their powers and duties and settle their terms of employment and remuneration.
The board or, if authorized by the board, the chief executive officer, may
remove at its or his or her pleasure any officer so appointed without prejudice
to such officer's rights under any employment contract. Officers of divisions or
their sub-units shall not, as such, be officer of the Corporation.
SECTION TWELVE
INFORMATION AVAILABLE TO SHAREHOLDERS
12.01 Except as provided by the Act, no shareholder shall be entitled to
discovery of any information respecting any details or conduct of the
Corporation's business which in the opinion of the directors would be
inexpedient in the interests of the Corporation to communicate to the public.
12.02 The Directors, may, from time to time, subject to the rights conferred by
the Act, determine whether and to what extent and at what time and place and
under what circumstances or regulations the documents, books and registers and
accounting records of the Corporation or any of them shall be open to inspection
of shareholders and no shareholder shall have any right to inspect any document
or book or register or accounting records of the Corporation except as conferred
by statute or authorized by the board of Directors or by a resolution of the
shareholders.
SECTION THIRTEEN
NOTICES
13.01 METHOD OF GIVING NOTICES
Any notice (which term includes any communication or document) to be
given (which term includes sent, delivered or served) pursuant to the Act, the
regulations thereunder, the Articles, the by-laws or otherwise to a shareholder,
director, officer, auditor or member of a committee of the board shall be
sufficiently given if delivered personally to the person to whom it is to be
given or if delivered to his or her recorded address or if mailed to him at his
or her recorded address by prepaid ordinary or air mail or if sent to him at his
or her recorded address by any means of prepaid transmitted or recorded
communication including facsimile transmission. A notice so delivered shall be
deemed to have been given when it is delivered personally or to the recorded
address as aforesaid; a notice so mailed shall be deemed to have been given when
dispatched or delivered to the appropriate communication company or agency or
its representative for dispatch. The
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secretary may change or cause to be changed the recorded address of any
shareholder, director, officer, auditor or member of a committee of the board in
accordance with any information believed by him to be reliable.
13.02 NOTICE TO JOINT SHAREHOLDERS
If two or more persons are registered as joint holders of any share, any
notice shall be addressed to all of such joint holders but notice to one of such
persons shall be sufficient notice to all of them.
13.03 COMPUTATION OF TIME
In computing the date when notice must be given under any provision
requiring a specified number of days' notice of any meeting or other event, the
date of giving the notice shall be excluded and the date of the meeting or other
event shall be included.
13.04 UNDELIVERED NOTICES
If notices given to a shareholder pursuant to Clause 13.01 are returned
on three consecutive occasions because he or she cannot be found, the
Corporation shall not be required to give any further notices to such
shareholder until he or she informs the Corporation in writing of his or her new
address.
13.05 OMISSIONS AND ERRORS
The accidental omission to give any notice to any shareholder, director,
officer, auditor or member of a committee of the board or the non-receipt of any
notice by any such person or any error in any notice not affecting the substance
thereof shall not invalidate any action taken at the meeting held pursuant to
such notice or otherwise founded thereon.
13.06 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW
Every person who, by operation of law, transfer, death of a shareholder
or any other means whatsoever shall become entitled to any share, shall be bound
by every notice in respect of such share which shall have been duly given to the
shareholder from whom he or she derives his or her title to such share prior to
his or her name and address being entered on the securities register (whether
such notice was given before or after happening of the event upon which he or
she became so entitled) and prior to his or her furnishing to the Corporation
the proof of authority or evidence of his or her entitlement prescribed by the
Act.
13.07 WAIVER OF NOTICE
Any shareholder (or his or her duly appointed proxyholder), director,
officer, auditor or member of a committee of the board may at any time waive any
notice, or waive or abridge the time for any notice, required to be given to him
under any provision of the Act, the regulations thereunder, the Articles, the
by-laws or otherwise and such waiver or abridgment shall cure any default in the
giving or in the time of such notice, as the case may be. Any such waiver or
abridgement shall be in writing except a waiver or notice of a meeting of
shareholders or of the board which may be given in any manner.
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SECTION FOURTEEN
EFFECTIVE DATE AND REPEAL
14.01 EFFECTIVE DATE
This by-law shall come into force when made by the board in accordance
with the Act.
14.02 REPEAL
All previous by-laws of the Corporation are repealed as of the coming
into force of this by-law. Such repeal shall not affect the previous operation
of any by-law so repealed or affect the validity of any act done or right,
privilege, obligation or liability acquired or incurred under, or the validity
of any contract or agreement made pursuant to, or the validity of any Articles
(as defined in the Act) or predecessor charter documents of the Corporation
obtained pursuant to, any such by-law prior to its repeal. All officers and
persons acting under any such by-law so repealed shall continue to act as if
appointed under the provisions of this by-law and all resolutions of the
shareholders or the board or a committee of the board with continuing effect
passed under any repealed by-law shall continue to be good and valid except to
the extent inconsistent with this by-law and until amended or repealed.
MADE BY the board the ______ day of _________________, 2001.
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ROBERT RUDMAN,
President, Chairman, Chief Executive Officer and a Director
CONFIRMED by the shareholders in accordance with the Act the ______ day of
___________, 2001.
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KEVIN CARLSON,
Chief Financial Officer, Managing Director, Corporate Secretary and a Director