1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
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Amendment No. 1 to
Annual Report on Form 10-K
on Form 10-K/A
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MARK ONE ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
Commission file number 0-22636
CANMAX INC.
(Exact name of registrant as specified in its charter)
Wyoming 75-2461665
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State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
150 W. CARPENTER FRWY.
IRVING, TEXAS 75039
(Address of principal executive offices)
(Zip Code)
972-541-1600
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Title of each class
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Common Stock, without par value
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements the past 90 days. Yes No X
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amount to this Form 10-K or any amount to this Form 10-K. [ ]
As of September 10, 1998, 6,611,005 shares of Common Stock were
outstanding. The aggregate market value of the 4,546,543 shares of Common
Stock held by nonaffiliates of Canmax Inc. as of such date, approximated
$2,727,925.
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CANMAX INC.
FORM 10-K/A
PAGE
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PART III
Item 10. Directors and Executive Officers of the Registrant................
Item 11. Executive Compensation ...........................................
Item 12. Security Ownership of Certain Beneficial Owners and Management....
Item 13. Certain Relationships and Related Transactions....................
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EXPLANATORY NOTE
This Form 10-K/A amends Items 10, 11, 12 and 13 of Canmax, Inc.'s
("Canmax") Annual Report on Form 10-K for the year ended October 31, 1997. In
that report, these items were to have been incorporated by reference from the
Company's definitive proxy statement which was expected to be filed by
February 28, 1998 which was not timely filed. Items 10, 11, 12 and 13 of
Form 10-K are being filed with the Commission via this 10-K/A.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the current
directors, nominees for director and executive officers of the Company.
NAME AGE POSITION WITH THE COMPANY
- ------------------------ --- ----------------------------------------
Roger D. Bryant 55 President, Chief Executive Officer, and
Director
Debra L. Burgess 40 Executive Vice President, Chief Operating
Officer, Secretary and Director
W. Thomas Rinehart 57 Director
Robert M. Fidler 59 Director
Nick DeMare 43 Director
ROGER D. BRYANT has served as President, Chief Executive Officer and a
director of Canmax since November 15, 1994. Prior to joining Canmax, Mr.
Bryant was President of Network Data Corporation (1993-1994), a private
corporation which specialized in developing software for the convenience
store and retail petroleum industries. Mr. Bryant has also served as
President of Wayne Division, USA (1991-1993), a division of Dresser
Industries Inc., a manufacturer of fuel dispensing equipment. Mr. Bryant
currently serves as a director of Field Point Petroleum Corporation. Mr.
Bryant has extensive knowledge and experience in the software development,
retail petroleum and convenience store industries. Mr. Bryant holds a degree
in electrical engineering.
DEBRA L. BURGESS has served with the Company since 1989 in increasingly
responsible positions. Since November 1994, she has been the Company's Chief
Operating Officer and a director. Ms. Burgess also serves as the Company's
Chief Financial Officer. Ms. Burgess has been the Secretary of the Company
since 1996. Prior to joining Canmax, Ms. Burgess was the Manager of Retail
Automation responsible for the selection and implementation of a retail
automation solution (1981-1989) at Fina Oil and Chemical Company, a retail
petroleum, petrochemical refining and exploration company. Ms. Burgess is a
Certified Public Accountant.
W. THOMAS RINEHART has served as a director of Canmax since May, 1991.
He was co-founder and Executive Vice President of BASS Inc., from June 1981
until his retirement in September 1992. BASS Inc., a private corporation, is
a supplier of retail automation hardware and software to the grocery store
industry. Prior to BASS Inc., Mr. Rinehart was with NCR from 1964 to 1981,
where he held various staff and management positions within its retail
software development divisions. Mr. Rinehart has extensive experience in
software development and retail automation.
ROBERT M. FIDLER has served as a director of Canmax since November 1994.
Mr. Fidler joined Atlantic Richfield Company ("ARCO") in 1960, was a member
of ARCO's executive management team from 1976 to 1994 and was ARCO's manager
of New Marketing Programs from 1985 until his retirement in 1994. Mr. Fidler
has extensive knowledge and experience in managing retail petroleum
operations.
NICK DEMARE, has served as a director of Canmax since January 1991.
Since May, 1991, Mr. DeMare has been the President and Chief Financial
Officer of Chase Management Ltd., where his overall responsibility includes
providing a broad range of administrative, management and financial services
to private and public companies with varied interests in mineral exploration
and development, precious and base metals production, oil and gas, venture
capital and computer software. Mr. DeMare has served and continues to serve
on the boards of a number of Canadian
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public companies and on the board of directors of North Lily Mining Co., a
mining company. Mr. DeMare is a Chartered Accountant (Canada).
SIGNIFICANT EMPLOYEES
A brief description of the business experience and position of certain
significant employees of the Company and its subsidiaries who are not also
directors is provided below.
LYNN G. CHIANESE is Vice President of Customer Services of Canmax Retail
Systems Inc., ("CRSI") and has served in that capacity since April 1993. Ms.
Chianese joined Canmax in September 1986 and has held positions of increasing
responsibility. Prior to joining Canmax, she was the Operations Manager for
Darnell / Darcor, an international manufacturing company.
IVOR J. FLANNERY is Vice President of Advanced Research of CRSI and has
served in that capacity since January 1989. Mr. Flannery joined Canmax in
September 1983 and has held positions of increasing responsibility. Prior to
joining Canmax he was an Advanced Systems Engineer for RIM Technology, a
software development company which developed point of sale systems for the
retail petroleum industry.
RICHARD STEPHENS is Vice President of Development of CRSI and has served
in that capacity since April 1995. Previously, he spent seven years with the
Wayne Division of Dresser Industries Inc., a manufacturer of fuel dispensing
equipment, as Manager--Systems Software, responsible for developing point of
sale systems and applications.
SCOTT R. MATTHEWS is Vice President of Telecommunications
Development/Sales and Marketing and has served in that capacity since April
1998. From February 1996 to March 1998, Mr. Matthews was the Vice President
of Sales and Marketing at Galaxy Communications, Inc., a telecommunications
company. Mr. Matthews previously served as the Director of Sales of ATCALL,
Inc., a telecommunications company.
MICHAEL C.F. MCQUARRIE is the Vice President of Professional Services
and has served in that capacity since March of 1998. Since 1997, Mr.
McQuarrie has also been responsible for overseeing the development of CRSI's
Windows NT based software products. Mr. McQuarrie joined Canmax in 1982 and
has held positions of increasing responsibility.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who own
more than 10% of the Company's common stock to file with the SEC initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and greater than
10% shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) reports they file. To the Company's knowledge,
based solely on the review of the copies of such reports filed during the
fiscal year ended October 31, 1997, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with, except (i) Mr. Roger D. Bryant, Mr. Philip M. Parsons and
Ms. Debra L. Burgess each filed one late report concerning their receipt of
the Performance Warrants, (ii) the Dodge Jones Foundation has not filed a
Form 3 to report their 10% ownership interest in the Company, (iii) neither
Mr. Bernet, Ms. Delia O'Donnell nor the trustee of the voting trust for the
former shareholders of USC have filed Form 3's reporting their receipt of
shares of Company Common Stock on January 30, 1998 as a result of the Merger
Agreement, and (iv) each of the Company's officers and directors filed late
their Form 5 Annual Statement of Beneficial Ownership of Securities Report
that was due on or about December 15, 1997.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by Canmax and its
subsidiaries during the years ended October 31, 1997, 1996 and 1995 for
services in all capacities to each of Canmax's chief executive officer and
the four highest paid executive officers (the "Named Executive Officers") of
Canmax whose total annual salary and bonus exceeded $100,000.
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SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION OPTIONS (#) COMPENSATION (2)
- ---------------------------------- ---- --------- ---------- ------------- ----------- ------------
Roger D. Bryant................. 1997 185,000 -- -- 45,000 538
President and CEO 1996 169,750 73,920 18,733(4) 210,000 --
1995 10,000 -- 35,000 --
Debra L. Burgess................ 1997 140,000 -- -- 35,000 69
Executive Vice President 1996 118,542 40,320 -- 69,000 --
Chief Operating Officer 1995 104,260 4,000 -- 15,800 --
Secretary
Philip M. Parsons(3)............ 1997 125,000 -- -- 25,000 65
Executive Vice President 1996 108,750 36,960 -- 55,000 --
Chief Financial Officer 1995 36,070 4,000 -- 10,000 --
Treasurer
Ivor Flannery................... 1997 110,000 -- -- 23,000 --
Vice President - 1996 94,050 21,056 -- 15,000 --
Advanced Research (5) 1995 91,055 12,750 -- --
Richard Stephens................ 1997 110,000 -- -- 15,000 --
Vice President- 1996 94,000 21,056 -- 20,000 --
Development (5) 1995 52,724 4,500 -- 5,000 --
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(1) Reflects bonus earned during the fiscal year but paid during the next year.
(2) Reflects compensation associated with supplemental long-term disability
insurance.
(3) Mr. Parsons resigned as a director and officer of the Company effective
April 9, 1998.
(4) Reflects compensation associated with relocation expenses incurred by
Mr. Bryant.
(5) Reflects positions held with Canmax's subsidiary, CRSI.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
Mr. Bryant and Ms. Burgess serve as executive officers of CRSI pursuant
to written employment agreements that commenced July 1, 1997 and were amended
effective upon their renewal on July 1, 1998. Each employment agreement
provides for certain benefits and protections upon a "Change of Control,"
which is defined to occur (i) at any time a person becomes a "beneficial
owner" of in excess of thirty percent of the combined voting power of the
outstanding securities of CRSI or Canmax, (ii) if, at any time during the
twenty-four month period following a merger, tender offer, consolidation,
sale of assets or contested election, or any combination thereof, at least a
majority of the Canmax Board shall cease to consist of either (a) directors
who served prior to such transaction or (b) directors whose nomination for
election by the shareholders of Canmax was approved by at least two-thirds of
all directors then serving, or (iii) at any time the shareholders of Canmax
approve an agreement to sell or dispose of all or substantially all of the
assets of CRSI or Canmax. Each employment agreement also permits CRSI or
Canmax to terminate the executive for "Cause", meaning a termination as a
result of (a) acts of dishonesty constituting a felony or intended to result
in substantial gain for personal enrichment at the expense of CRSI or Canmax,
or (b) the willful and continued failure to substantially perform such
person's duties and responsibilities following a demand for substantial
performance by CRSI or Canmax. Each employment agreement prohibits the
executive from engaging in any activities in competition with CRSI or Canmax
during the employment term and prohibits the executive from
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soliciting any employees, customers or clients of Canmax or CRSI during the
2-year period following any voluntary termination by the executive or
termination for Cause.
The July 1, 1997 employment agreements with Mr. Bryant and Ms. Burgess
provided for the issuance of warrants ("1997 Performance Warrants") to each
executive as additional employment compensation. Each 1997 Performance
Warrant expires 10 years from the date of issuance and, prior to the
amendments to the employment agreements and 1997 Performance Warrants
effective July 1, 1998, was exercisable at a price of $2.25 per share, the
closing price of the Canmax Common Stock on July 17, 1997, the date that the
compensation committee approved the issuance of such warrants. The vesting of
the 1997 Performance Warrants was conditioned on the Company's achievement of
certain financial targets or upon the occurrence of a Change of Control. The
1997 Performance Warrants vested on January 30, 1998 as a result of the
Company's issuance of shares of common stock and warrants as consideration
for its acquisition of USCommunication Services, Inc. ("USC"). Effective
July 20, 1998, the Compensation Committee reduced the exercise price of the
1997 Performance Warrants from $2.25 per share to $0.53 per share, the
closing price of the Canmax Common Stock on July 17, 1998, the trading date
preceding the date that the Compensation Committee repriced the 1997
Performance Warrants. In addition, on such date the Compensation Committee
also issued to Mr. Bryant and Ms. Burgess additional performance warrants
(the "1998 Performance Warrants") having an exercise price of $0.53 per share
and a 10 year expiration period, the vesting of which is dependent either
upon the Company's recording of revenues in excess of $50 million in any
period of twelve consecutive months with positive earnings during such
twelve-month period or upon a Change of Control (other than a Change of
Control arising from the Proposed Sale).
Mr. Bryant's employment agreement expires June 30, 2000. Mr. Bryant is
entitled to receive an annual base salary of $200,000 and to participate in
any bonus programs established by the Canmax Board. Pursuant to his
employment agreement, Mr. Bryant has also been granted 1997 Performance
Warrants to acquire 250,000 shares of Canmax Common Stock and 1998
Performance Warrants to acquire an additional 100,000 shares of Canmax Common
Stock. Pursuant to the terms of his agreement, Mr. Bryant may elect to
voluntarily terminate his employment within 90 days following a Change of
Control and receive a lump sum payment equal to one year's base salary. If
Mr. Bryant is terminated during his employment period without Cause, he will
be entitled to continue to receive his base salary and benefits for a period
of two years and an amount equal to any bonus paid during the preceding 12
months (payable in 24 monthly installments) in accordance with CRSI's
standard payroll cycle; provided, however, that such amounts shall be payable
in a lump sum following a Change of Control.
Ms. Burgess' employment agreement expires June 30, 1999. Ms. Burgess is
entitled to receive an annual base salary of $165,000 and to participate in
any bonus programs established by the Canmax Board. Pursuant to her
employment agreement, Ms. Burgess has also been granted 1997 Performance
Warrants to acquire 125,000 shares of Canmax Common Stock and 1998
Performance Warrants to acquire 200,000 shares of Canmax Common Stock.
Pursuant to the terms of her agreement, Ms. Burgess may elect to voluntarily
terminate her employment within 90 days following a Change of Control and
receive a lump sum payment equal to one year's base salary. If Ms. Burgess is
terminated during her employment period without Cause, she will be entitled
to continue to receive her base salary and benefits for a period of one year
and an amount equal to 50% of any bonus paid during the preceding 12 months
(payable in 12 monthly installments) in accordance with CRSI's standard
payroll cycle; provided, however, that such amounts shall be payable in a
lump sum following a Change of Control.
Mr. Parsons was a party to an employment agreement similar to the
agreements of Mr. Bryant and Ms. Burgess, which provided for an annual base
salary of $125,000 and the grant of 1997 Performance Warrants to acquire
100,000 shares of Canmax Common Stock. Mr. Parsons' employment agreement and
1997 Performance Warrants terminated upon his resignation on April 9, 1998.
On June 12, 1998, the Company and CRSI executed employment contracts
with Lynn G. Chianese, Ivor J. Flannery, Richard Stephens and Michael
McQuarrie, each a vice president of CRSI, which requires the Company to give
six months prior written notice of any termination of the employment of each
person without cause. Pursuant to these employment contracts, Mr. McQuarrie
is entitled to receive an annualized base salary of $96,000, Ms. Chianese is
entitled to receive an annualized base salary of $100,000, and Messers.
Flannery and Stephens are each entitled to receive an annualized base salary
of $110,000. In the event the Company terminates any such employee without
cause upon less than six months prior written notice, each such employee
shall be entitled, for a period of six months from the date of delivery of
notice of termination without cause, (i) to continue to receive the base
salary in effect at the time of termination in accordance with the Company's
regular payroll cycle, (ii) to receive monthly payments equal to one-twelfth
of any bonuses paid during the 12-month period preceding the date of
termination, and (iii) to continue to participate in all regular employee
benefit plans of the Company. Each employment contract provides that if such
employee is involuntarily terminated (other than for "cause") in
contemplation of, or within six months following, a Change of
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Control, then the employee shall be entitled to receive a lump sum severance
payment equal to fifty percent (50%) of the employee's annualized base salary
in effect at the time of the involuntary termination plus 50% of any bonuses
paid during the preceding 12 month period. Each employment contract provides
that the employee would also be entitled to continue to participate in any
employee benefit plans for a period of six months following the date of
termination, and that upon a Change of Control any unvested options held by
such employee would be immediately vested and exercisable. In addition, Mr.
Flannery and Mr. Matthews have each been granted 1998 Performance Warrants to
acquire 100,000 shares of Canmax Common Stock.
STOCK OPTIONS
The Board of Directors introduced a stock option plan (the "Stock Option
Plan"), pursuant to a resolution dated March 29, 1990, in the form approved
by Canmax's shareholders at an annual general meeting held March 20, 1990.
The Stock Option Plan authorizes the Directors to grant options to
purchase common shares of Canmax provided that, when exercised, such options
will not exceed 2.3 million shares of Canmax Common Stock and no options will
be granted to any individual director or employee which will, when exercised,
exceed 5% of the issued and outstanding shares of Canmax. The term of any
option granted under the Stock Option Plan is fixed by the Board of Directors
at the time the options are granted, provided that the exercise period may
not be longer than 10 years from the date of granting. The exercise price of
any options granted under the Stock Option Plan is the fair market value at
the date of grant. On February 26, 1998, the Board of Directors increased the
number of shares issuable under the Stock Option Plan from 1.2 million shares
to 2.3 million shares so that stock options previously granted by the Board
in excess of those permitted by the Stock Option Plan could be covered by the
Plan. As of September 14, 1998, 1,121,990 shares of Canmax Common Stock had
been issued under the Stock Option Plan, 1,094,650 shares remain subject to
outstanding options under the Stock Option Plan, and 83,360 shares were
available under the Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
pursuant to Canmax's stock option plans granted to the Named Executive
Officers during fiscal year ended October 31,1997.
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POTENTIAL REALIZABLE
INDIVIDUAL GRANTS
---------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM (1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------- ---------- --------------- -------- ---------- ---------- -----------
Roger D. Bryant........ 5,000 1.88 4/30/02 2,597 5,739
13,333 1.88 4/30/03 8,525 19,340
13,333 1.88 4/30/04 10,204 23,781
13,334 1.88 4/30/05 11,969 28,667
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45,000 17% 33,295 77,527
Debra L. Burgess....... 5,000 2.13 5/11/99 1,092 2,236
5,000 1.88 4/30/02 2,597 5,739
8,333 1.88 4/30/03 5,328 12,087
8,333 1.88 4/30/04 6,378 14,863
8,334 1.88 4/30/05 7,480 17,918
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35,000 13% 22,875 52,843
Philip M. Parsons...... 5,000 1.88 4/30/02 2,597 5,739
6,666 1.88 4/30/03 4,262 9,669
6,667 1.88 4/30/04 5,103 11,891
6,667 1.88 4/30/05 5,984 14,334
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25,000 9% 17,946 41,633
Ivor J. Flannery....... 8,000 2.13 5/11/99 1,746 3,578
5,000 1.88 4/30/03 3,197 7,253
5,000 1.88 4/30/04 3,827 8,918
5,000 1.88 4/30/05 4,488 10,750
-------- ------- -------
23,000 9% 13,258 30,499
Richard Stephens....... 5,000 1.88 4/30/03 3,197 7,253
5,000 1.88 4/30/04 3,827 8,918
5,000 1.88 4/30/05 4,488 10,750
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15,000 6% 11,512 26,921
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(1) Based upon the per share market price on the date of grant and on annual
appreciation of such market price through the expiration date of such
options at the stated rates. These amounts represent assumed rates of
appreciation only and may not necessarily be achieved. Actual gains, if
any, are dependent on the future performance of the Common Stock, as well
as the continued employment of the Named Executives through the vesting
period. The potential realizable values indicated have not taken into
account amounts required to be paid as income tax under the Internal
Revenue Code of 1986, as amended, and any applicable state laws.
No other annual or long-term compensation was received or is receivable
by the executive officers named above in respect of employment in 1997 or
prior years.
The following table sets forth information with respect to each exercise
of stock options during fiscal 1997, by each of the Named Executive Officers
and the number of options held at fiscal year end and the aggregate value of
in-the-money options held at fiscal year end. None of the Named Executive
Officers exercised options in fiscal 1997.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN-THE-MONEY" OPTIONS AT
OPTIONS AT FY-END (#) FY-END ($)
SHARES ACQUIRED ON VALUE REALIZED ----------------------------- -----------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------------ -------------- ----------- ------------- ----------- -------------
Roger D. Bryant...... -- -- 150,000 140,000 -- --
Debra L. Burgess..... -- -- 77,800 50,000 -- --
Philip M. Parsons.... -- -- 45,000 45,000 -- --
Ivor J. Flannery..... -- -- 26,500 22,500 -- --
Richard Stephens..... -- -- 15,000 25,000 -- --
On October 31, 1997, there were 1,017,700 outstanding stock options with
a weighted average exercise price of $2.23 per share.
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table sets forth information with respect to long term
incentive plan awards to the Named Executive Officers during fiscal year
ended October 31, 1997.
ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES UNDERLYING PERFORMANCE OR OTHER PERIOD UNDER NON-STOCK PRICE-BASED
NAME WARRANTS (#) UNTIL MATURATION OR PAYOUT PLANS (#)
- ------------------------------- ---------------------------- --------------------------- ----------------------------
Roger D. Bryant................ 250,000 (1) 250,000
Debra L. Burgess............... 125,000 (1) 125,000
Philip M. Parsons.............. 100,000 (1) 100,000
- -------------------
(1) The long-term incentive plan awards to Mr. Bryant, Ms. Burgess and
Mr. Parsons relate to the 1997 Performance Warrants issued under each of
their employment agreements. See "Employment and Change of Control
Agreements". Under the terms of the 1997 Performance Warrants, vesting of
such warrants is dependent upon the earlier of (i) the earnings per share
of Canmax (after tax) equals or exceeds $0.30 per share during any fiscal
year, (ii) the closing price of the Canmax Common Stock equals or exceeds
$8.00 per share for sixty-five consecutive trading days, or (iii) a Change
of Control.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Canmax has no interlocking relationships involving any of its
Compensation Committee members which would be required by the Commission to
be reported herein, and no officer or employee of Canmax serves on its
Compensation Committee.
COMPENSATION COMMITTEE REPORT
In fiscal 1997, Canmax's Compensation Committee consisted of two outside
directors; Messrs., Fidler, and Rinehart. The Committee was responsible for
determining the compensation of Canmax's executive officers and other key
senior employees, including Roger D. Bryant, Canmax's Chief Executive
Officer, (the "Chief Executive").
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DETERMINATION OF CEO AND EXECUTIVE OFFICER COMPENSATION.
Canmax has strived to structure its executive compensation programs in a
manner designed to attract and retain a talented and capable management team,
and to provide appropriate compensation based on that team's achievement of
financial performance objectives. During fiscal 1997, the Compensation
Committee held primary responsibility for determining the compensation of the
Chief Executive, and for approving the determinations of compensation paid to
other officers and senior executives, as proposed by the Chief Executive.
Compensation is normally paid to the Chief Executive in the form of base
compensation, bonus compensation and the granting of options to buy shares of
Canmax's Common Stock at then prevailing market prices. Each year the Board
of Directors of Canmax sets forth certain financial performance objectives
for Canmax. Canmax's ability to meet such targeted financial goals, and the
Chief Executive's previous base compensation level, are the most important
criteria utilized by the Compensation Committee in determining the
compensation of the Chief Executive, although the Compensation Committee
reviews other factors, including the compensation awarded to chief executive
officers of similar corporations. Based on a review of such criteria, the
Compensation Committee will determine the annual base and bonus compensation
of the Chief Executive. In addition, the Compensation Committee may grant
stock options in order to align the interests of the Chief Executive with
those of the shareholders. With respect to the Chief Executive's compensation
during fiscal 1997, the Compensation Committee primarily considered Canmax's
financial performance and the previously existing compensation level of the
Chief Executive.
Compensation to other executive officers is also provided in the form of
base compensation, bonus compensation and the granting of stock options. Base
compensation is determined based on industry norms associated with the
position held by the executive and the recommendation of the Chief Executive,
while bonus compensation is normally linked to specific shorter-term (e.g.,
one to three years) financial performance objectives. Stock options are
granted to align the interests of the executive officers with those of the
shareholders. The Chief Executive is principally responsible for the
performance assessment of individual executive officers and provides his
recommendations to the Compensation Committee for its review and approval.
Additionally, on July 17, 1997, the Compensation Committee approved
employment agreements for certain executives. The employment agreements
provide for the issuance of warrants to each executive as additional
compensation. The warrants were intended to align the interests of the
executive officers with those of the shareholders by providing incentive
compensation based on the performance of the Company and to retain key
executive management by providing protection against a change in control.
COMPENSATION COMMITTEE:
Robert M. Fidler (Chairman)
W. Thomas Rinehart
STOCK PERFORMANCE GRAPH
Securities and Exchange Commission rules require that a line graph
performance presentation be provided comparing cumulative total shareholder
return with a performance indicator of a broad market index and a nationally
recognized industry index. The following performance graph compares the
cumulative total shareholder return on the Company's stock with the Nasdaq
Stock Market Total Return Index (Nasdaq Index) and the Nasdaq Computer and
Data Processing Services Stocks Total Return Index (Industry Index).
The Company's stock traded on the Nasdaq SmallCap market tier of The
Nasdaq Stock Market from February 10, 1994 through June 8, 1998 on which date
it was delisted from the Nasdaq SmallCap market. The Company's stock
currently trades on the over-the-counter bulletin board. The comparison
assumes that $100 was invested on February 10, 1994 in the Company's shares
and in each of the indices. Past performance is not necessarily an indicator
of future performance.
11
COMPARISON OF THREE YEARS ENDED OCTOBER 31, 1997
CUMULATIVE TOTAL RETURN
CANMAX INC., NASDAQ STOCK MARKET INDEX AND NASDAQ COMPUTER AND DATA PROCESSING
SERVICES INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
CANMAX NASDAQ INDEX INDUSTRY INDEX
------------------ --------------------- -------------------
Feb-94 $ 100.00 $ 100.00 $ 100.00
Oct-95 $ 21.43 $ 132.90 $ 174.99
Oct-96 $ 11.07 $ 156.96 $ 203.20
Oct-97 $ 9.64 $ 206.72 $ 273.71
FEBRUARY 10, 1994 OCTOBER 31, 1995 OCTOBER 31, 1996 OCTOBER 31, 1997
----------------- ---------------- ---------------- ----------------
Canmax Inc. 100 21.43 11.07 9.64
Nasdaq Index 100 132.90 156.96 206.72
Nasdaq Industry Index 100 174.99 203.20 273.71
The data set forth in the above graph and related table was obtained
from the Nasdaq Stock Market. All Canmax share data is based on the last
closing price of the month. The total return calculation is based upon
weighting at the beginning of the period.
COMPENSATION OF DIRECTORS
Each director who is not an officer of the Company receives a fee of
$1,500 for each Board meeting attended in person. Directors are not
compensated for attending committee meetings or participating in meetings by
telephone. Further, all directors participate in the Company's Stock Option
Plan and are awarded non-qualified stock options for 5,000 shares of Common
Stock for service on the Board of Directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 10,
1998, concerning those persons known to Canmax, based on information obtained
from such persons, Canmax's records and schedules required to be filed with
Canmax, with respect to the beneficial ownership of Canmax's Common Stock by
(i) each shareholder known by Canmax to own beneficially 5% or more of such
outstanding Common Stock, (ii) each current director of Canmax and each
nominee for election as a director, (iii) each Named Executive Officer and
(iv) all executive officers and directors of Canmax as a group. Except as
otherwise indicated below, each of the entities or persons named in the table
has sole voting and investment power with respect to all shares of Common
Stock beneficially owned. Effect has been given to shares reserved for
issuance under outstanding stock options and warrants where indicated.
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AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
- ----------------------------------------- ---------------------- -----------
Dodge Jones Foundation 1,000,000 15.1%
400 Pine Street, Suite 900
Abilene, Texas 79601
Joseph E. Canon 1,000,000(2) 15.1%
Dodge Jones Foundation
P.O. Box 176
Abilene, Texas 79601
Founders Equity Group 2,788,364(3) 32.7%
2602 McKinney, Suite 220
Dallas, Texas 75204
Roger D. Bryant (4) 540,000(5) 7.6%
Nick DeMare 46,880(6) *
Chase Management
1090 West Georgia Street, Suite 1305
Vancouver, BC V6E 3V7
W. Thomas Rinehart 101,600(7) 1.5%
700 Freeling Drive
Sarasota, Florida 34242
Debra L. Burgess (4) 274,800(8) 4.0%
Ivor J. Flannery (4) 83,468(9) 1.3%
Robert M. Fidler 25,000(10) *
987 Laguna Road
Pasadena, California 91105
Richard Stephens (4) 25,000(11) *
All Executive Officers and Directors as a 1,096,748(12) 14.5%
group (10 persons)
* Less than 1.0%
(1) Based upon 6,611,005 shares of Canmax Common Stock outstanding as of
September 10, 1998.
(2) Includes 1,000,000 shares held by Dodge Jones Foundation, of which Mr.
Canon serves as the Executive Director. As such, Mr. Canon exercises voting
power over all such shares.
(3) Includes 50,000 shares subject to presently exercisable warrants and
1,875,000 shares subject to presently convertible debentures issued under
the Loan Agreement.
(4) The business address for Canmax executives is 150 West Carpenter Freeway,
Irving, Texas 75039.
(5) Includes 290,000 shares of Common Stock which may be acquired through the
exercise of stock options which are exercisable within 60 days of September
10, 1998 ("Vested Options") and 250,000 shares subject to presently
exercisable warrants.
(6) Includes 36,600 Vested Options.
(7) Includes 35,000 Vested Options.
(8) Includes 127,800 Vested Options and 125,000 shares subject to presently
exercisable warrants.
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(9) Includes 35,250 Vested Options.
(10) Includes 20,000 Vested Options.
(11) Includes 25,000 Vested Options.
(12) Includes 569,650 Vested Options and 375,000 shares subject to presently
exercisable warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the first quarter of 1995, a director, W. Thomas Rinehart
advanced Canmax $250,000. This advance was unsecured and bore interest at
the rate of 10%. The principal balance was due on demand and could be repaid
by Canmax from time to time. Principal payments of $95,765 (together with
accrued interest thereon) were repaid during the six months ended April 30,
1997, which fully satisfied Canmax's obligation.
On April 30, 1997, Founders Equity Group, Inc. ("Founders") acquired
from Electronic Data Systems ("EDS") 863,364 shares of Canmax Common Stock in
a private transaction, in connection with which Canmax agreed to extend to
Founders certain registration rights similar to those previously held by EDS.
On May 9, 1997, Founders exercised its right to demand that Canmax file a
registration statement with regard to all of its shares of Canmax Common
Stock. Under applicable securities laws, Canmax was unable to file the
Founders registration statement until after the filing of a registration
statement relating to the proposed Merger of Canmax with Auto-Gas Systems,
Inc., which merger was subsequently abandoned. Pursuant to the terms of the
registration rights agreement with Founders, Canmax was to have filed a
registration statement on or about July 23, 1997 or incur a registration
penalty of 50,000 shares per month. Founders agreed to extend the
registration obligation until August 26, 1997 in exchange for its receipt of
a warrant to acquire 50,000 shares of Canmax Common Stock at an exercise
price of $2.00 per share. In addition, in May of 1997, Canmax retained
Founders to provide advisory services regarding the proposed Merger with
Auto-Gas Systems, Inc., and agreed to pay to Founders a fee of $25,000 for
such services.
On April 30, 1997, the Dodge Jones Foundation acquired from EDS
1,000,000 shares of Canmax Common Stock in a private transaction, in
connection with which Canmax agreed to extend to the Dodge Jones Foundation
certain registration rights similar to those previously held by EDS.
On October 30, 1997, a shareholder, Founders Equity Group, Inc.
("Founders"), advanced Canmax $100,000. The advance was unsecured and had an
interest rate of 12%. On November 6, 1997, Canmax repaid principal and
interest of $100,230, which fully satisfied Canmax's obligation.
On December 15, 1997, Canmax executed a convertible loan agreement (the
"Original Agreement") with Founders providing for financing of up to $500,000
at an interest rate of 10% per annum. Advances under the Original Agreement
were secured by a lien on all of the Company's assets. Indebtedness
outstanding under the Original Agreement was convertible, at the option of
Founders, into shares of Canmax Common Stock at a conversion price of $1.25
per share, subject to adjustment for certain events, and was redeemable at
the option of Canmax at 110% of par.
On February 11, 1998, Canmax and Founders executed a loan commitment
letter (the "Loan Commitment") which provided for a multiple advance loan of
up to $2 million upon terms similar to the Original Agreement; however,
indebtedness outstanding under the Loan Commitment was convertible into
shares of Canmax Common Stock at a conversion price equal to the average
closing prices of the Canmax Common Stock over the five-day trading period
immediately preceding the date of each advance. As consideration for the
Loan Commitment, Canmax paid a commitment fee of $10,000.
As of March 31, 1998, Founders (and certain of its affiliates) entered
into the First Restated Loan Agreement (the "Loan Agreement") which
consolidated all rights and obligations of Canmax to Founders under the
Original Agreement and the Loan Commitment. Amounts advanced under the Loan
Agreement bear interest at the rate of 12% per annum, are secured by a lien
on all of the Company's assets and are convertible into shares of Canmax
Common Stock, at the option of Founders, at $.80 per share. On August 25,
1998, Founders agreed to release its lien on all of the Company's assets upon
the consummation of the Proposed Sale. As consideration for the release, the
Company agreed, upon the consummation of the Proposed Sale, to repay $1.0
million of the $1.5 million currently outstanding under the Loan Agreement,
and to allow Founders to convert the remaining $500,000 plus all accrued but
unpaid interest outstanding under the Loan Agreement into shares of Canmax
Common Stock at a conversion price of $.50 per share.
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On February 5, 1998, Founders and the Company entered into a financial
consulting agreement pursuant to which Founders agreed to provide financial
advisory and consulting services to the Company, and the Company agreed to
pay to Founders a fee equal to 3% of the value of the consideration received
in any sale or merger of any division or subsidiary of the Company. As a
result of this agreement, Founders will receive $120,000 of the initial
proceeds of the Proposed Sale. Founders has agreed to forego any further
payments that may be attributable to the Company's receipt of deferred
payments in connection with the Proposed Sale.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed
in its behalf by the undersigned thereunto duly authorized.
Canmax Inc.
Date: September 18, 1998
By: /s/ Debra L. Burgess
-------------------------------
Debra L. Burgess
Executive Vice President and
Chief Financial Officer