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 sec.240.14a-11(c) or
sec.240.14a-12
SIDEWARE SYSTEMS INC.
---------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than
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)(4) 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: December 4, 2001
May 11, 2001
Dear Sideware Shareholder:
The annual general meeting for Sideware will be held on June 28, 2001 at
1:00 p.m. at the Reston Hyatt, 1800 Presidents Street, Reston, Virginia.
Like most young hi-tech companies, Sideware faces serious challenges today.
Revenue generation and capital raising are difficult in the current
economic climate. However, we have refined our business model and are
pursuing our goals with optimism.
During the past year, there have been several favourable developments for
Sideware:
- - Director Jay Nussbaum, Oracle Executive Vice President, has
reconstituted our board of directors, bringing on Jack Kemp of
Empower America, John Shoemaker from Sun Microsystems Inc., and Ken
Thornton from IBM.
- - Rahul Bardhan joined Sideware as Chief Technology Officer after six
years at Oracle.
- - Sideware's Enterprise Interaction Suite, Version 3.0 has been
released with Web Collaboration, computer telephony integration and
e-mail management. Version 4.0 is under development and will add
self-service and wireless modules.
- - We have implemented serious cost cutting measures, reduced our staff
by approximately one-half, closed our Vancouver development office
and concentrated our operations in Reston.
- - We have raised $4 million by way of equity private placement.
- - IBM selected Sideware for its e-government business partnership
program.
Our plans for coming months include:
- - We will continue to refine and enhance our products.
- - Our sales efforts will be focussed primarily on two verticals -
public sector and banking/finance/insurance.
- - We are attempting to raise an additional $5 million in share capital.
We have approximately six months cash today and another $5 million
would give us a further estimated six months of cash.
- - We intend to develop our relationships with Sun and IBM.
- - We are searching for a new Chairman/Chief Executive Officer for
Sideware.
- - We are seeking new markets for our products including e-learning and
e-training.
In conclusion, Sideware directors, management and employees are working
hard on your behalf.
If you have any questions regarding the annual general meeting, please
contact Jennifer Burke, Shareholder and Investor Relations:
Telephone: (604) 669-2101, ext 224
Fax: (604) 669-2151
e-mail: jennifer@sideware.com
Yours truly,
SIDEWARE SYSTEMS INC.
Per:
"Grant Sutherland"
Grant Sutherland, Chairman
SIDEWARE SYSTEM INC.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
June 28, 2001
1:00 p.m.
To The Shareholders:
NOTICE IS HEREBY GIVEN that the Annual General Meeting of
Shareholders (the "Meeting") of Sideware Systems Inc.,
("Sideware") will be held on June 28, 2001 at 1:00 p.m. (local
time), at the Hyatt Regency Hotel 1800 Presidents Street, Reston,
Virginia, 20190 USA for the following purposes:
1. To receive the report of the directors;
2. To receive the audited financial statements of Sideware for
the fiscal year ending December 31, 2000;
3. To fix the number of directors at 8;
4. To elect directors for the ensuing year;
5. To appoint the auditor for Sideware, and to authorize the
directors to fix the remuneration to be paid to the auditor;
6. To consider and, if thought fit, to pass a special resolution
approving the continuation of Sideware under the Business
Corporations Act (Yukon);
7. To consider and, if thought fit, to approve the adoption of
Sideware's Stock Option Plan (2001) by a resolution of the
disinterested shareholders, as set forth in the accompanying
Proxy Statement and Information Circular;
8. To consider and, if thought fit, to pass an ordinary
resolution authorizing the directors of Sideware to complete a
private placement or private placements of common shares and
common share purchase warrants or other security convertible to
common shares, not exceeding 15,000,000 shares and 15,000,000
share purchase warrants or other security convertible to common
shares; and
9. To transact such other business as may be brought before the
Meeting.
Only shareholders of record at the close of business on May 16,
2001 will be entitled to notice of and to vote at the Meeting or
any adjournment thereof.
A SHAREHOLDER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS
ENTITLED TO APPOINT A PROXYHOLDER TO ATTEND AND VOTE IN HIS
STEAD. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
WITHIN THE TIME SET OUT IN THE NOTES. AS SET OUT IN THE NOTES,
THE ENCLOSED PROXY IS SOLICITED BY MANAGEMENT,
BUT YOU MAY AMEND IT, IF YOU SO DESIRE, BY STRIKING OUT THE NAMES
LISTED THEREIN AND INSERTING IN THE SPACE PROVIDED THE NAME OF THE
PERSON YOU WISH TO REPRESENT YOU AT THE MEETING. AN ADDRESSED
ENVELOPE, FOR WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES OR CANADA, IS ENCLOSED FOR YOU TO RETURN THE PROXY. SENDING
IN YOUR PROXY WILL NOT PREVENT YOU FROM VOTING YOUR STOCK AT THE
MEETING IF YOU DESIRE TO DO SO, AS YOUR PROXY IS REVOCABLE AT YOUR
OPTION.
TAKE NOTICE THAT PURSUANT TO THE COMPANY ACT OF BRITISH COLUMBIA
YOU MAY UNTIL 2 DAYS PRIOR TO THE MEETING GIVE SIDEWARE A NOTICE
OF DISSENT BY REGISTERED MAIL ADDRESSED TO SIDEWARE SYSTEMS INC.
AT 1600 - 777 DUNSMUIR ST., VANCOUVER, B.C. V6N 1K9 WITH RESPECT
TO THE PROPOSED RESOLUTIONS APPROVING CONTINUATION OF SIDEWARE
UNDER THE BUSINESS CORPORATIONS ACT OF THE YUKON TERRITORY. AS A
RESULT OF GIVING NOTICE OF DISSENT YOU MAY, ON RECEIVING A NOTICE
OF INTENTION TO ACT UNDER SECTION 231 OF THE COMPANY ACT OF
BRITISH COLUMBIA, REQUIRE SIDEWARE TO PURCHASE ALL YOUR SHARES IN
RESPECT OF WHICH THE NOTICE OF DISSENT WAS GIVEN.
For the Board of Directors
SIDEWARE SYSTEMS INC.
GRANT SUTHERLAND
Chairman of the Board
Vancouver, British Columbia
May 11, 2001
SIDEWARE SYSTEMS INC.
------------------------
1810 Samuel Morse Drive
Reston, Virginia, USA 20190-5316
PROXY STATEMENT AND INFORMATION CIRCULAR
FOR ANNUAL GENERAL MEETING OF
SHAREHOLDERS TO BE HELD JUNE 28, 2001
DATE, TIME, AND PLACE OF MEETING
This Proxy Statement and Information Circular, which was mailed
to shareholders on May 28, 2001, is furnished in connection with
the solicitation of proxies by the Board of Directors of Sideware
Systems Inc. ("Sideware"), to be voted at the Annual and
Extraordinary General Meeting of the shareholders of Sideware
(the "Meeting"), which will be held at 1:00 p.m. (local time) on
June 28, 2001 at the Hyatt Regency Hotel 1800 Presidents Street,
Reston, Virginia, 20190 USA for the purposes set forth in the
accompanying Notice of Annual General Meeting.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the accompanying instrument of proxy are
directors or officers of Sideware. A SHAREHOLDER HAS THE RIGHT
TO APPOINT A PERSON TO ATTEND AND ACT FOR HIM ON HIS BEHALF AT
THE MEETING OTHER THAN THE PERSONS NAMED IN THE ENCLOSED
INSTRUMENT OF PROXY. TO EXERCISE THIS RIGHT, A SHAREHOLDER SHALL
STRIKE OUT THE NAMES OF THE PERSONS NAMED IN THE INSTRUMENT OF
PROXY AND INSERT THE NAME OF HIS NOMINEE IN THE BLANK SPACE
PROVIDED, OR COMPLETE ANOTHER INSTRUMENT OF PROXY.
THE COMPLETED INSTRUMENT OF PROXY MUST BE DATED AND SIGNED AND
THE DULY COMPLETED INSTRUMENT OF PROXY MUST BE DEPOSITED AT
SIDEWARE'S TRANSFER AGENT, COMPUTERSHARE INVESTOR SERVICES, INC.,
4TH FLOOR, 510 BURRARD STREET, VANCOUVER, BRITISH COLUMBIA, V6C
3B9, AT LEAST 48 HOURS BEFORE THE TIME OF THE MEETING OR ANY
ADJOURNMENT THEREOF, EXCLUDING SATURDAYS, SUNDAYS AND HOLIDAYS.
The instrument of proxy must be signed by the shareholder or by
his duly authorized attorney. If signed by a duly authorized
attorney, the instrument of proxy must be accompanied by the
original power of attorney or a notarially certified copy
thereof. If the shareholder is a corporation, the instrument of
proxy must be signed by a duly authorized attorney, officer, or
corporate representative, and must be accompanied by the original
power of attorney or document whereby the duly authorized officer
or corporate representative derives his power, as the case may
be, or a notarially certified copy thereof.
The articles of Sideware confer discretionary authority upon the
Chairman of the Meeting to accept proxies which do not strictly
conform to the foregoing requirements and certain other
requirements set forth in the articles.
IN ADDITION TO REVOCATION IN ANY OTHER MANNER PERMITTED BY LAW, A
SHAREHOLDER MAY REVOKE A PROXY BY (A) SIGNING A PROXY BEARING A
LATER DATE AND DEPOSITING IT AT THE PLACE AND WITHIN THE TIME
AFORESAID, (B) SIGNING AND DATING A WRITTEN NOTICE OF REVOCATION
(IN THE SAME MANNER AS THE INSTRUMENT OF PROXY IS REQUIRED TO BE
EXECUTED AS SET OUT IN THE NOTES TO THE INSTRUMENT OF PROXY) AND
EITHER DEPOSITING IT AT THE PLACE AND WITHIN THE TIME AFORESAID
OR WITH THE CHAIRMAN OF THE MEETING ON THE DAY OF THE MEETING OR
ON THE DAY OF ANY ADJOURNMENT THEREOF, OR (C) REGISTERING WITH
THE SCRUTINEER AT THE MEETING AS A SHAREHOLDER PRESENT IN PERSON,
WHEREUPON SUCH PROXY SHALL BE DEEMED TO HAVE BEEN REVOKED.
DISSENTERS' RIGHT OF APPRAISAL
Sideware management will propose special resolutions which
approve continuation of Sideware under the Business Corporations
Act of the Yukon Territory (the "Yukon Resolutions").
Under section 207 of the Company Act of British Columbia (the
"BCCA"), shareholders of Sideware have a dissent right if they
are opposed to the Yukon Resolutions. A shareholder may dissent
only with respect to the common shares in the capital of Sideware
registered in the shareholder's name.
In order to dissent with respect to the Yukon Resolutions, a
shareholder must send to Sideware c/o Suite 1600-777 Dunsmuir
Street, PO Box 10425 Pacific Centre, Vancouver, BC, V7Y 1K4, at
anytime up to 2 days prior to the Meeting, a written notice of
dissent ("Notice of Dissent"). The Notice of Dissent must
identify the resolution, or resolutions, in respect of which the
Notice of Dissent is given.
A vote against the Yukon Resolutions does not constitute written
Notice of Dissent. However, a shareholder need not vote against
a resolution to give a Notice of Dissent in respect of those
resolutions. A shareholder's Notice of Dissent with respect to
the Yukon Resolutions ceases to be effective if the dissenting
shareholder votes in favour of the resolutions, unless the vote
is given solely as a proxy holder for another shareholder whose
proxy required an affirmative vote.
If:
(a) a shareholder gives Notice of Dissent with respect to the
Yukon Resolutions;
(b) the Yukon Resolutions are passed; and
(c) Sideware proposes to act on the authority of the Yukon
Resolutions;
Sideware will give notice to the dissenting shareholder of its
intention to act, and advise the dissenting shareholder of the
rights of dissenting shareholders under section 207 of the BCCA
(the "Sideware Notice").
On receiving the Sideware Notice, a shareholder who delivered a
Notice of Dissent which meets the requirements of the BCCA is
entitled to require Sideware to purchase all of the dissenting
shareholder's shares in respect of which the Notice of Dissent
was given. Such dissenting shareholder must, within fourteen
(14) days of delivery of the Sideware Notice, deliver to Sideware
c/o Suite 1600-777 Dunsmuir Street, PO Box 10425 Pacific Centre,
Vancouver, BC, V7Y 1K4 both a notice stating that the dissenting
shareholder requires Sideware to purchase all of the dissenting
shareholder's shares in respect of which the Notice of Dissent
was given (a "Demand Notice"), and the share certificates
representing all of those shares. Upon delivery of the Demand
Notice and the share certificates, the dissenting shareholder is
bound to sell the shares in respect of which the Demand Notice
was given, and Sideware is bound to purchase those shares.
The price that must be paid to a dissenting shareholder for the
shares in respect of which a Notice of Dissent and Demand Notice
are given is the fair value as of the day before the date on
which the resolution passed, including any appreciation or
depreciation in anticipation of the vote on the resolution.
Every dissenting member who has complied with the dissent
procedures in the BCCA must be paid the same price.
A dissenting shareholder who has complied with the requirements
for the dissent procedure may apply to the court having
jurisdiction to require that Sideware purchase the shares in
respect of which the Notice of Dissent and Demand Notice have
been given, to set the price and terms for the purchase and sale,
or to order that the price and terms be established by
arbitration, in either case having due regard for the rights of
the creditors. The court may allow the dissenting shareholder to
join in the application any other dissenting shareholders that
have complied with the dissent procedure.
2
Section 236 of the BCCA provides that a company must not purchase
any of its shares if, at the time of the proposed purchase, the
company is insolvent, or if the purchase would render the company
insolvent. If the company receives Notices of Dissent and Demand
Notices from a sufficient number of shareholders, it is possible
that Sideware would be unable to meet the solvency tests in the
BCCA. In such case, Sideware's directors may elect to abandon
Sideware's plan to continue the corporation to the Yukon
Territory.
A dissenting shareholder who has complied with the dissent
procedures in the BCCA may not vote or exercise or assert any
rights of a shareholder in respect of the shares for which a
Notice of Dissent and Demand Notice has been given, other than
under section 207 of the BCCA, and may not withdraw the
requirement to purchase the shares, unless Sideware consents.
Until paid in full, the dissenting shareholder may exercise and
assert all rights of a creditor of Sideware.
A dissenting shareholder who fails to comply with the dissent
procedures under the section 207 of the BCCA, loses any right to
make a demand for Sideware to purchase the dissenting
shareholder's shares.
A dissenting shareholder who is ultimately not entitled to be
paid fair value for the dissenting shareholder's shares for any
reason, including as a result of withdrawal of the Notice of
Dissent or Demand Notice, or the failure of the dissenting
shareholder to comply with the dissent procedures under section
207 of the BCCA, shall be reinstated as a holder of common shares
with the number of shares to which the shareholder is entitled.
Otherwise, a dissenting shareholder shall, as at and from the
date the shareholder sends the Demand Notice, cease to have any
rights as a shareholder of Sideware other than to be paid the
fair value of the shares.
The foregoing summary is not meant to provide a comprehensive
statement of the procedures to be followed by a dissenting
shareholder that seeks payment of the fair value of the
shareholder's shares. Section 207 of the BCCA requires strict
adherence to the procedures established therein and failure to do
so may result in the loss of all of a dissenting shareholder's
rights. Accordingly, shareholders who desire to exercise dissent
rights should carefully consider and comply with the provisions
of section 207 of the BCCA and consult a legal advisor.
In order for Sideware to be continued to the Yukon Territory, the
applicable resolution approving continuation must be passed by
not less than three-quarters of the votes cast in respect of the
Yukon Resolutions.
PERSONS MAKING THE SOLICITATION
THE ENCLOSED INSTRUMENT OF PROXY IS SOLICITED BY MANAGEMENT.
Solicitations will be made by mail and possibly supplemented by
telephone or other personal contact to be made without special
compensation by regular officers and employees of Sideware.
Sideware may reimburse shareholders' nominees or agents
(including brokers holding shares on behalf of clients) for the
cost incurred in obtaining authorization from their principals to
execute the instrument of proxy. No solicitation will be made by
specifically engaged employees or soliciting agents. The cost of
solicitation will be borne by Sideware. None of the directors of
Sideware have advised management in writing that they intend to
oppose any action intended to be taken by management as set forth
in this Proxy Statement and Information Circular.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
As disclosed below, certain directors and officers have been
granted options, and may be granted additional options, pursuant
to Sideware's Stock Option Plan (2001).
Other than as disclosed elsewhere in this Information Circular,
none of the directors or officers of Sideware, no proposed
nominee for election as a director of Sideware, none of the
persons who have been
3
directors or officers of Sideware since the
commencement of Sideware's last completed financial year, and no
associate or affiliate of any of the foregoing persons has any
material interest, direct or indirect, by way of beneficial
ownership of securities or otherwise, in any matter to be acted
upon at the Meeting.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record at the close of business on May 16, 2001
will be entitled to vote at the Meeting on the basis of one vote
for each share held. On May 16, 2001, there were 66,116,167
shares of common stock outstanding, held by 411 shareholders of
record. At a general meeting of Sideware shareholders, on a show
of hands, every shareholder present in person shall have one vote
and, on a poll, every shareholder shall have one vote for each
share of which he is the holder.
The following table sets forth certain information regarding the
beneficial ownership of our outstanding common shares as of
February 28, 2001 by (i) our directors and executive officers,
and (ii) all of our directors and executive officers as a group.
To the best of our knowledge, no person other than Grant
Sutherland is the beneficial owner of more than 5% of our issued
and outstanding common shares.
Title Name and Address of Amount and Percent of
of Beneficial Owner Nature of Beneficial Class (1)
Class Ownership
Common James Speros, 2,462,400(2) 3.6%
President, CEO
1810 Samuel Morse Drive
Reston, VA 20190-5316
Common Grant Sutherland, Chairman 4,554,100(3) 6.7%
1600 - 777 Dunsmuir St.
Vancouver, B.C. V7Y 1K4
Common Jay Nussbaum, Director 450,000(4) 0.7%
1910 Oracle Way
Reston, VA 20190
Common Jack Kemp, Director 75,000(5) 0.1%
1701 Pennsylvania Avenue
Washington, DC 20006
Common John Shoemaker, Director 75,000(6) 0.1%
10 Network Circle
MPK 10-212
Menlow Park, CA 94025
Common Peter Kozicki, Director 702,850(7) 1.1%
45 Grovetree Road
Toronto, Ontario M9V 2Y4
Common Edward White, Director 344,530(8) 0.5%
113 - 980 West 1st Street
North Vancouver, BC
V7P 3N4
Common Scott Friedlander, 2,002,300(9) 2.9%
Executive Vice-President
1810 Samuel Morse Drive
Reston, VA 20190-5316
4
Common Rahul Bardhan, Chief 650,000(10) 1.0%
Technology Officer
1810 Samuel Morse Drive
Reston, VA 20190-5316
Common Stewart Walchli, Chief 500,000(11) 0.8%
Financial Officer
1810 Samuel Morse Drive
Reston, VA 20190-5316
Common All Directors and 11,816,180(12) 16.0%
Executive Officers
(1) Percentage ownership figures are calculated using data as at
February 28, 2001. As at February 28, 2001 we had 66,116,167 shares
issued and outstanding. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission
and generally includes voting or investment power with respect to
securities. Shares of Common Stock subject to options or warrants
currently exercisable or convertible, or exercisable or convertible
within 60 days, are deemed outstanding for computing the percentage
of the person or group of persons holding such option or warrant
but are not deemed outstanding for computing the percentage of any
other person. Except as indicated in the footnotes to this table
and pursuant to applicable community property laws, the persons
named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned.
(2) Includes shares issuable under the following securities:
- 625,000 shares issuable under stock options exercisable within 60
days; and
- 1,060,000 shares issuable under outstanding share purchase
warrants exercisable within 60 days.
(3) Includes shares issuable under the following securities:
- 643,000 shares issuable under stock options exercisable within 60
days; and
- 1,310,000 shares issuable under outstanding share purchase
warrants exercisable within 60 days.
(4) Includes shares issuable under the following securities:
- 450,000 shares issuable under stock options exercisable within 60
days.
(5) Includes shares issuable under the following securities:
- 75,000 shares issuable under stock options exercisable within 60
days.
(6) Includes shares issuable under the following securities:
- 75,000 shares issuable under stock options exercisable within 60
days.
(7) Includes shares issuable under the following securities:
- 128,750 shares issuable under stock options exercisable within 60
days.
(8) Includes shares issuable under the following securities:
- 178,750 shares issuable under stock options exercisable within 60
days.
(9) Includes shares issuable under the following securities:
- 2,000,000 shares issuable under stock options exercisable within
60 days.
(10) Includes shares issuable under the following securities:
- 650,000 shares issuable under stock options exercisable within 60
days.
(11) Includes shares issuable under the following securities:
- 500,000 shares issuable under stock options exercisable within 60
days.
(12) Includes shares issuable under the following securities:
- 5,325,500 shares issuable under stock options exercisable within
60 days; and
- 2,370,000 shares issuable under outstanding share purchase
warrants exercisable within 60 days.
PARTICULARS OF MATTERS TO BE ACTED UPON
A. ELECTION OF DIRECTORS
Management intends to propose for adoption an ordinary resolution
that the number of directors of Sideware be fixed at eight.
Advance notice of the Meeting was published pursuant to section
111 of the BCCA in the Vancouver Province on April 26, 2001, and
no nominations for directors were received from the shareholders
of Sideware.
Each director of Sideware is elected annually and holds office
until the next Annual General Meeting of the shareholders unless
that person ceases to be a director before then. In the absence
of instructions to the contrary, the shares represented by proxy
will, on a poll, be voted for the nominees herein listed.
MANAGEMENT DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE
UNABLE TO SERVE AS A DIRECTOR.
5
The following table sets out the names of the persons to be
nominated for election as directors, the positions and offices
which they presently hold with Sideware, and the number of shares
of Sideware which each beneficially owns, directly or indirectly,
or over which control or direction is exercised as of May 11,
2001:
NOMINEES
Name of Age Current Positions with Sideware No. of Shares beneficially
Nominee owned as at May 11, 2001
Age
James L. Speros 42 President and Chief Executive Officer, 737,400
Director
W. Grant Sutherland 54 Chairman, Director 2,601,100
Jay H. Nussbaum 57 Director 0
Jack Kemp 65 Director 0
John Shoemaker 58 Director 0
Kenneth Thornton 59 Director 0
Peter Kozicki 67 None 574,100
Edward White 56 None 165,780
JAMES L. SPEROS. Mr. Speros was appointed Sideware's President
and Chief Executive Officer effective October 15, 2000. Mr.
Speros has also been the President and Chief Operating Officer of
Sideware Corp. since August 5, 1998. From June 1993 to January
1997 Mr. Speros was the President and owner of two professional
sports franchises, the Baltimore Stallions and Montreal Alouettes
of the Canadian Football League. From January 1997 to February
1999 Mr. Speros was the President of Exploration Mirandor, a
mining exploration company. Mr. Speros is also a director of
BrainTech, Inc., a public company trading on the OTC-Bulletin
Board.
W. GRANT SUTHERLAND. Mr. Sutherland has been a director since
May 1993. Since May 3, 1995 Mr. Sutherland has held the position
of Chairman of the Board. Since December 1995 Mr. Sutherland has
also been a director and the Chairman of the Board of BrainTech,
Inc. Mr. Sutherland is a licensed lawyer in the Province of
British Columbia, and has been engaged in the private practice of
law for 29 years. Mr. Sutherland is a partner in the law firm
Sutherland Johnston, but currently devotes the substantial
majority of his time to our affairs.
JAY H. NUSSBAUM. Mr. Nussbaum was appointed a director on June
14, 1999. Mr. Nussbaum is the Executive Vice President of Oracle
Service Industries and a member of the Executive Committee of
Oracle. Mr. Nussbaum joined Oracle after a 24-year career with
Xerox Corp. that culminated with his position as President,
Integrated Systems Operations. While at Xerox, Mr. Nussbaum was
responsible for integration and consulting services in commercial
and federal government markets. Mr. Nussbaum joined Oracle in
1992 as the Senior Vice President and General Manager of what was
then Oracle Federal. Mr. Nussbaum received a bachelor's degree
in business from the University of Maryland. He is a member of
the University's Chancellor's Advisory Board and also serves on
the advisory board of James Madison University. Mr. Nussbaum is
on the board of directors of the Armed Forces Communications and
Electronics Association and is active in several other business
and charitable organizations in the Washington area.
JACK KEMP. Mr. Kemp was appointed a director on February 9,
2001. Mr. Kemp is a co-founder of Empower America, an
organization devoted to ensuring that government actions foster
growth, economic well-being, freedom, and individual
responsibility. In 1996, Mr. Kemp was the Vice-Presidential
candidate for the Republican Party. Prior to founding Empower
America, Mr. Kemp served for four years as U.S. Secretary of
Housing and Urban Development, and for 18 years in the U.S. House of
6
Representatives. Mr. Kemp also serves as a director of Oracle
Corp., Hawk Corporation, Proxicom, Inc., and Speedway Motorsports
Inc.
JOHN SHOEMAKER. Mr. Shoemaker was appointed a director on
February 9, 2001. For the past 10 years, Mr. Shoemaker has held
a variety of senior executive positions with Sun Microsystems.
Since July 2000, he has served as executive vice president of
Sun's systems product group. Prior to joining Sun Microsystems,
Mr. Shoemaker was the senior vice president of electronic
printing and the vice president and general manager of the
document systems business at Xerox Corporation.
KENNETH THORNTON. Mr. Thornton was appointed a director
effective April 1, 2001. Mr. Thornton was previously employed by
IBM, as General Manager of IBM's Public Sector. In this role, he
led IBM's government, education, healthcare and pharmaceuticals
business operations worldwide. Previously, he served as the vice
president and general manager of IBM's Mid-Atlantic Area, where
he was responsible for leading IBM's marketing and services
operations in the Mid-Atlantic states. Prior positions with IBM
include Industry Director of the Public Sector, Regional Manager
of the Atlantic Region, Director of Federal Marketing Operations
and Sales Branch Manager. Mr. Thornton has been a member of the
Internet2 Executive Council, a part of IBM's Worldwide Management
Council, and a member of IBM's Corporate Technology Council.
PETER KOZICKI. Director. Mr. Kozicki was elected a director on
May 3, 1995. Mr. Kozicki is a retired engineer. Prior to his
retirement, Mr. Kozicki was a private engineering consultant for
over 12 years, specializing in the installation of deep
foundations and vertical barriers for containment of hazardous
wastes. He obtained his B.Sc. degree in Civil Engineering from
the University of Saskatchewan and a M.Sc. degree in Soil
Mechanics from the University of Alberta.
EDWARD A. WHITE. Director. Mr. White was appointed a director
on October 14, 1995. Mr. White is a member of the British
Columbia Institute of Chartered Accountants, and practised as a
self-employed chartered accountant for over 20 years. Mr. White
has been a director and officer of Oro Bravo Resource Partners
Ltd. since February 1987, and a director of West African Venture
Exchange Corp. since March 1993. In November 2000, Mr. White
also became a director and Chief Financial Officer of BrainTech,
Inc. Mr. White currently works full time for BrainTech, Inc.
Pursuant to the provisions of the Company Act of British Columbia
Sideware is required to have an audit committee, which is
currently comprised of Edward White, Peter Kozicki and Grant
Sutherland. The Audit Committee has had two meetings subsequent
to December 31, 1999. All members were in attendance. Edward
White and Peter Kozicki are independent directors as defined in
Rule 4200(a)(15) of the NASD listing standards. The Sideware
Board of Directors has adopted an Audit Committee Charter, a copy
of which is attached to this Proxy Statement and Information
Circular. Sideware does not have an Executive Committee. Most
of the proceedings of the Sideware Board of Directors during the
year ended December 31, 2000 were by written consent resolution.
There were five meetings of the Board of Directors, of which four
were conducted by conference telephone. Jay Nussbaum met with
members of management on a regular basis to discuss issues
relating to marketing Sideware products and corporate strategy,
but did not attend the board meetings.
B. APPOINTMENT OF AUDITOR
Sideware's Board of Directors recommends KPMG LLP, Chartered
Accountants, of 900 - 777 Dunsmuir Street, P.O. Box 10426,
Pacific Centre, Vancouver, B.C., V7Y 1K3 for re-appointment as
auditor of Sideware for the ensuing year, at a remuneration to be
fixed by the directors. KPMG LLP was first appointed auditor for
the fiscal year ending April 30, 1995.
7
C. CONTINUATION TO THE YUKON TERRITORY
The shareholders of Sideware will be asked to consider and, if
thought fit, to pass the special resolutions set out below, to
approve and authorize the continuance of Sideware under the
Business Corporations Act (Yukon) (the "YBCA").
Sideware is proposing to continue under the YBCA, as the YBCA
does not have a requirement that a majority of the directors of
Sideware be resident Canadians. Sideware has determined that
continuing under the YBCA will allow Sideware to seek the most
qualified persons to act as directors irrespective of their place
of residence. The slate of directors that management is
nominating for election as directors consists of a majority of
directors that are resident in the United States.
"BE IT RESOLVED AS SPECIAL RESOLUTIONS THAT:
1. THE APPLICATION OF SIDEWARE TO SIDEWARE'S REGISTRAR UNDER
THE COMPANY ACT (BC) FOR AUTHORIZATION TO CONTINUE UNDER THE
BUSINESS CORPORATIONS ACT (YUKON) BE AND IS HEREBY AUTHORIZED
AND APPROVED;
2. THE APPLICATION, PURSUANT TO THE BUSINESS CORPORATIONS ACT
(YUKON), FOR A CERTIFICATE OF CONTINUANCE CONTINUING SIDEWARE AS
IF IT HAD BEEN INCORPORATED THEREUNDER, INCLUDING THE FILING OF
ARTICLES OF CONTINUANCE WHICH WILL AFFECT CHANGES TO THE
CONSTATING DOCUMENTS OF SIDEWARE TO CONFORM TO THE BUSINESS
CORPORATIONS ACT (YUKON), SUCH AS CHANGING THE ADDRESS OF THE
REGISTERED OFFICE TO WHITEHORSE, YUKON TERRITORIES, CANADA, BE
AND IS HEREBY AUTHORIZED AND APPROVED SUBJECT TO RECEIPT BY
SIDEWARE OF ALL REQUIRED REGULATORY APPROVALS;
3. NOTWITHSTANDING THAT THE FOREGOING RESOLUTIONS HAVE BEEN
DULY PASSED BY THE SHAREHOLDERS OF SIDEWARE, THE DIRECTORS OF
SIDEWARE BE AND ARE HEREBY AUTHORIZED AND EMPOWERED TO ABANDON
SIDEWARE'S APPLICATION FOR CONTINUANCE UNDER THE BUSINESS
CORPORATIONS ACT (YUKON) AND TO REVOKE ALL OR ANY ONE OF THESE
RESOLUTIONS AT ANY TIME PRIOR TO THEIR BEING ACTED UPON WITHOUT
FURTHER APPROVAL OF THE SHAREHOLDERS OF SIDEWARE; AND
4. ANY DIRECTOR OR OFFICER OF SIDEWARE BE AND IS HEREBY
AUTHORIZED AND EMPOWERED, ACTING FOR, AND IN THE NAME OF AND ON
BEHALF OF THE NAME OF SIDEWARE, TO EXECUTE OR CAUSE TO BE
EXECUTED, UNDER THE SEAL OF SIDEWARE OR OTHERWISE, AND TO DELIVER
OR CAUSED TO BE DELIVERED, SUCH OTHER DOCUMENTS AND INSTRUMENTS,
AND TO DO OR CAUSE TO BE DONE, SUCH OTHER ACTS AND THINGS, AS IN
THE OPINION OF SUCH ONE DIRECTOR OR OFFICER OF SIDEWARE MAY BE
NECESSARY OR DESIRABLE IN ORDER TO CARRY OUT THE INTENT OF THE
FOREGOING RESOLUTIONS."
(THE ABOVE SPECIAL RESOLUTIONS ARE HEREINAFTER CALLED THE "YUKON
RESOLUTIONS").
The continuation into the Yukon will not affect the operations of
Sideware nor its listing on the Toronto Stock Exchange.
Notwithstanding the continuance of Sideware from the Province of
British Columbia to the Yukon, the BCCA and the YBCA provide that
all the rights of creditors of Sideware against Sideware's
property, rights and assets and all liens on Sideware's property,
rights and assets are unimpaired by the continuation and all the
debts, contracts, liabilities and duties of Sideware from then on
attach to Sideware as continued into the Yukon and continue to be
enforceable against it as if Sideware has remained incorporated
under the BCCA.
The continuance under the YBCA will involve the filing of
Articles of Continuance with the Registrar of Corporations
(Yukon), which will replace Sideware's current Articles of
Incorporation and effect a change in the address of the
registered office of Sideware to Whitehorse, Yukon Territories,
Canada. A copy of the Articles of Continuance will be available
for inspection at 1600-777 Dunsmuir Street, Vancouver, BC V7Y 1K4
during normal business hours prior to the Meeting, and will also
be available for inspection at the Meeting.
8
Even if the Yukon Resolutions are passed and all required
regulatory approvals are given, the directors of Sideware may
abandon Sideware's application for continuance under the YBCA and
revoke the Yukon Resolutions if, among other things, the number
of shares with respect to which notices of dissent are given is,
in the opinion of the Board, unduly detrimental to Sideware or
its shareholders.
In addition to shareholder approval, the continuance of Sideware
under the YBCA is subject to Sideware's receipt of all necessary
regulatory approvals including, without limitation, the
acceptance of the Toronto Stock Exchange.
The following is a comparison of the more relevant sections of
Act (British Columbia) (the "BCCA") and the YBCA.
Dividends
The payment of dividends to the shareholders of Sideware under
both the BCCA and the YBCA is determined by the Board of
Directors from time to time according to any special rights that
may be attached to Sideware's outstanding shares as provided for
in Sideware's constating documents. Under the BCCA the record
date for determining those shareholders of Sideware entitled to
receive the payment of a dividend may be fixed by the Board of
Directors not more than 49 days before the date on which
entitlement to receive a dividend payment occurs whereas under
the YBCA such a record date is limited to not more than 50 days
prior to the date for the payment of any such dividend.
Meetings of Shareholders
Under the BCCA every general meeting of a company incorporated
under the BCCA must be held in the Province of British Columbia
unless, prior to such meeting, the Registrar of Companies for
British Columbia has given consent to the meeting being held
outside of the Province of British Columbia. The YBCA specifies
that general meetings are to be held in the Yukon or at any place
outside the Yukon as may be specified in the articles of
Sideware.
Annual General Meetings of a company under the jurisdiction of
the YBCA must be held not more than 15 months after the holding
of the last Annual General Meeting whereas Annual General
Meetings under the BCCA must be held within 13 months after the
holding of a company's last Annual General Meeting.
Under each of the BCCA and the YBCA every shareholder entitled to
vote at a meeting of shareholders has, upon a ballot being
required, one vote for each share held by the shareholder, unless
the articles of Sideware otherwise provide. In addition, every
shareholder entitled to vote at a meeting of shareholders may
appoint a proxyholder, who need not be a shareholder of Sideware,
to attend and act at the meeting in the manner and to the extent
authorized and with the authority conferred by the proxy. Under
the BCCA, such proxyholder may vote on a show of hands if the
articles of Sideware so permit. Under the YBCA, unless the
bylaws of Sideware state otherwise or unless a proxyholder has
conflicting instructions from more than one shareholder, such
proxyholder may vote on a show of hands.
Requisition of Meetings
Under both the BCCA and the YBCA the Board of Directors may
convene a special general meeting at any time.
Under both the BCCA and the YBCA shareholders of Sideware holding
not less than 5% of the issued voting shares of Sideware may give
notice to the directors requiring them to call and hold a
shareholders' meeting. Under the BCCA the meeting must be held
within four (4) months of such notice.
9
Removal of Directors between Annual General Meetings
Pursuant to the BCCA the shareholders of a company may remove
from office a director of a company between Annual General
Meetings by way of a Special Resolution requiring 75% of the
votes cast at the meeting of shareholders held for that purpose.
Under the provisions of the YBCA the shareholders of a company
may remove from office a director between Annual General Meetings
by way of an ordinary resolution which requires a simple majority
of the votes cast at a meeting of shareholders held for that
purpose, subject to any cumulative voting provisions in the
articles of Sideware or a unanimous shareholder agreement.
Election of Directors
Under each of the BCCA and the YBCA Sideware, as a Reporting
Issuer in the Province of British Columbia (called a Distributing
Corporation in the Yukon), must have a minimum of
three directors on its Board of Directors. Under the YBCA, at least
two of the directors must not be officers or employees of Sideware or
its affiliates. The BCCA and YBCA each require a Reporting Issuer or
Distributing Corporation to have an audit committee composed of
not less than three directors, a majority of whom are not
officers or employees of Sideware or any of its affiliates.
Pursuant to the provisions of the BCCA the directors of Sideware
are elected or appointed in accordance with the articles of
Sideware which currently provide that each of Sideware's
directors are deemed to have resigned at each Annual General
Meeting of Sideware. There is no limitation in the BCCA in
connection with the duration of a term for which a director may
serve as a director of a company if that company's articles so
provide. Under the YBCA, the articles of a company or unanimous
shareholder agreement may provide for a director's term to last
longer than the period of time between successive Annual General
Meetings provided however that the term does not exceed the third
Annual Meeting of the shareholders of that company following the
director's election.
Under the BCCA, every Reporting Issuer is required to publish an
advance notice of a meeting at which a director is to be elected
inviting written nominations for the director positions from the
shareholders. In order to submit a nomination, shareholders
representing not less than 10% of the outstanding shares in
Sideware entitled to vote at the meeting must sign the
nomination. Although Distributing Corporations are not required
to publish advance notice of a meeting at which a director is to
be elected under the YBCA, a shareholder is permitted to submit a
shareholder proposal for the nomination of a director not more
than 90 days before the anniversary of the previous annual
meeting of the shareholders. Such a proposal under the YBCA need
only be signed by members holding 5% of the shares entitled to
vote at the meeting.
Under the BCCA, the majority of the directors of Sideware are
required to be ordinarily resident in Canada and at least one of
the directors is required to be ordinarily resident in British
Columbia. The YBCA does not have any residency requirements for
directors of Sideware.
Under the BCCA the minimum age of a person qualified to become a
director of a company is eighteen years whereas under the YBCA
the minimum age is nineteen years. The other conditions
disqualifying persons to become directors of a company under the
BCCA and the YBCA are equivalent (i.e. cannot be an undischarged
bankrupt, a person who is not an individual or a person found to
be incapable of managing his own affairs by reason of mental
infirmity) except that under the BCCA additional
disqualifications exist to the extent of a person who has been
convicted of an offence within the last five years in connection
with the promotion, formation or management of a corporation or
involving fraud or a person whose registration in any capacity
has been cancelled under the Securities Act (British Columbia),
the Mortgage Brokers Act (British Columbia) or the Commodity
Contract Act (British Columbia).
10
Rights of Dissenting Shareholders
Each of the BCCA and the YBCA contains provision for the
shareholders of a company to dissent to certain resolutions being
put to the shareholders of the company for a vote (i.e. to the
continuance of that company to another incorporating
jurisdiction, to the proposed sale of all or substantially all of
the company's undertaking, to amend the company's articles so as
to change or remove any restriction on the business or businesses
that the company may carry on and to an amalgamation of the
company with another company or companies). Each of the BCCA and
the YBCA contain certain additional rights of dissent which are
not found in the other legislation. For example, the BCCA
provides an additional right of dissent for a company converting
from a specially limited company under the BCCA and to a
resolution approving a company being wound up where a transfer,
sale or arrangement involves the payment, or any liability for
payment of money by the members of the company being wound up.
The YBCA contains additional rights of dissent where a company
proposes to amend its articles so as to add, change or remove any
provisions restricting or constraining the issue or transfer of
shares or where the resolution involves a change to the number or
rights, privileges, restrictions or conditions attached to a class
or series of shares.
Under each of the BCCA and the YBCA a shareholder who is entitled
to dissent and validly exercises that right of dissent under the
applicable legislation is entitled to be paid by the company the
fair value of the shares held by him in respect of which he
dissents. Fair value is determined as of the day before the date
on which the resolution entitling the shareholder to dissent was
passed. Under the BCCA, and determined as of the close of
business on the last business day before the day on which the
resolution entitling the shareholder to dissent was passed under
the YBCA. Under each of the BCCA and the YBCA, if a company and
the shareholder are unable to mutually agree upon the fair market
value of the shareholder's shares, then the court having
authority in that jurisdiction has the power to fix the fair
value to be paid by the company to that shareholder for his
shares.
Resolutions of Shareholders Passed at Meetings
Under each of the BCCA and the YBCA, resolutions passed by
shareholders at meetings are, unless required to be passed as a
Special Resolution, passed as an Ordinary Resolution requiring a
simple majority of the votes cast. Under the BCCA, a Special
Resolution requires 75% of the votes cast at the meeting at which
the vote is taken, whereas under the YBCA a Special Resolution
only requires two-thirds of the votes cast.
Under the BCCA the only material matters with respect to which a
simple majority vote is required are election of directors and
the appointment and removal of auditors.
Under the YBCA a simple majority vote is required in relation to
election of directors and the appointment and removal of
auditors. Additionally, any amendment to the bylaws of a YBCA
corporation must be submitted to the shareholders at a meeting of
the shareholders, and the shareholders may, by ordinary
resolution, confirm, reject or amend the amendment to the bylaws.
Amendments to Constating Documents
A number of corporate governance matters that may be addressed in
the bylaws of a YBCA corporation must be addressed in the
Memorandum and Articles of a BCCA company. The Memorandum and
Articles of a BCCA company can only be amended by the affirmative
vote of 75% of the votes cast.
Amendments to the Articles or Articles of Continuance of a YBCA
corporation can only be amended by a special resolution of the
shareholders requiring an affirmative vote of two-thirds of the
votes cast. The bylaws of a YBCA corporation can be amended by a
resolution of the directors. However, the amendment must
subsequently be placed before the shareholders at the next
meeting of the shareholders and confirmed, rejected or amended by
the shareholders by an ordinary resolution.
11
The matters that must be addressed in the Articles or Articles of
Continuance of a YBCA corporation are: the name of the
corporation, the classes and the maximum number of shares that
the corporation is authorized to issue, the restrictions, if any,
on share transfer, the minimum or maximum numbers of directors,
the restrictions, if any, on the business the corporation may
carry on. The Articles or Articles of Continuance may also
specify whether meetings of the shareholders may be held outside
of the Yukon Territory and whether the directors may, between
annual general meetings, appoint one or more additional directors
of the corporation to serve until the next annual general
meeting.
Compulsory Acquisition of Shares
Each of the BCCA and the YBCA contain provisions allowing for the
compulsory acquisition of the remaining issued and outstanding
shares of a company where the entity making the acquisition has
acquired not less than 90% of the outstanding shares or class of
shares (in respect of which the offer has been made) of that
company. The BCCA limits however the compulsory acquisition
procedure to a situation where the offeror is a company which has
been incorporated under the BCCA whereas the YBCA allows the
compulsory acquisition procedure to be used by a person whether
or not such person is a corporation and whether or not, if a
corporation, it has been incorporated under the YBCA.
Shareholder Remedies
Under both the BCCA and the YBCA a shareholder of Sideware has a
right to apply to court on the grounds that Sideware is acting in
a manner that is oppressive or 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 Sideware.
Also, under both the BCCA and YBCA a member of Sideware may, with
leave of the court, bring an action in the name of and on behalf
of Sideware to enforce a right, duty or obligation owed to
Sideware that could be enforced by Sideware itself, and to obtain
damages for breach of any such right, duty or obligation, or to
defend an action brought against Sideware.
The BCCA provides that on application of members holding not less
than 25% of the issued shares of any class of Sideware, or an
application of Sideware, the court having jurisdiction may
appoint an inspector to investigate the affairs and management of
Sideware or its affiliates.
Under the YBCA any shareholder or security holder or the
registrar may apply to the court having jurisdiction, and the
court may grant an order directing an investigation be made of
the corporation or any of its affiliate corporations.
D. 2001 STOCK OPTION PLAN
Effective December 6, 2000 the Sideware Board of Directors
adopted Sideware's Stock Option Plan (2001) (the "2001 Plan"),
which reserved 6,000,000 shares for issuance pursuant to stock
options. Effective February 9, 2001, the Board of Directors
increased the number of shares reserved for issuance under the
2001 Plan to 7,000,000. A copy of the 2001 Plan is enclosed with
this Proxy Statement and Information Circular.
Regulations of the Toronto Stock Exchange ("TSE") required that
the 2001 Plan is subject to shareholder approval. In connection
with shareholder approval of the 2001 Plan, management will place
the following proposed resolution before the shareholders for
their consideration:
"BE IT RESOLVED THAT THE 2001 STOCK OPTION PLAN OF SIDEWARE,
PRESENTED FOR CONSIDERATION AT THE 2001 ANNUAL GENERAL MEETING OF
SIDEWARE, BE APPROVED."
12
Description of the 2001 Plan
Eligibility
Options under the 2001 Plan ("Options") may be granted to
directors, officers, employees and Consultants of Sideware and
its subsidiaries.
No person has any claim or right to receive an Option under the
2001 Plan, and Sideware has no obligation to treat different
participants equally. The decision to grant an Option to any
individual (an "Optionee") is in the sole discretion of
Sideware's board of directors (the "Board"), or any committee it
establishes.
The grant of an Option to one Optionee neither requires nor
precludes another Option grant to that Optionee or any other
person.
Administration
The 2001 Plan is administered by the Board unless the Board
appoints a committee (a "Committee") to administer the 2001
Plan. Any such Committee serves at the pleasure of the Board.
The 2001 Plan sets out the powers of the Board or Committee,
including their power to amend the 2001 Plan. The Board or
Committee has the power to:
- - determine when Options shall be granted;
- - determine the officers, directors, employees or consultants
to whom Options should be granted;
- - determine the option price (the "Option Price") of each
Option in accordance with applicable rules and regulations;
- - determine the vesting schedule, if any, upon which the
exercise of an Option is contingent;
- - determine the terms and provisions of the option agreement to
be entered into with any Optionee; and
- - amend option agreements, provided the Board obtains the
consent of the Optionee, and any required approval from any
stock exchange on which Sideware's shares are listed.
Shares subject to the 2001 Plan
Sideware has reserved a total of 7,000,000 common shares
("Shares") for issuance under the 2001 Plan. If an outstanding
Option expires, is terminated, exchanged, surrendered or
cancelled, any remaining Shares under that Option become
available for subsequent grants.
If there is a material change in the outstanding common shares of
Sideware by reason of any stock dividend, split,
recapitalization, amalgamation, merger, consolidation,
combination or exchange of shares or other similar corporate
change, the Board may, in its sole discretion, make equitable
adjustments to:
- - the number or kind of Shares issuable under the 2001 Plan;
- - the number or kind of Shares subject to outstanding Options;
or
- - the Option Price under any Options.
Effect on employment
Nothing in the 2001 Plan or in any Option entitles any individual
to any right to commence or continue in the employ or service of
Sideware or its subsidiaries or affiliates or to interfere in any
way with the right of Sideware or its direct or indirect
subsidiaries or affiliates to terminate any such employment.
13
Terms and conditions of Options
Options entitle the Optionee to purchase Shares during a
specified period (the "Option Term") at a specified Option
Price.
Each Option will be recorded in an option agreement between
Sideware and the Optionee. The option agreement will set out the
applicable terms and conditions.
Option Price
The Option Price is the price that the Optionee must pay to
Sideware to purchase one Share of Sideware. The Board or
Committee is authorized to set the Option Price for each Option.
Sideware's common shares currently trade on the Toronto Stock
Exchange ("TSE"). Under TSE regulations, the Option Price must
not be less than the market price for Sideware's shares at the
time the Option is granted, calculated in accordance with
applicable TSE regulations.
Option term
The Board or Committee is authorized to set the Option Term for
each Option, subject to the following requirements of the 2001
Plan:
(a) upon the death of an Optionee, the legal heirs or personal
representatives of the Optionee shall have no more than
twelve months from the date of death of the Optionee to
exercise the Optionee's Option;
(b) if an Optionee's employment is terminated by Sideware by
reason of such Optionee having a disability (as defined in
the 2001 Plan), the Optionee, or his or her guardian, may
exercise any Option held by such Optionee that could have
been exercised immediately prior to such termination of
employment for a period of 12 months following the
termination;
(c) if an Optionee, who has ceased to be a director, officer,
employee or consultant of Sideware by reason of such
Optionee's disability, dies within six months after the
termination of his or her employment, the legal heirs or
personal representatives of such Optionee will have a right
to exercise any option held by the Optionee, on behalf of
the estate of the Optionee, that could have been exercised
immediately prior to his or her death for a period of 12
months following the death of such Optionee; and
(d) if the Optionee is no longer a director, officer, employee
or consultant of Sideware by reason other than such
Optionee's disability, the option shall terminate on the
expiry of the period, not in excess of 90 days, prescribed
by the Board or Committee, following the date that the
Optionee ceases to be a director, officer, employee or
consultant of Sideware.
However, nothing in provisions (a) to (d), above can extend the
term of an Option beyond its original expiry date, or increase
the number of Shares the Optionee was entitled to at the date of
his or her termination or death.
For the purposes of determining the termination of employment,
any Optionee's employment is deemed to continue intact during any
sick leave or other bona fide leave of absence if the period of
such leave does not exceed 90 days or, if longer, for so long as
the Optionee's right to reemployment with Sideware is guaranteed
either by statute or by contract.
Under the regulations of the TSE, no Option Term can exceed 10
years.
14
Restrictions on transfer
Optionees may not assign, negotiate or otherwise transfer their
Options other than by will or the laws of descent and
distribution. Accordingly, only the Optionee or his/her legal
heirs or personal representatives may exercise an Optionee's
Options.
Amendment and termination of the 2001 Plan
The Board may at any time and from time to time suspend, amend,
modify, or terminate the 2001 Plan; provided, however, that:
- - an amendment is subject to any required regulatory
approvals; and
- - any amendment to the number of Shares reserved under the
2001 Plan, or to materially modify the 2001 Plan eligibility
requirements or the method for determining Option Price, is
subject to shareholder approval (unless the amendment is
required to comply with requirements of any regulatory
authority).
No amendment may adversely affect any Option previously granted,
except with the consent of the Optionee.
Options granted under the 2001 Plan
We have already granted Options under the 2001 Plan. All options
granted under the 2001 Plan have been granted in accordance with
TSE regulations, which regulate the price and other terms that
can be included in an Option. Because the TSE requires
disinterested shareholder approval of the 2001 Plan, all option
agreements provide that the Options are subject to that approval.
The following table shows the dates on which Options have been
granted under the 2001 Plan, the number of Options granted, the
number of Optionees, the Option Price, and the closing price for
Sideware shares on the day preceding the Option grant, which set
the minimum Option Price permitted under TSE regulations.
Date of Grant No. of Options No. of Optionees Exercise Price Previous day's
Closing Price
Jan. 18, 2001 5,680,500 141 $1.00 $0.76
Feb. 9, 2001 498,000 6 $1.00 $0.85
Feb. 22, 2001 190,000 6 $1.00 $0.86
Mar. 7, 2001 150,000 1 $1.00 $0.75
All of the Options were for five year terms.
The grantees of the Options referred to above included the
following directors, executive officers, and persons nominated
for election as director:
James Speros 500,000 options
Grant Sutherland 150,000 options
Jay Nussbaum 200,000 options
Jack Kemp 150,000 options
John Shoemaker 150,000 options
Peter Kozicki 20,000 options
Kenneth Thornton 150,000 options
Edward White 20,000 options
Scott Friedlander 500,000 options
15
Rahul Bardhan 500,000 options
Stewart Walchli 500,000 options
The total number of Options granted thus far to directors and
executive officers under the 2001 Plan is 2,840,000.
Option rescission and re-grants
Subsequent to the granting of the Options described above, the
market price for Sideware shares has deteriorated. On May 9,
2001, the closing price for Sideware shares on the Toronto Stock
Exchange was $0.36. Sideware management believes that the
deterioration in the market price of Sideware stock could have
adverse consequences for Sideware;s stock option plans:
- - Options are viewed by employees as an important part of
their overall compensation. Options with Option Prices well
above current market trading prices will not provide
adequate incentive to Optionees.
- - Sideware faces competition in the employment market. If
Sideware is unable to offer attractive incentives to current
and prospective employees through stock options, it faces
the prospect that it will be unable to attract and retain
suitably qualified or skilled personnel, or that it will
have to increase cash compensation paid to such personnel
substantially.
Based on these considerations, the Board of Directors of Sideware
has determined to rescind a number of the Options granted thus
far under the 2001 Plan, and to grant new Options to the
Optionees at a reduced Option Price. Effective May 10, 2001 the
Board of Directors has determined to enter into agreements with
approximately 50 Optionees under the 2001 Plan to:
- - rescind the Options previously granted to the Optionees
under the 2001 Plan; and
- - grant new Options to the Optionees, for the same number of
Options, with a reduced exercise price of $0.36.
In addition to a reduced Option Price, some of the new Options
will have accelerated vesting schedules. However, none of the
new Options will contain any terms which are less advantageous to
the Optionees than the previous Options.
These agreements will not include insiders of Sideware, as
defined by the TSE. Under definitions applied by the TSE, the
insiders of Sideware include all directors, executive officers,
and senior officers. The senior officers of Sideware include
Sideware's vice-presidents and the corporate Secretary. The
agreements will also not include employees whom Sideware has
terminated it its recent staff reductions. In total, the
agreements will cover approximately 1.5 million shares held by
approximately 50 Optionees.
In accordance with regulations of the TSE, the agreements will be
subject to TSE approval.
Tax consequences of Options
Regulations of the Securities and Exchange Commission require
that Sideware include disclosure about the United States federal
income tax consequences of Options granted to employees who are
residents of the United States.
Set forth below is a discussion of certain United States federal
tax consequences with respect to Options. This discussion is
based on an analysis of the Internal Revenue Code (the "Code")
as currently in effect, existing laws, judicial decisions,
administrative rulings and regulations, and proposed regulations,
all of which are subject to change. In addition to being subject
to the federal tax consequences described below, an employee may
also be subject to foreign, state, and local income or other tax
consequences in the jurisdiction in which he works and/or
resides.
16
THE FOLLOWING DISCUSSION IS OF A GENERAL NATURE ONLY, AND IS NOT
INTENDED TO CONSTITUTE TAX ADVICE FOR ANY RECIPIENT OF OPTIONS.
ANY RECIPIENT OF OPTIONS IS URGED TO CONSULT HIS OR HER PERSONAL
TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES TO HIM OR
HER OF THE 2001 PLAN (OR ANY COMPONENT THEREOF).
Income tax
Some Options issued under the 2001 Plan may, in the discretion of
the Committee, constitute incentive stock options ("ISOs").
Options which are not ISO's are non-qualifying stock options
("NSOs").
Options must meet certain special requirements in order to
qualify as ISOs. Among these are that the Option Price of an ISO
cannot be less than 100% (110% in the case of a 10% owner of
Sideware) of the fair market value of the Shares when the ISO is
granted. Second, the term of an ISO cannot exceed ten (10) years
or five (5) years in the case of a 10% owner of Sideware. Third,
no ISO may be granted to any Optionee who is not at the time of
the grant an employee of Sideware or its subsidiaries. Fourth,
the aggregate fair market value (determined as of the time the
Option is granted) of the Shares subject to ISOs which become
exercisable as to any Optionee for the first time in any calendar
year (under all plans of Sideware and its subsidiary
corporations) may not exceed $100,000. (Any Options granted in
excess of this limitation will be treated as NSOs.) Finally, for
any reason, including retirement or death, any ISO or unexercised
portion thereof which is not exercised within three (3) months
from the date on which the Optionee cease to be an employee will
become an NSO (unless the Optionee dies during this three-month
period).
NONQUALIFIED STOCK OPTIONS
An Optionee generally will not recognize taxable income upon the
grant of an NSO. Rather, at the time of exercise of such NSO,
the Optionee will recognize ordinary income for income tax
purposes in an amount equal to the excess of the fair market
value of the Shares purchased over the Option Price. Sideware
will generally be entitled to a tax deduction at such time and in
the same amount that the Optionee recognizes ordinary income.
If Shares acquired upon exercise of an NSO are later sold or
exchanged, then the difference between the amount received upon
such sale, exchange or disposition and the fair market value of
such Shares on the date of such exercise will generally be
taxable as long-term or short-term capital gain or loss (if the
Shares are a capital asset of the Optionee) depending upon the
length of time such Shares were held by the Optionee.
INCENTIVE STOCK OPTIONS
An Optionee will not recognize any ordinary income upon the grant
or timely exercise of an ISO. However, the amount by which the
fair market value of the Shares on the exercise date of an ISO
exceeds the Option Price generally will constitute an item which
increases the Optionee's "alternative minimum taxable income."
Exercise of an ISO will be timely if made during its Option Term
and if the Optionee remains an employee of Sideware or a
subsidiary at all times during the period beginning on the date
of grant of the ISO and ending on the date three months before
the date of exercise (or one year before the date of exercise in
the case of a disabled Optionee). Exercise of an ISO will also
be timely if made by the legal representative of an Optionee who
dies (i) while in the employ of Sideware or a subsidiary or (ii)
within three months after termination of employment. The tax
consequences of an untimely exercise of an ISO will be determined
in accordance with the rules applicable to NSOs, discussed above.
17
If Shares acquired pursuant to the timely exercise of an ISO are
later disposed of, and if the Shares are a capital asset of the
Optionee, the Optionee will, except as noted below, recognize
short-term or long-term capital gain or loss (depending upon the
length of time such Shares were held by the Optionee) equal to
the difference between the amount realized upon such sale and the
Option Price. Sideware, under these circumstances, will not be
entitled to any income tax deduction in connection with either
the exercise of the ISO or the sale of such Shares by the
Optionee.
If, however, Shares acquired pursuant to the exercise of an ISO
are disposed of by the Optionee prior to the expiration of two
years from the date of grant of the ISO or within one year from
the date such Shares are transferred to him or her upon exercise
(a "disqualifying disposition"), any gain realized by the
Optionee generally will be taxable at the time of such
disqualifying disposition as follows: (i) at ordinary income
rates to the extent of the difference between the Option Price
and the lesser of the fair market value of the Shares on the date
the ISO is exercised or the amount realized on such disqualifying
disposition and (ii) if the Shares are a capital asset of the
Optionee, as short-term or long-term capital gain (depending upon
the length of time such Shares were held by the Optionee) to the
extent of any excess of the amount realized on such disqualifying
disposition over the sum of the Option Price and any ordinary
income recognized by the Optionee. In such case, Sideware may
claim an income tax deduction at the time of such disqualifying
disposition for the amount taxable to the Optionee as ordinary
income.
OTHER OPTIONS OUTSTANDING
In addition to options granted under the 2001 Plan, Sideware has
the following options outstanding:
- - approximately 6.5 million options are outstanding pursuant
to Sideware's 2000 Stock Option Plan; and
- - approximately 4 million options are outstanding from
individual option grants which preceded the adoption of the
2000 Stock Option Plan and the 2001 Stock Option Plan.
These options include the following options held by directors,
executive officers, and persons nominated for election as
director:
Optionee Number Exercise Expiry No. Exercisable
of Price Date within 60 days of
Shares February 28, 2001
James Speros 250,000 C$0.36 07/06/03 250,000
125,000 C$2.33 06/17/04 125,000
Grant
Sutherland 198,000 C$0.50 06/24/01 198,000
75,000 C$0.70 12/16/02 75,000
125,000 C$2.33 06/17/04 125,000
170,000 C$2.66 10/10/04 170,000
Peter Kozicki 50,000 C$0.50 06/24/01 50,000
25,000 C$0.70 12/16/02 25,000
25,000 C$2.33 06/17/04 25,000
25,000 $5.10 04/20/05 18,750
Edward White 100,000 C$0.50 06/24/01 100,000
25,000 C$0.70 12/16/02 25,000
25,000 C$2.33 06/17/04 25,000
25,000 $5.10 04/20/05 18,750
Jay Nussbaum 200,000 $11.08 01/21/05 200,000
200,000 $5.10 04/20/05 150,000
50,000 $1.00 01/18/06 25,000
150,000 $1.00 02/09/06 75,000
Jack Kemp 150,000 $1.00 02/09/06 75,000
John
Shoemaker 150,000 $1.00 02/09/06 75,000
Scott
Friedlander 1,000,000 $8.69 01/14/05 1,000,000
1,000,000 $5.10 04/20/05 750,000
Rahul Bardhan 1,000,000 $2.25 08/30/05 400,000
18
Stewart
Walchli 100,000 $11.08 01/21/05 100,000
200,000 $5.10 04/20/05 150,000
DISINTERESTED SHAREHOLDER APPROVAL
Pursuant to regulations of the Toronto Stock Exchange, the 2001
Plan requires disinterested shareholder approval. The approval
requires the affirmative vote of more than 50% of the eligible
votes cast. Votes attaching to shares owned beneficially by
insiders to whom options may be awarded under the 2001 Plan and
their associates ("Excluded Shares") will be excluded. To the
knowledge of management of Sideware there are 5,107,572 Excluded
Shares which will not be counted in the voting in respect of the
2001 Plan.
E. AUTHORIZATION OF PRIVATE PLACEMENT
On February 22, 2001, Sideware completed a private placement of
5,229,752 shares and 5,229,752 share purchase warrants. In
addition, Sideware issued 526,316 warrants in consideration of
placement agent services provided in the private placement. Each
of those warrants entitles the holder to acquire one share and
one share purchase warrant, with each share purchase warrant
entitling the holder to acquire one additional share. Accordingly,
the total number of shares which may be issued as a result of the
private placement is 11,512,136.
Under regulations of the Toronto Stock Exchange, Sideware
requires shareholder approval before it can issue, during any six
month period, private placement shares representing more than 25%
of the issued and outstanding shares at the beginning of the six
month period. For purposes of TSE regulations, shares which may
be issued under warrants issued in a private placement count as
shares issued in the private placement. As a result, the total
number of additional shares which Sideware can issue in private
placements prior to August 22, 2001 is limited to approximately
3.5 million.
Sideware management believes that it is in Sideware's best
interests to have the flexibility to issue additional private
placement shares, if an opportunity arises to raise additional
financing on satisfactory terms. Management will place the
following proposed resolution before the shareholders for their
consideration:
"BE IT RESOLVED THAT THE ISSUANCE OF UP TO 15,000,000 SHARES AND
15,000,000 SHARE PURCHASE WARRANTS OR OTHER SECURITY CONVERTIBLE
TO COMMON SHARES PURSUANT TO PRIVATE PLACEMENTS SUBSEQUENT TO THE
DATE OF THIS RESOLUTION, ON SUCH TERMS AND CONDITIONS AS THE
DIRECTORS OF SIDEWARE MAY APPROVE, BE AND IS HEREBY APPROVED."
EXECUTIVE COMPENSATION
Apart from stock options, we do not presently compensate our
directors for services provided as directors. We provide
compensation to our directors who are also officers or employees,
for services rendered as officers or employees. We provide the
following compensation to our directors and executive officers.
JAMES L. SPEROS. We currently pay Mr. Speros an annual salary of
$250,000. During 2000 Mr. Speros' salary was $225,000 per year.
During November and December 1999, Mr. Speros' salary was $15,000
per month. Between April 1999 and November 1999, Mr. Speros'
salary was $11,500 per month. Between August 1998 and April
1999, Mr. Speros' salary was $8,000 per month. In October and
November 1999, Mr. Speros received bonus payments totaling
$50,000. In addition, Mr. Speros holds stock options to acquire
875,000 shares.
GRANT SUTHERLAND. Effective September 1, 2000 we pay Mr.
Sutherland an annual salary of $100,000. Between January 1, 2000
and August 31, 2000 Mr. Sutherland's salary was $200,000 per
year. Between June 1, 1998, and December 31, 1999, Mr.
Sutherland's salary was $6,600 per month, which we shared
19
with BrainTech, Inc., paying 80% during 1999 and 50% during 1998.
Prior to June 1, 1998, we paid Mr. Sutherland $3,300 per month.
Mr. Sutherland exercised stock options to acquire 250,000 shares
in 1999 and options to acquire 80,000 shares in 2000. Mr.
Sutherland holds additional stock options to acquire 718,000
shares. At the end of the first quarter of 2000 we paid Mr.
Sutherland a discretionary bonus of $85,140, in respect of
services rendered during 1999.
SCOTT FRIEDLANDER. Effective January 1, 2001 we pay Mr.
Friedlander an annual salary of $250,000. Between September 1,
2000 and December 31, 2000 Mr. Friedlander's annual salary was
$200,000. Between February 1, 2000 and August 31, 2000 Mr.
Friedlander's annual salary was $175,000. We paid Mr.
Friedlander a bonus of $16,800 as an inducement to accept
employment with our company. We also accrued an additional
payment for Mr. Friedlander in the amount of $200,000 as at December
31, 2000, as an adjustment to Mr. Friedlander's compensation in
recognition of additional executive and administrative
responsibilities undertaken by Mr. Friedlander, beyond his
initial responsibilities in managing our US sales
operations. We expect to make that payment in April 2001. Mr.
Friedlander will be entitled to receive bonuses equal to:
- - 75% of his base salary if our revenue exceeds $20 million
during 2001; and
- - 200% of his base salary if our revenue exceeds $26.7 million
during 2001.
We have also entered into a Change of Control Severance Agreement
with Mr. Friedlander, entitling Mr. Friedlander to receive up to
two years salary and bonus payments if we terminate his
employment following a change in control of Sideware. Mr.
Friedlander holds options to purchase 2,500,000 shares.
RAHUL BARDHAN. We currently pay Mr. Bardhan an annual salary of
$250,000. We also accrued a bonus in the amount of $60,000 for
Mr. Bardhan as at December 31, 2000, which we agreed to at the
time Mr. Bardhan commenced employment, as an inducement to join our
company. We expect to pay that bonus in April 2001. Mr. Bardhan
will also be entitled to receive bonuses equal to:
- - 75% of his base salary if our revenue exceeds $20 million
during 2001;
- - 200% of his base salary if our revenue exceeds $26.7 million
during 2001;
- - 75% of his base salary if our revenue exceeds $33 million
during 2002; and
- - 200% of his base salary if our revenue exceeds $40 million
during 2002.
We have entered into a Change of Control Severance Agreement with
Mr. Bardhan, entitling Mr. Bardhan to receive up to two years
salary and bonus payments if we terminate his employment
following a change in control of Sideware. Mr. Bardhan holds
options to purchase 1,500,000 shares.
STEWART WALCHLI. We currently pay Mr. Walchli a salary of
$132,000 per year. Prior to December 31, 2000, Mr. Walchli's
salary was $100,000 per year. We also accrued an additional
payment for Mr. Walchli in the amount of $50,000 as at December
31, 2000, as an adjustment to Mr. Walchli's compensation in
recognition of additional duties and responsibilities undertaken
by Mr. Walchli in assuming the role of Chief Financial Officer,
after accepting employment with us as Vice-President Finance. We
expect to make that payment in April 2001. Mr. Walchli will be
entitled to receive bonuses equal to:
- - 75% of his base salary if our revenue exceeds $20 million
during 2001; and
- - 200% of his base salary if our revenue exceeds $26.7 million
during 2001.
We have entered into a Change of Control Severance Agreement with
Mr. Walchli, entitling Mr. Walchli to receive up to two years
salary and bonus payments if we terminate his employment
following a change in control of Sideware. Mr. Walchli also
holds options to purchase 800,000 shares.
The following table summarizes compensation paid to our directors
and named executive officers for the fiscal years ended December
31, 2000 and December 31, 1999, the eight month period ended
December 31, 1998, and the fiscal year ended April 30, 1998.
20
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name and Awards Payouts All other
Principal Period Restricted Securities Compensation
Position Ended Salary Bonus Other Stock Underlying
mm/dd/yy Awards Optons/SARs
James Speros, 12/31/00 $225,000 $ 0 $ 0 0 0 $0 $54,000 (1)
President, CEO 12/31/99 $136,250 $ 50,000 $ 0 0 125,000 $0 $ 0
(since Oct. 12/31/98 $ 44,000 $ 0 $ 0 0 250,000 $0 $ 0
15, 2000)
Grant 12/31/00 $167,000 $ 0 $ 0 0 0 $0 $ 0
Sutherland, 12/31/99 $ 63,400 $ 85,140 $ 0 0 375,000 $0 $ 0
Chairman 12/31/98 $ 39,600 $ 0 $ 0 0 25,000 $0 $ 0
04/30/98 $ 39,600 $ 0 $ 0 0 75,000 $0 $ 0
Owen Jones, 12/31/00 $126,000 $ 0 $ 0 0 0 $0 $ 0
President, CEO 12/31/99 $ 80,000 $117,480 $ 0 0 125,000 $0 $ 0
(up to Oct. 15, 12/31/98 $ 31,350 $ 66,000 $ 0 0 55,000 $0 $ 0
2000) 04/30/98 $ 20,000 $ 66,000 $ 0 0 75,000 $0 $ 0
Jay Nussbaum, 12/31/00 $ 0 $ 0 $ 0 0 400,000 $0 $ 0
Director 12/31/99 $ 0 $ 0 $ 0 0 0 $0
Jack Kemp, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Director
John Shoemaker, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Edward White, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Director 12/31/99 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
12/31/98 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
04/30/98 $ 4,600 $ 0 $ 0 0 25,000 $0 $ 0
Peter Kozicki, 12/31/00 $ 0 $ 0 $ 0 0 0 $0 $ 0
Director 12/31/99 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
12/31/98 $ 0 $ 0 $ 0 0 25,000 $0 $ 0
Scott 12/31/00 $172,600 $ 16,800 $200,000 0 2,000,000 $0 $ 0
Friedlander,
Exec. VP
Rahul Bardhan, 12/31/00 $ 63,550 $ 60,000 $ 0 0 1,000,000 $0 $ 0
Chief
Technology
Officer
Stewart Walchli 12/31/00 $ 83,917 $ 0 $ 50,000 0 300,000 $0 $ 0
Chief
Financial
Officer
1. This amount represents a club membership purchased for Mr. Speros.
We do not have a long term incentive plan.
The following table summarizes options granted to our directors and
executive officers during the year ended December 31, 2000.
OPTION / SAR GRANTS IN LAST FISCAL YEAR
Name Number of Percent of Exercise or Expiration Grant date
securities total options / base price date present
underlying SARs granted to (mm/dd/yy) value (1)
Options / employees in
SARs granted fiscal year
James Speros Nil 0.0% N/A N/A N/A
Grant
Sutherland Nil 0.0% N/A N/A N/A
Owen Jones Nil 0.0% N/A N/A N/A
Scott Friedlander 1,000,000 11.3% $8.69 01/14/05 $ 760,000
1,000,000 11.3% $5.10 04/20/05 $1,000,000
Rahul Bardhan 1,000,000 11.3% $2.25 08/30/05 $ 400,000
Stewart Walchli 100,000 1.1% $11.08 01/21/05 $ 822,000
200,000 2.2% $5.10 04/20/05 $ 200,000
21
(1) Grant date present value was calculated by multiplying the number
of option shares by the difference between the exercise price and the
closing trading price on the date of grant.
In addition to the foregoing, we granted the following options to our
directors and executive officers in January and February 2001:
Grant Sutherland 150,000 options
James Speros 500,000 options
Jay Nussbaum 200,000 options
Jack Kemp 150,000 options
John Shoemaker 150,000 options
Peter Kozicki 20,000 options
Edward White 20,000 options
Scott Friedlander 500,000 options
Rahul Bardhan 500,000 options
Stewart Walchli 500,000 options
The exercise price for these options was $1.00, and the term was five
years. None of these options have been exercised as at the date of
this Proxy Statement and Information Circular.
The following table summarizes options exercised by our directors and
executive officers during the year ended December 31, 2000.
Aggregated Option / SAR Exercises in Last Fiscal Year and FY-End
Option / SAR Values
Shares acquired Value realized Number of securities Value of unexercised
Name on exercise underlying unexercised in-the-money options /
options / SARS at end SARs at end of fiscal
of fiscal year year
---------------------- ---------------------
Exercisable /
Unexercisable
James Speros 0 0 375,000 / 0 $65,600 / 0
Grant Sutherland 80,000 $638,052 568,000 / 0 $36,510 / 0
Jay Nussbaum 0 0 400,000 / 0 0
Jack Kemp 0 0 0 0
John Shoemaker 0 0 0 0
Peter Kozicki 0 0 112,500 / 12,500 $9,450 / 0
Edward White 0 0 162,500 / 12,500 $17,950 / 0
Scott Friedlander 0 0 1,500,000 / 500,000 0
Rahul Bardhan 0 0 200,000 / 800,000 0
Stewart Walchli 0 0 300,000 /0 0
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a compensation committee during the year ended
December 31, 2000. The following officers and employees
participated in deliberations concerning executive officer
compensation during the year ended December 31, 2000: Grant
Sutherland, Chairman, James Speros, Director, President of
Sideware Corp., and Chief Executive Officer (from October 15,
2000), Owen Jones, Director (to November 30, 2000), and Chief
Executive Officer (to October 15, 2000), Scott Friedlander,
Executive Vice President and General Manager of US Operations,
Rahul Bardhan, Chief Technical Officer, Stewart Walchli, Chief
Financial Officer, and Paul Hildebrand, Secretary. Grant
Sutherland, Owen Jones, and James Speros were directors of
BrainTech, Inc. during the year ended December 31, 2000,
and were involved in determining executive officer compensation for
BrainTech, Inc. Otherwise, no executive
22
officer of Sideware served as a director or member of the
compensation committee of any other entity (or performed similar
functions as a director of any other entity), one of whose executive
officers served as a director of Sideware or participated in making
compensation decisions for Sideware.
The following table indicates those Board members who were also
officers or employees of Sideware or any of its subsidiaries
(other than subsidiaries which do not carry on active business)
during the last completed financial year.
Name Position
James Speros President and CEO (from October 15, 2000)
President of Sideware Corp.
Grant Sutherland Chairman of Sideware
Chairman & Secretary/Treasurer of Sideware Corp.
Manager of Sideware International SRL, Society
Owen Jones1 President and CEO (up to October 15, 2000)
1. Mr. Jones resigned as the President and CEO of Sideware on
October 15, 2000, and as a director of Sideware on November 1,
2000.
No member of Sideware's Board had or has any relationship with
Sideware or any of its subsidiaries which requires disclosure
under "Indebtedness of Directors, Executive Officers and Senior
Officers" or "Interest of Insiders in Material Transactions"
other than as set forth under those headings.
REPORT ON EXECUTIVE COMPENSATION
Compensation of Sideware's executive officers comprises two main
components: cash compensation and stock options. Grants of
stock options are approved by the full Board of Directors.
Salaries are set by senior management.
Among other things, the exercise price, number of shares optioned
and other terms of previously granted stock options are factors
which influence the Board of Directors when granting new stock
options to the same optionees. However, new options are granted
on a case-by-case basis and there is no specific formula for
quantifying this influence and applying it in any specific
instance. Past performance of an optionee is also a
consideration in the granting of stock options.
For the most recently completed financial year, Sideware's CEO
received total cash compensation of $225,000 in salary and bonus.
He did not exercise any stock options during the year. Sideware
did not grant any stock options to it current CEO durng the year.
In January 2001, Sideware granted options to its CEO to purchase
500,000 shares at a price of $1.00 per share. At a base salary
of $250,000, management considered the CEO's salary to be fixed
at a rate similar to competitive rates for a similar position.
The foregoing Report on Compensation is submitted by those directors
who were members of the Board of Directors during the year ended
December 31, 2000.
James Speros Grant Sutherland Jay Nussbaum
Peter Kozicki Edward White
23
PERFORMANCE GRAPH
The graph appearing below compares the yearly percentage change
in Sideware's cumulative total shareholder return on its common
shares with the cumulative total return of the TSE 300 Composite
Index and the S&P 500 Index, based on an initial $100 investment.
For this purpose, the yearly percentage change in Sideware's
cumulative total shareholder return is calculated by dividing the
difference between the price for Sideware's shares at the end and
the beginning of the "measurement period" by the price for
Sideware's common shares at the beginning of the measurement
period. "Measurement period" means the period beginning at the
market close on the last trading day before the beginning of
Sideware's fifth preceding financial year, through and including
each of the five ensuing financial years.
[insert graph]
*For the 1995 and 1996 year ends Sideware was suspended from
trading. The price used for Sideware's shares for these dates is
the last closing price before Sideware was suspended. Note: The
performance graph shows April 30, 1998 and December 31, 1998 to
ensure no lapse in reporting given the change in fiscal year end
that occurred for 1998.
AUDITORS
KPMG LLP are the independent public auditors for Sideware for the
fiscal year ending December 31, 1999 and the current fiscal year.
Representatives of KPMG LLP will not be present at the Annual
Meeting.
VOTING PROCEDURES
Votes cast by proxy or in person at the meeting will be tabulated
by representatives of Montreal Trust Company of Canada. A quorum
for the Meeting will consist of shareholders, present in person
or by proxy, representing 5% of the shares entitled to vote at
the Meeting.
Effect of an Abstention and Broker Non-Votes: A shareholder who
abstains from voting on any or all proposals will be included in
the number of shareholders present at the meeting for the purpose
of determining the presence of a quorum. Abstentions will not be
counted either in favour of or against the
24
election of the nominees or other proposals. If a broker returns
a "non-vote" proxy, indicating a lack of authority to vote on a
proposal, then the shares covered by such "non-vote" shall be deemed
present at the meeting for purposes of determining a quorum, but not
for the purposes of calculating the vote with respect to the proposal
on which the broker had no authority to vote.
PROXY VOTING AND DISCRETION OF PROXYHOLDERS
On any poll, the persons named in the enclosed instrument of
proxy will vote the shares in respect of which they are appointed
and, where directions are given by the shareholder in respect of
voting for or against any resolution, will do so in accordance
with such direction.
IN THE ABSENCE OF ANY DIRECTION IN THE INSTRUMENT OF PROXY, IT IS
INTENDED THAT SUCH SHARES WILL BE VOTED IN FAVOUR OF THE MOTIONS
PROPOSED TO BE MADE AT THE MEETING AND FOR THE ELECTION OF THE
MANAGEMENT NOMINEES FOR DIRECTORS AND AUDITOR, AS STATED UNDER
THE HEADINGS IN THIS INFORMATION CIRCULAR. The instrument of
proxy enclosed, when properly signed, confers discretionary
authority with respect to amendments or variations to any matters
which may properly be brought before the Meeting. At the time of
printing of this Information Circular, the management of Sideware
is not aware that any such amendments, variations or other
matters are to be presented for action at the Meeting. However,
if any other matters which are not now known to the management
should properly come before the Meeting, the proxies hereby
solicited will be exercised on such matters in accordance with
the best judgement of the nominee.
OTHER MATTERS
The Board of Directors does not intend to bring any other
business before the meeting, and so far as is known to the Board,
no matters are to be brought before the meeting except as
specified in the notice of the meeting. However, as to any other
business that may properly come before the meeting, it is
intended that proxies, in the form enclosed, will be voted in
respect thereof in accordance with the judgement of the persons
voting such proxies.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS
AND SENIOR OFFICERS
Total indebtedness of all present and former employees to
Sideware was approximately $235,000 at May 11, 2001. We expect
to forgive a portion of that indebtedness in respect of
employees who have been terminated subsequent to December 31,
2000.
The following table shows indebtedness to Sideware of individuals
who are, or were during the year ended December 31, 2000,
directors, executive officers, or senior officers (as defined in
the Securities Act of British Columbia) of Sideware or any of its
subsidiaries.
Name and Involvement of Largest Amount Amount
Principal Issuer or Outstanding Outstanding as
Position Subsidiary During Last at Current Date
Completed
Financial Year
John Zhang, Lender $212,000 $194,000
Vice President
of Java
Development
The indebtedness of Mr. Zhang is secured by a mortgage over Mr.
Zhang's residence. The mortgage bears interest at the rate of 1%
per annum. As Vice-President of Java Development, Mr. Zhang is a
senior officer under the Securities Act of British Columbia, but
is not a reporting officer under section 16 of the Securities
Exchange Act of 1934.
25
During the course of the fiscal year ended December 31, 1999,
Sideware made loans to John Wedel, former General Manager of
ebusiness Solutions, totalling $152,000. Those loans were
forgiven during 2000 as a bonus. Mr. Wedel remains indebted to
Sideware in the amount of approximately $8,000, and has
guaranteed the indebtedness of another employee in the
approximate amount of $25,000. Mr. Wedel is no longer employed
by Sideware.
Other than Mr. Zhang and Mr. Wedel, no person who is or at any
time during the most recently completed financial year was a
director, executive officer or senior officer of Sideware, no
proposed nominee for election as a director of Sideware, and no
associate of any of the foregoing persons has been indebted to
Sideware at any time since the commencement of Sideware's last
completed financial year. No guarantee, support agreement,
letter of credit or other similar arrangement or understanding
has been provided by Sideware at any time since the beginning of
the most recently completed financial year with respect to any
indebtedness of any such person.
STATEMENT OF CORPORATE GOVERNANCE
"Corporate Governance" refers to the process and structure used
to direct and manage the business and affairs of a Company.
Regulations of the Toronto Stock Exchange ("TSE") include
guildelines on corporate governance. TSE regulations also
require listed companies to include in their information
circulars a statement of their corporate governance practices,
including matters on which their corporate governance practices
differ from TSE guidelines.
Sideware shares began trading on the TSE on November 10, 2000.
Subsequent to that time, Sideware has substantially re-structured
its Board of Directors. Sideware is also in the process of
adapting its corporate governance practices to comply with the
majority, if not all, of the TSE guidelines.
STEWARDSHIP OF SIDEWARE
TSE regulations require that the Board of Directors assume
stewardship of the corporation, including matters such as
strategic planning, the identification and management of risks,
appointing and monitoring senior management, a corporate
communications policy, and the integrity of internal corporate
control and corporate management systems.
The nominees for the Sideware board include individuals with the
experience and expertise to ensure that all required standards of
corporate governance are met:
- - The Sideware Board includes individuals with senior
executive experience with major companies in the computer
industry, to provide strategic planning, and to appoint,
train and provide guidance to senior management, and to
assist management in identifying and managing risk.
- - The Sideware Board also includes individuals with extensive
corporate experience to ensure that Sideware complies with
its public disclosure and communications obligations, and to
ensure that Sideware maintains proper internal controls and
information systems.
BOARD INDEPENDENCE
TSE regulations require that a majority of the Board of Directors
be independent. Of the existing and proposed nominees for
election as directors, Jay Nussbaum, Jack Kemp, John Shoemaker,
Kenneth Thornton, Edward White, and Peter Kozicki are
independent.
Grant Sutherland has historically served as Chairman of the Board
of Directors, and is not an independent director. The Board of
Directors has considered Mr. Sutherland an appropriate Chairman
because of his longstanding association with Sideware and his
legal training. Whether Mr. Sutherland will continue as Chairman
will be determined by the Board of Directors following the
Meeting. Subsequent to the
26
restructuring of the Sideware Board of Directors, the Board of
Directors has implemented a policy of conducting quarterly board
meetings.
Sideware has historically relied on business contacts of existing
directors as a means of recruiting new directors. Sideware
believes that given the level of experience of its existing
directors and nominees, that will be an adequate means of
recruiting directors for the foreseeable future.
BOARD COMMITTEES
Sideware has an audit committee, which currently consists of Mr.
Sutherland, Mr. White, and Mr. Kozicki. Mr. White and Mr.
Kozkicki are independent directors. Sideware has adopted a
written Audit Committee Charter, a copy of which is enclosed with
this Proxy Statement and Information Circular.
Historically, Sideware has functioned without additional
committees of the Board of Directors. Sideware considered this
appropriate given the size of Sideware, and the size of the Board
of Directors. Sideware will review the need for board committees
following the Meeting.
MANAGEMENT PROCEDURES
The Sideware Board of Directors has entrusted day to day
management of the affairs of Sideware to senior operating
personnel. Day to day management of operations is under the
control of Sideware's President, Executive Vice-President, Chief
Technology Officer, and Chief Financial Officer.
Senior operating personnel have direct access to members of the
Board of Directors. Sideware's Chairman currently devotes the
majority of his time to the affairs of Sideware, and is available
for direct consultation by senior operating personnel. Senior
operating personnel are also authorized to communicate directly
with individual members of the Board of Directors to raise issues
of concern.
All transactions involving the issuance of securities require
approval of the full Board of Directors.
Sideware employs investor relations personnel to monitor
communications with, and concerns of, shareholders. Investor
relations personnel are authorized to have direct communication
with Sideware's Chairman and President, to ensure that
shareholder concerns are brought to the attention of the Board of
Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Within the last three fiscal years, we have entered into the
transactions set out below in which our current directors or
officers were interested.
TRANSACTIONS WITH BRAINTECH, INC. AND TECHWEST MANAGEMENT
INC.
We have had several transactions with BrainTech, Inc. and
Techwest Management Inc.
BrainTech is a public company engaged in the business of
developing and marketing vision systems and related hardware and
software products. The directors of BrainTech are Owen Jones,
Grant Sutherland, James Speros, and Edward White. BrainTech
common shares are quoted on the OTC-Bulletin Board. As at the
date of this annual report, inclusive of options and warrants
exercisable within 60 days, Mr. Sutherland, Mr. Speros and Mr.
White own the following shares in BrainTech, Inc.:
Name Number of Shares % of Issued and Outstanding
Grant Sutherland 5,542,499 10.2%
James Speros 300,000 0.5%
27
Edward White 1,125,001 2.1%
Techwest is a private management company in which Owen Jones and
Grant Sutherland each hold 50% interests.
COST SHARING
Up to November 2000 we operated under a cost sharing arrangement
with BrainTech, pursuant to which we shared the following costs:
- - costs of our North Vancouver premises, which we shared with
BrainTech;
- - salary costs of certain personnel including, inter alia, the
salary costs of our accounting personnel; and
- - miscellaneous office charges, such as office supplies and
telephone and fax charges.
Prior to October 1999, we shared the common costs equally with
BrainTech. By a Cost Sharing and Allocation Agreement executed
in October 1999, we agreed with BrainTech to re-allocate the
common costs 80% to us and 20% to BrainTech effective from
January 1, 1999. The reason for the reallocation of costs was the
substantially greater level of our business, and our
corresponding greater use of the common premises and personnel.
Shared costs under the Cost Sharing and Allocation Agreement were
administered by Techwest. Techwest passed shared costs on to us
and to BrainTech at its costs, without any markup.
From time to time, either our payments or those of BrainTech
exceeded the proportionate share required under the cost sharing
arrangement, giving rise to indebtedness as between us, BrainTech
and Techwest Management. Accordingly, the payments were
reconciled and adjusted from time to time as required. Through
much of 1999, BrainTech was indebted to us (either directly or
indirectly through Techwest) as a result of BrainTech not paying
its proportionate share of the common operating costs, during
periods when BrainTech did not have cash available to do so. There
was no material indebtedness among Sideware, BrainTech, or Techwest
during 2000.
In the summer of 2000, BrainTech, Inc. began to move its
operations to separate premises. On November 6, 2000 we entered
into a letter agreement with BrainTech, Inc. under which we
agreed that BrainTech, Inc. could continue to use a portion of
our North Vancouver office, as well as certain services provided
by our personnel, during a transitional period not to exceed six
months. As at the date of this annual report, BrainTech, Inc. no
longer occupies any portion of those premises or makes any use of
our personnel.
The lease for our downtown Vancouver premises was originally
taken in the name of Techwest. By agreement dated January 19,
2001, Techwest assigned its interest in the premises to us.
PURCHASE OF COMPUTER EQUIPMENT
We purchase computer equipment for BrainTech, Inc. and Techwest
Management Inc., owing to favorable equipment pricing available
to us. Our current policy is to pass that equipment on at cost
to BrainTech, Inc. and Techwest Management Inc. Hardware sales
to BrainTech and Techwest totaled $81,945 during the fiscal year
ended December 31, 2000, $30,856 during the fiscal year ended
December 31, 1999, and $85,524 during the eight month period
ended December 31, 1998.
WIZMASTER
In September 1999, we entered into a Software Development and
License Agreement with BrainTech. Under that agreement,
BrainTech developed a program named "Wizmaster", which enables
the user,
28
through a drop-and-drag procedure, to construct
customized knowledge trees. We incorporated Wizmaster into
version 3.1 of Dr. Bean, but we no longer make any use of the
Wizmaster program. We paid approximately $11,400 to BrainTech
for the development of Wizmaster.
KOSTIUK LITIGATION
Effective October 31, 1998 we purchased an interest in the
proceeds of a judgment which BrainTech had obtained against John
Kostiuk, in the amount of $300,000, in the Supreme Court of
British Columbia. We paid $132,000 on account of the purchase
price, which was subject to adjustment depending on the benefit
we ultimately received from the judgment. On March 18, 1999 the
British Columbia Court of Appeal allowed an appeal from the
judgment, and BrainTech repaid the $132,000.
PARTNER PROGRAM
BrainTech is a participant in the Sideware Partner Program.
PRIVATE PLACEMENTS
Our directors and executive officers have acquired the following
securities in private placements during the last three fiscal
years.
(1) In a private placement completed January 14, 1999 James
Speros acquired 600,000 Special Warrants at a price of C$0.28 per
Special Warrant. Each Special Warrant was exercisable at any
time within one year, without additional consideration, into one
unit comprised of one share and one non-transferable share
purchase warrant. Each share purchase warrant would entitle the
holder thereof to purchase one additional share for a period of
two years at a price of C$0.28 per share for the first year and
C$0.32 per share in the second year. The Special Warrants were
exercised on June 4, 1999.
(2) In a private placement completed January 7, 1999, the
following directors and executive officers acquired Special
Warrants at a price of C$0.35 per Special Warrant:
Grant Sutherland 297,500 Special Warrants
Peter Kozicki 50,000 Special Warrants
Each Special Warrant was exercisable at any time within a period
of one year, without additional consideration, into 1.1 units,
with each unit comprised of one share and one non-transferable
share purchase warrant. Each share purchase warrant would
entitle the holder to purchase one additional share for a period
of two years at a price of C$0.35 per share for the first year
and C$0.40 per share in the second year. The Special Warrants
were exercised on June 4, 1999.
(3) In a private placement completed April 14, 1999, the
following directors and executive officers acquired Special
Warrants at a price of C$0.55 per Special Warrant:
Grant Sutherland 1,000,000 Special Warrants
Jim Speros 1,000,000 Special Warrants
Each Special Warrant was exercisable at any time within a period
of one year, without additional consideration, into one unit
comprised of one share and one non-transferable share purchase
warrant. Each share purchase warrant would entitle the holder
thereof to purchase one additional share for a period of two
years at a price of C$0.55 per share for the first year and
C$0.63 per share in the second year. The Special Warrants were
exercised on June 4, 1999.
(4) In a private placement completed January 21, 2000 the
following directors and executive officers acquired Units at a
price of $1.64 per Unit:
29
Grant Sutherland 60,000 Units
Jim Speros 60,000 Units
Each Unit consisted of one share and one share purchase warrant.
Each share purchase warrant would entitle the holder thereof to
purchase one additional share for a period of two years at a
price of $0.1.64 per share for the first year and $1.89 per share
in the second year.
(5) In a private placement completed February 22, 2001 the
following directors and executive officers acquired Units at a
price of $0.80 per Unit:
Grant Sutherland 1,250,000 Units.
Each Unit consisted of one share and one share purchase warrant.
Each share purchase warrant would entitle the holder thereof to
purchase one additional share for a period of three years at a
price of $1.00 per share.
OTHER TRANSACTIONS
We have acquired legal services from the law firm Sutherland
Johnston, of which Grant Sutherland is a partner. The amount of
those legal services prior to December 31, 1998 was not material.
During the years ended December 31, 1999 and December 31, 2000,
we paid legal fees to Sutherland Johnston of approximately
$138,000 and $258,000, respectively. In addition, we have sold
approximately $24,000 in computer equipment at cost to Dunsmuir
Management Ltd., a management company owned by Sutherland
Johnston.
We acquired our interest in the premises at 1600 - 777 Dunsmuir
Street, Vancouver, British Columbia through an assignment from
SJM Management Ltd., a management company for the law firm
Sutherland Johnston. The assignment covered the period from July
1, 1999 to December 31, 2000. Under the assignment, SJM
Management Ltd. assigned its interest in respect of the premises
at Suite 1600 to Techwest Management Inc., which agreed to
perform all of the obligations of the tenant under the lease. We
signed the lease as an indemnifier, and were liable to perform
all of the obligations of the assignee, including the payment of
rent. The term covered by the assignment has expired.
Paul Hildebrand is our corporate Secretary, and has been an
employee of Sideware Systems Inc. since January 1, 2000. Prior
to December 31, 1999 we have acquired legal services from Dale W.
Wilcox, a Law Corporation, a law firm with which Mr. Hildebrand
is associated. Between May 3, 1995 and December 31, 1999, Dale
W. Wilcox, a Law Corporation has received payments totaling
$377,000 in fees (exclusive of taxes and disbursements) for legal
services.
We have granted the following stock options to Mr. Hildebrand:
(1) options to purchase 100,000 shares at C$0.50 per share
expiring May 1, 2001;
(2) options to purchase 75,000 shares at C$0.70 per share
expiring December 16, 2002;
(3) options to purchase 55,000 shares at C$1.35 per share
expiring April 29, 2004;
(4) options to purchase 100,000 shares at C$2.33 per share
expiring June 17, 2004;
(5) options to purchase 25,000 shares at C$2.78 per share
expiring October 20, 2004;
(6) options to purchase 300,000 shares at $11.08 per share
expiring Januay 21, 2005;
(7) options to purchase 300,000 shares at $5.10 per share
expiring April 20, 2005; and.
(8) options to purchase 150,000 shares at $1.00 per share
expiring January 18, 2006.
In addition, Mr. Hildebrand and Alder Enterprises Ltd., a private
company in which Mr. Hildebrand owns a 45% interest, have also
acquired the following shares, special warrants, and share
purchase warrants pursuant to private placements:
30
(1) In a private placement completed November 19, 1998, Mr.
Hildebrand acquired 90,000 Special Warrants at a price of C$0.32
per Special Warrant. Each Special Warrant was exercisable at any
time within a period of one year, without additional
consideration, into one unit comprised of one share and one non-
transferable share purchase warrant. Each share purchase warrant
would entitle the holder thereof to purchase one additional share
for a period of two years from the date of issuance of the
Special Warrants at a price of C$0.32 per share for the first
year and C$0.37 per share in the second year. The Special
Warrants were exercised on June 4, 1999.
(2) In a private placement completed January 7, 1999, Mr.
Hildebrand and Alder Enterprises Ltd. acquired, respectively,
30,000 and 277,500 Special Warrants. Each Special Warrant was
exercisable at any time within a period of one year, without
additional consideration, into 1.1 units, with each unit
comprised of one share and one non-transferable share purchase
warrant. Each share purchase warrant would entitle the holder to
purchase one additional share for a period of two years at a
price of C$0.35 per share for the first year and C$0.40 per share
in the second year. The Special Warrants were exercised on June
4, 1999.
(3) In a private placement completed February 22, 2001, Mr.
Hildebrand and Alder Enterprises Ltd. acquired, respectively,
187,500 and 125,000 Units at a price of $0.80 per Unit. Each
Unit consisted of one share and one share purchase warrant. Each
share purchase warrant would entitle the holder thereof to
purchase one additional share for a period of three years at a
price of $1.00 per share.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
To the best of the knowledge of Sideware, all reports required
under Section 16(a) of the Exchange Act during the year ended
December 31, 2000 were filed in a timely way.
PROPOSALS OF SHAREHOLDERS
Sideware must receive proposals of shareholders intended to be
presented at the 2002 annual meeting of shareholders no later
than January 16, 2001 in order that they be included in the Proxy
Statement and Information Circular and form of proxy for that
meeting. Sideware reserves the right to reject, rule out of
order, or take other appropriate action with respect to any
proposal that does not comply with these and other applicable
requirements.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into
this Proxy Statement and Information Circular:
(1) Annual Report on Form 10-K for the year ended December 31,
2000 and our first amendment to the Annual Report on Form
10-K/A.
AVAILABILITY OF DOCUMENTS
Upon request made to the Secretary of Sideware at 1600 - 777
Dunsmuir St., Vancouver, B.C. V7Y 1K4 Sideware will send a copy
of any or all of the following documents to the person making the
request and, in the case of a shareholder, will send the
documents without charge:
(1) Sideware's most current Annual Information Form filed with
the British Columbia Securities Commission and the Ontario
Securities Commission, together with one copy of any
document, or the pertinent pages of any document,
incorporated by reference in the Annual Information Form;
31
(2) Sideware's most recently filed comparative annual financial
statements, together with the accompanying report of the
auditor, and any interim financial statements that have been
filed for any period after the end of the most recently
completed financial year; and
(3) The information circular for the most recent annual meeting
of shareholders that involved the election of directors or
any annual filing prepared instead of that information
circular, as appropriate.
DATED: Vancouver, British Columbia, May 11, 2001.
BY ORDER OF THE BOARD
"GRANT SUTHERLAND"
CHAIRMAN
SIDEWARE SYSTEMS INC.
1810 Samuel Morse Drive
Reston, Virginia, USA 20190-5316
32
SIDEWARE SYSTEMS INC.
STOCK OPTION PLAN (2001)
1. INTERPRETATION
1.1 DEFINED TERMS - For the purposes of this Plan, the following
terms have the following meanings:
(a) "AFFILIATE" means a Parent Corporation or a Subsidiary
Corporation of a corporation;
(b) "BOARD" means the Board of Directors of the Company;
(c) "CDNX" means the Canadian Venture Exchange;
(d) "COMMITTEE" means a committee of the Board appointed in
accordance with this Plan, or if no such committee is
appointed, the Board itself;
(e) "COMPANY" means Sideware Systems Inc.;
(f) "DATE OF GRANT" means the date on which an Option is
granted;
(g) "DISABILITY" means a medically determinable physical or
mental impairment expected to result in death or to last for
a continuous period of not less than six months, and which
causes an individual to be unable to engage in any
substantial gainful activity;
(h) "EFFECTIVE DATE" means the effective date of this Plan,
which is December 6, 2000;
(i) "FAIR MARKET VALUE" means:
(i) where the Shares are listed for trading on the CDNX
only, the minimum price at which options may be granted
under CDNX rules, regulations and policies; or
(ii) where the Shares are listed for trading on the TSE,
whether or not interlisted with any other stock
exchange or an over the counter market, the closing
price of the Shares on the TSE on the last trading day
prior to the Date of Grant; or
(iii) where the Shares are listed for trading on a stock
exchange or over the counter market other than the CDNX
or the TSE, the value which is determined by the
Committee in accordance with the rules, regulations and
policies, if any, of any such stock exchange or over the
counter market; or
(iv) where the Shares are not listed for trading on a stock
exchange or over the counter market, the value which is
determined by the Committee to be the fair value of the
- 2 -
Shares as of the day immediately prior to the Date of
Grant, taking into consideration all factors that the
Committee deems appropriate, including, without
limitation, recent sale and offer prices of the Shares
in private transactions negotiated at arm's length;
(j) "GUARDIAN" means the guardian, if any, appointed for an
Optionee;
(k) "OPTION" means an option to purchase Shares granted pursuant
to the terms of this Plan;
(l) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee specifying the terms of the Option
being granted to the Optionee under the Plan;
(m) "OPTION PRICE" means the price at which a Share may be
purchased by an Optionee under an Option;
(n) "OPTIONEE" means a person to whom an Option has been
granted;
(o) "PARENT CORPORATION" means any corporation in an unbroken
chain of corporations ending with the Company if, at the
Date of Grant, each corporation, other than the Company,
owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the
other corporations in such chain;
(p) "PLAN" means this stock option plan of the Company;
(q) "SUBSIDIARY CORPORATION" means any corporation in an
unbroken chain of corporations beginning with the Company
if, at the Date of Grant, each of the corporations, other
than the last corporation, owns stock possessing 50 percent
or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain;
(r) "SHARES" means common shares without par value in the
capital of the Company;
(s) "TERM" means the period of time during which an Option is
exercisable; and
(t) "TSE" means the Toronto Stock Exchange.
2. STATEMENT OF PURPOSE
2.1 PRINCIPAL PURPOSES - The principal purposes of the Plan are
to:
- 3 -
(a) promote a proprietary interest in the Company among the
directors, officers, employees and consultants of the
Company and its Affiliates;
(b) retain and attract the qualified directors, officers,
employees and consultants the Company and its Affiliates
require;
(c) provide a long-term incentive element in overall
compensation; and
(d) promote the long-term profitability of the Company and its
Affiliates.
3. ADMINISTRATION
3.1 BOARD OR COMMITTEE - The Plan shall be administered by the
Board or, if the Board so designates, by a Committee. Once
appointed, the Committee shall continue to serve until otherwise
directed by the Board. From time to time, the Board may increase
the size of the Committee and appoint additional members, remove
members (with or without cause) and appoint new members in their
place, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
3.2 QUORUM AND VOTING - A majority of the members of the
Committee shall constitute a quorum, and, subject to the
limitations in this Section 3.2, all actions of the Committee
shall require the affirmative vote of members who constitute a
majority of such quorum. Members of the Committee may vote on
any matters affecting the administration of the Plan or the grant
of Options pursuant to the Plan, except that no such member shall
act upon the granting of an Option to himself (but any such
member may be counted in determining the existence of a quorum at
any meeting of the Committee during which action is taken with
respect to the granting of Options to him).
3.3 POWERS OF COMMITTEE - The Committee will have the power and
authority to do the following:
(a) administer the Plan in accordance with its express terms,
including the authority to grant Options;
(b) determine all questions arising in connection with the
administration, interpretation, and application of the Plan,
including all questions relating to the value of the Shares;
(c) correct any defect, supply any information, or reconcile any
inconsistency in the Plan in such manner and to such extent
as shall be deemed necessary or advisable to carry out the
purposes of the Plan;
- 4 -
(d) prescribe, amend, and rescind rules and regulations relating
to the administration of the Plan;
(e) determine the duration and purposes of leaves of absence
from employment which may be granted to Optionees without
constituting a termination of employment for purposes of the
Plan; and
(f) do the following with respect to the granting of Options:
(i) determine when Options shall be granted,
(ii) determine the employees, officers, directors, or
consultants of the Company and of its Affiliates to
whom Options shall be granted, based on the eligibility
criteria set out in this Plan,
(iii) determine the number of Shares subject to each
Option,
(iv) determine the Option Price of each Option,
(v) determine the vesting schedule, if any, upon which the
exercise of an Option is contingent, including, without
limitation, discretion to:
(A) allow full and immediate vesting upon the grant of
such Option,
(B) permit partial vesting in stated percentage
amounts based on the length of the Term of such
Option, or
(C) permit full vesting after a stated period of time
has passed from the Date of Grant;
(vi) determine the terms and provisions of the Option
Agreement to be entered into with any Optionee (which
need not be identical with the terms of any other
Option Agreement),
(vii) amend the terms and provisions of Option
Agreements, provided the Committee obtains:
(A) the consent of the Optionee, and
(B) any required approval of any stock exchange on
which the Company is listed; and
- 5 -
make all other determinations necessary or advisable for
administration of the Plan. Notwithstanding paragraph (v),
while the Company is listed on the CDNX and is considered a
Tier 2 company, vesting schedules for Options issued
pursuant to this Plan shall be, at a minimum, in accordance
with CDNX policy, unless upon application CDNX permits a
more favourable vesting schedule in any particular case.
3.4 ADMINISTRATION BY COMMITTEE - The Committee's administration
of the Plan shall in all respects be consistent with the policies
and rules of any stock exchange and/or over the counter market on
which the Shares are listed. All determinations made by the
Committee in good faith on matters referred to in Section 3.3
shall be final, conclusive, and binding upon the Company and the
relevant Optionee.
4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES - Subject to adjustment as contemplated by
section 11, the number of Shares that may be issued pursuant to
the exercise of Options under the Plan shall not exceed 6,000,000
in the aggregate. Any stock options of the Company outstanding
immediately prior to the Effective Date shall not be considered
Options for any purpose under the Plan.
4.2 EXPIRY OF OPTION - Should an Option expire, terminate or
cease to be exercisable in accordance with the terms of the Plan
without having been exercised in full, then the Shares which were
set aside for issue pursuant to that Option but which were not
issued shall become available for issue pursuant to the Plan.
4.3 LIMITATIONS - Notwithstanding any other provision of the
Plan, at no time may the number of shares reserved for issuance
pursuant to stock options granted to any one person, whether
granted pursuant to the Plan or otherwise, exceed 5% of the
issued and outstanding Shares from time to time. Subject to the
foregoing, there is no limitation on the ability of the Company
to grant options to its insiders and their associates.
5. ELIGIBILITY
5.1 ELIGIBILITY - Options may be granted to any director,
officer, employee or consultant of the Company or of any of its
Affiliates. An Optionee shall not be precluded from being granted
an Option solely because such Optionee may previously have been
granted an Option under the Plan.
5.2 NO VIOLATION OF LAWS - No Option shall be granted to any
Optionee unless the Committee has determined that the grant of
such Option and the exercise thereof by the Optionee will not
violate applicable securities laws.
- 6 -
6. GRANTING OF OPTIONS
6.1 GRANTS OF OPTIONS - The Committee may from time to time
designate directors, officers, employees or consultants of the
Company or of its Affiliates to whom Options to purchase Shares
may be granted and the number of Shares to be optioned to each,
provided that the total number of Shares to be optioned shall not
exceed the number provided in Section 4.1 of this Plan.
6.2 OPTION AGREEMENT - Each Option granted under the Plan shall
be evidenced by an Option Agreement between the Company and the
Optionee in such form as shall be approved by the Committee,
which Option Agreement shall include the following terms:
(a) the number of Shares subject to purchase pursuant to such
Option;
(b) the Date of Grant;
(c) the Term, including the provisions in Section 7 of this
Plan;
(d) the Option Price, provided that the Option Price shall not
be less than the Fair Market Value of the Shares;
(e) any vesting schedule upon which the exercise of an Option is
contingent;
(f) a provision that the Option is not assignable or
transferable; and
(g) such other terms and conditions as the Committee deems
advisable and are consistent with this Plan.
7. OPTION TERM
7.1 OPTION TERM - The Term of an Option, subject to the
provisions of the Plan requiring acceleration of rights of
exercise, will be such period as may be determined by the
Committee but subject to the rules of any stock exchange or other
regulatory body having jurisdiction, except that in no case shall
the Term of any Option exceed ten years from the Date of Grant.
In addition, each Option Agreement shall provide that:
(a) upon the death of the Optionee, the Option may be exercised
by the legal heirs or personal representatives of the
Optionee until the date determined by the Committee which
shall not be more than twelve months from the date of death;
(b) if the position of an Optionee as a director or officer of
the Company or of an Affiliate of the Company, or the
employment of an Optionee as an employee or consultant of
the Company or of an Affiliate of the Company, is terminated
by the Company or its
- 7 -
Affiliate by reason of such Optionee's
Disability, any Option held by such Optionee that could have
been exercised immediately prior to such termination of
service shall be exercisable by such Optionee, or by his
Guardian, for a period of 12 months following the
termination of service of such Optionee;
(c) if an Optionee who has ceased to be a director, officer,
employee or consultant of the Company or of an Affiliate of
the Company by reason of such Optionee's Disability dies
within six months after the termination of such employment,
any Option held by such Optionee that could have been
exercised immediately prior to his or her death shall pass
to the legal heirs or personal representatives of such
Optionee, and shall be exercisable by such person for a
period of 12 months following the death of such Optionee;
(d) if the Optionee shall no longer be a director, officer,
employee or consultant of the Company or of an Affiliate of
the Company by reason other than such Optionee's Disability,
the Option shall terminate on the expiry of the period, not
in excess of 90 days, prescribed by the Committee at the
Date of Grant, following the date that the Optionee ceases
to be a director, officer, employee or consultant of either
the Company or an Affiliate of the Company;
provided that nothing in the foregoing shall have the effect of
extending the Term of an Option beyond its original expiry date
and provided that the number of Shares that the Optionee (or his
Guardian or legal heirs or personal representatives) shall be
entitled to purchase until such date of termination shall be the
number of Shares which the Optionee was entitled to purchase on
the date of death or the date the Optionee ceased to be a
director, officer, employee or consultant of the Company or its
Affiliate, as the case may be, notwithstanding the fact that the
Option may have vested thereafter with respect to the purchase of
additional shares.
7.2 DEEMED NON-INTERRUPTION OF EMPLOYMENT - Employment shall be
deemed to continue intact during any sick leave or other bona
fide leave of absence if the period of such leave does not exceed
90 days or, if longer, for so long as the Optionee's right to
reemployment with the Company or an Affiliate of the Company is
guaranteed either by statute or by contract; but if the period of
such leave exceeds 90 days and the Optionee's reemployment is not
so guaranteed, then his or her employment shall be deemed to have
terminated on the ninety-first day of such leave.
7.3 VOLUNTARY TERMINATION - The Committee may, with the consent
of an Optionee, cancel any outstanding Option.
- 8 -
8. EXERCISE OF OPTION
8.1 METHOD OF EXERCISE - An Option may be exercised from time to
time by delivery to the Company at its head office or such other
place as may be specified by the Company, of a written notice of
exercise specifying the number of Shares with respect to which
the Option is being exercised accompanied by payment in full of
the purchase price of the Shares then being purchased by way of
certified cheque or bank draft. In the event of the exercise of
an Option by an Optionee's legal heirs or personal
representatives, such legal heirs or personal representatives
shall also deliver evidence satisfactory to the Company that they
are entitled to exercise the Option.
8.2 ISSUANCE OF CERTIFICATE - As soon as practicable after
exercise of an Option in accordance with Section 8.1, the Company
shall issue a certificate evidencing the Shares with respect to
which the Option has been exercised. Until the issuance of such
certificate, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to such Shares,
notwithstanding the exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date
is prior to the date the certificate is issued.
9. RESTRICTIONS ON EXERCISE
9.1 REGULATORY COMPLIANCE - The exercise of each Option granted
under the Plan shall be subject to the condition that if at any
time the Company shall determine in its sole discretion that it
is necessary or desirable to comply with any legal requirements
or the requirement of any stock exchange or other regulatory
authority or to obtain any approval or consent from any such
stock exchange or other regulatory authority as a condition of,
or in connection with, such exercise or the issue of Shares as a
result thereof, then in any such event such exercise shall not be
effective unless such compliance shall have been effected or such
approval or consent obtained on conditions satisfactory to the
Company. The Company's inability to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability with respect to the failure to issue or sell such
Shares.
10. RESTRICTIONS ON TRANSFER
10.1 NON-ASSIGNABILITY - No Option shall be assignable,
negotiable or otherwise transferable other than by will or the
laws of descent and distribution and shall, subject to the terms
hereof, be exercisable only by the Optionee to whom it is granted
or such Optionee's legal heirs or personal representatives.
- 9 -
11. ADJUSTMENTS
11.1 ALTERATION OF CAPITAL - In the event of any material change
in the outstanding common shares of the Company prior to complete
exercise of any Option by reason of any stock dividend, split,
recapitalization, amalgamation, merger, consolidation,
combination or exchange of shares or other similar corporate
change, an equitable adjustment shall be made in one or more of
the maximum number or kind of shares issuable under the Plan or
subject to outstanding Options or the Option Price of such
shares. Any such adjustment shall be made in the sole discretion
of the Board, acting on recommendations made by the Committee,
and shall be conclusive and binding for all purposes of the Plan.
11.2 GENERAL OFFER FOR SHARES - Notwithstanding anything else
herein to the contrary, in the event an offer to purchase common
shares of the Company shall be made to the holders of common
shares generally, unless the Board determines that such offer
will not result in any change in control of the Company, or in
the event of a sale of all or substantially all of the assets of
the Company or the sale, pursuant to an agreement with the
Company, of securities of the Company pursuant to which the
Company is or becomes a subsidiary of another corporation, then
unless provision is made by the acquiring corporation for the
assumption of each Option or the substitution of a substantially
equivalent option therefor, the Company shall give written notice
thereof to each Optionee holding Options under the Plan and such
Optionees shall be entitled to exercise all such Options in
respect of all Shares to which Options relate to the extent
previously unexercised, regardless of whether such Optionee would
otherwise be entitled to exercise such Options to such extent at
that time, and the Optionees shall be entitled to exercise such
Options up to the closing date of any of the aforementioned
transactions, or such other date determined by the Company
provided that the Company has given thirty (30) days written
notice of such date to each Optionee. Any Options not so
exercised will immediately terminate.
11.3 NO FRACTIONS - No fractional Shares shall be issued upon the
exercise of an Option and accordingly, if as a result of any
adjustment set out above an Optionee would be entitled to a
fractional Share, the Optionee shall have the right to purchase
only the adjusted number of full Shares and no payment or other
adjustment shall be made with respect to the fractional Share so
disregarded.
12. NO OBLIGATION TO RETAIN OPTIONEE
12.1 NO OBLIGATION TO RETAIN OPTIONEE - Nothing contained in this
Plan shall obligate the Company or an Affiliate of the Company to
retain an Optionee as an employee, officer, director, or
consultant for any period, nor shall this Plan interfere in any
way with the right of the Company or Affiliates of the Company to
reduce such Optionee's compensation.
- 10 -
13. CONDITIONS PRECEDENT
13.1 APPROVALS - The Plan is subject to the approval, if
required, of any stock exchange on which the Company's common
shares are listed for trading and is also subject to approval by
the shareholders of the Company. Any Options granted prior to
such approvals shall be conditional upon such approvals being
given and no such Options may be exercised unless such approvals,
if required, are given.
14. EFFECTIVE DATE OF PLAN
14.1 EFFECTIVE DATE - The effective date of the Plan is December
6, 2000, subject to receipt of all regulatory approvals which the
Company requires in connection with the implementation of the
Plan and subject to approval of the Plan by the shareholders of
the Company.
15. AMENDMENT AND TERMINATION
15.1 AMENDMENT AND TERMINATION - The Board may at any time and
from time to time amend, suspend or terminate the Plan in whole
or in part; provided, however, that any such amendment will be
subject to regulatory approval and, other than as set out in
Section 11, no such amendment may increase the maximum number of
Shares that may be optioned under the Plan, materially modify the
requirements as to eligibility for participation in the Plan or
change the manner of determining the Option Price unless such
amendment is approved by the affirmative votes of the holders of
a majority of the voting securities of the Company present or
represented and entitled to vote at a meeting duly held in
accordance with the applicable corporate laws or by the written
consent of the holders of a majority of the securities of the
Company entitled to vote; provided however, that the Company may
amend the terms of the Plan to comply with the requirements of
any applicable regulatory authority without obtaining the
approval of its shareholders. No such amendment, suspension or
termination shall adversely affect rights under any Options
previously granted without the consent of the Optionees to whom
such Options were granted.
15.2 NO GRANT DURING SUSPENSION OF PLAN - No Option may be
granted during any suspension or after termination of the Plan.
Amendment, suspension, or termination of the Plan shall not,
without the consent of the Optionee, alter or impair any rights
or obligations under any Option previously granted.
16. COMPLIANCE WITH LAWS
16.1 Transactions under the Plan are intended to comply with all
relevant provisions of law and the rules, regulations and
policies of any stock exchange or market upon which the Shares
may be listed or quoted. To the extent any provision of the Plan
or action by the Committee
- 11 -
fails to so comply, the Committee may, to the extent permitted by
law, do any of the following as it deems advisable:
(a) treat such provision as null and void; or
(b) amend the terms of the Plan to comply with such
applicable laws, rules, regulations, or policies; or
(c) ensure that the administration of the Plan and the
terms of the individual option agreements comply with
such applicable laws, rules, regulations, and policies.
17. GOVERNING LAW
17.1 LAW - The laws of the Province of British Columbia shall
govern the Plan and all rights and obligations hereunder shall be
determined in accordance with such laws.
SIDEWARE SYSTEMS INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. Function of Audit Committee
The primary function of the Audit Committee is to assist
the Board of Directors in fulfilling its oversight
responsibilities by reviewing: the financial reports and other
financial information provided by the Corporation to any
governmental body or the public; the Corporation's systems of
internal controls regarding finance, accounting, and legal
compliance that management and the Board have established; and
the Corporation's auditing, accounting and financial reporting
processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should
foster adherence to, the corporation's policies, procedures and
practices at all levels. The Audit Committee's primary duties
and responsibilities are to:
- - Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal
control systems.
- - Review and appraise the audit efforts of the Corporation's
independent accountants and internal accounting personnel.
- - Provide an open avenue of communication among the
independent accountants, financial and senior management,
the internal accounting personnel, and the Board of
Directors.
The Audit Committee will primarily fulfill these
responsibilities by carrying out the activities enumerated in
Section IV, of this Charter.
II. Composition of Committee
The Audit Committee shall be comprised of three directors
as determined by the Board, a majority of whom shall be
independent directors, and free from any relationship that, in
the opinion of the Board, would interfere with the exercise of
his or her independent judgment as a member of the Committee. A
director is independent if he or she is not an employee or
contractor of the Company or an affiliate of the Company, if he
or she does not alone or together with a group of persons acting
in concert, directly or indirectly, control the Company and if he
or she meets all other independence criteria of the SEC. All
members of the Committee shall have a working familiarity with
basic finance and accounting practices, and at least one member
of the Committee shall have accounting or related financial
management expertise.
The members of the Committee shall be elected by the Board
at the annual organization meeting of the Board or until their
successors shall be duly elected and
-2-
qualified. The members of the Committee shall designate a Chair
by majority vote of the full Committee membership.
III. Meetings of the Committee
The Committee shall meet at least four times annually, or
more frequently as circumstances dictate. As part of its job to
foster open communication, the Committee should meet at least
annually with management, the senior accounting officer and the
independent accountants in separate sessions to discuss any
matters that the Committee or each of these groups believe should
be discussed privately.
IV. Responsibilities and Duties
To fulfill its responsibilities and duties the Audit
Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, at least
annually, as conditions dictate.
2. Review the organization's annual financial statements and
any reports or other financial information submitted to any
governmental body, or the public, including any certification,
report, opinion, or review rendered by the independent
accountants.
3. Review all internal reports to management prepared by the
internal accounting personnel and management's response.
Independent Accountants
4. Recommend to the Board of Directors the selection of the
independent accountants, considering the independent accountants'
independence and effectiveness and approve the fees and other
compensation to be paid to the independent accountants. On an
annual basis, the Committee should review and discus with the
accountants all significant relationships the accountants have
with the Company to determine the accountants' independence.
5. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.
6. Periodically consult with the independent accountants out
of the presence of management about internal controls and the
fullness and accuracy of the organization's financial statements.
-3-
Financial Reporting Processes
7. In consultation with the independent accountants and the
internal accounting personnel, review the integrity of the
organization's financial reporting processes, both internal and
external.
8. Consider the independent accountants' judgments about the
quality and appropriateness of the Company's accounting
principles as applied in its financial reporting.
9. Consider and approve, if appropriate, major changes to the
Company's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the
internal accounting personnel.
Process Improvement
10. Following completion of the annual audit, review separately
with each of management, the independent accounts and the
internal accounting personnel any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information.
11. Review any significant disagreement among management and
the independent accountants or the internal accounting personnel
in connection with the preparation of the financial statements.
12. Review with the independent accountants, the internal
accounting department and management the extent to which changes
or improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented. (This review
should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the
Committee).
Legal Compliance
13. Review activities, organization structure, and
qualifications of the internal accounting department.
14. Review, with the organization's counsel, any legal matter
that could have a significant impact on the organization's
financial statements.
15. Perform any other activities consistent with this Charter,
the Corporation's By-laws and governing law, as the Committee or
the Board deems necessary or appropriate.