6-K 1 iqpower6k_07192004.txt FORM 6-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Issuer Pursuant to Rule 13A-16 or 15D1-6 of the Securities Exchange Act of 1934 For the month of: July 2004 Commission File Number: 000-26165 IQ POWER TECHNOLOGY INC. (Translation of registrant's name into English) Erlenhof Park Inselkammer Strasse 4 D-82008 Unterhaching, Germany ------------------------------------------------------------------- (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F Form 20-F [X] Form 40-F _____ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ________ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____ Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ______ No ______ If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b) 82 -- _________ SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. iQ POWER TECHNOLOGY INC. By /s/ Gregory A. Sasges -------------------------------------- Greg A. Sasges, Corporate Secretary Date: July 19, 2004 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form CB TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM (AMENDMENT NO. ___) Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form: Securities Act Rule 801 (Rights Offering) [ ] Securities Act Rule 802 (Exchange Offer) [X] Exchange Act Rule 13e-4(8) (Issuer Tender Offer) [ ] Exchange Act Rule 14d-1(c) (Third Party Tender Offer) [ ] Exchange Act Rule 14e-2(d) (Subject Company Response) [ ] IQ POWER TECHNOLOGY INC. ---------------------------------------------------------------- (Name of Subject Company) (Translation of Subject Company's Name into English (if applicable) British Columbia, Canada ---------------------------------------------------------------- (Jurisdiction of Subject Company's Incorporation or Organization) (Name of Person(s) Furnishing Form) Common Shares ---------------------------------------------------------------- (Title of Class of Subject Securities) (CUSIP Number of Class of Securities (if applicable) Kenneth G. Sam, Esq. Dorsey & Whitney LLP 1420 Fifth Avenue, Suite 3400 Seattle, Washington 90101 206-903-8804 ---------------------------------------------------------------- (Name, Address (including zip code) and Telephone Number (including area code) of Person(s) Authorized to Receive Notices and Communications on Behalf of Subject Company) June 30, 2004 ---------------------------------------------------------------- (Date Tender Offer/Rights Offering Commenced) Signatures After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. /s/ Gregory A. Sasges ---------------------------------------- (Signature) Gregory A. Sasges, Secretary ---------------------------------------- (Name and Title) July 17, 2004 ---------------------------------------- (Date) iQ POWER TECHNOLOGY INC. SUPPLEMENT TO MANAGEMENT PROXY CIRCULAR FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF IQ POWER TECHNOLOGY INC. SCHEDULED FOR JUNE 30, 2004 iQ POWER TECHNOLOGY INC. SUPPLEMENT TO MANAGEMENT PROXY CIRCULAR Note to United States Shareholders The transactions contemplated by the Special Resolution authorizing iQ Power Technology Inc. (hereinafter variously referred to as "we," "us," "our, and "the Corporation") to apply for continuance under Swiss corporation law as if the Corporation had been incorporated thereunder (the "Continuance"), details of which, including a copy of the proposed Special Resolution, are contained in the accompanying Management Proxy Circular, and repealing the existing Articles of the Corporation on such continuation, are subject to the Canada Business Corporations Act and the Swiss Code of Obligations. The Continuance is deemed to be an offer for the securities of a foreign corporation, iQ Power Technology Inc., by the continued corporation. The Continuance is subject to the disclosure requirements of a foreign country that are different from those of the United States. If the Continuance is completed, we (as a Swiss corporation) will be deemed to have issued new securities to our security holders, including common shares to our common shareholders, options to our option holders, warrants to our warrant holders and debt securities to our debt holders (collectively, the "Securities"). These Securities will be offered in the United States pursuant to an exemption from the U.S. tender offer rules provided by Rule 14d-1(c) under the Securities Exchange Act of 1934, as amended, and pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "1933 Act"), provided by Rule 802 thereunder. The Securities to be issued pursuant to the Continuance will be unregistered restricted securities within the meaning of Rule 144 under the 1933 Act to the same extent and proportion that the securities tendered or exchanged by the holder in that transaction were restricted securities. Consequently, shareholders holding unrestricted securities of the Corporation will be deemed to exchange their securities in the Continuance for unrestricted Securities that are freely transferable under United States federal securities laws, except for such shares held by persons who are "affiliates" (as such term is defined under Rule 144(a)(1) of the Securities Act) of the Corporation. The Securities held by such affiliates may be resold by them only in transactions permitted by the resale provisions of Rule 145(d)(1), (2), or (3) promulgated under the 1933 Act or as otherwise permitted under the 1933 Act, including pursuant to exemptions from registration available under Regulation S promulgated under the 1933 Act. Rule 144(a)(1) defines affiliates as "a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control of such issuer," and the term generally includes the directors, officers or 10% shareholders of an issuer. Shareholders who reside in the United States or who are U.S. citizens have been advised to seek their own legal counsel with respect to the effect the proposed Continuance may have on their right to trade the Securities deemed to be received by them. The Securities offered in connection with the Continuance have not been and will not be registered under the 1933 Act or under the securities laws of any state or district of the United States. Neither the U.S. Securities and Exchange Commission nor any U.S. state securities commission has approved the Securities, or determined if this document is accurate or complete. Any representation to the contrary is a criminal offence. IT MAY BE DIFFICULT FOR YOU TO ENFORCE YOUR RIGHTS OR BRING ANY CLAIM YOU MAY HAVE ARISING UNDER THE FEDERAL SECURITIES LAWS, SINCE THE CORPORATION IS LOCATED IN A FOREIGN COUNTRY, AND SOME OR ALL OF ITS OFFICERS AND DIRECTORS MAY BE RESIDENTS OF A FOREIGN COUNTRY. YOU MAY NOT BE ABLE TO SUE A FOREIGN COMPANY OR ITS OFFICERS OR DIRECTORS IN A FOREIGN COURT FOR VIOLATIONS OF THE U.S. SECURITIES LAWS. IT MAY BE DIFFICULT TO COMPEL A FOREIGN COMPANY AND ITS AFFILIATES TO SUBJECT THEMSELVES TO A U.S. COURT'S JUDGMENT. iQ POWER TECHNOLOGY INC. NOTICE OF MEETING AND MANAGEMENT PROXY CIRCULAR FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF IQ POWER TECHNOLOGY INC. SCHEDULED FOR JUNE 30, 2004 IQ POWER TECHNOLOGY INC. NOTICE OF 2004 ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 2004 annual general meeting (the "Meeting") of members of iQ Power Technology Inc. (the "Corporation") will be held in the Boardroom at 1111 West Hastings Street, Suite 708-A, Vancouver, British Columbia, Canada, on June 30, 2004, at the hour of 4:00 p.m. (Pacific Time) for the general purpose of receiving and considering the report of the directors, the audited financial statements of the Corporation for the period ended December 31, 2003, and the report of the auditor thereon, as well as the following specific purposes: (1) To set the number of directors for the Corporation for the ensuing year; (2) To elect directors for the Corporation for the ensuing year; (3) To re-appoint an auditor for the ensuing year at a remuneration to be fixed by the directors; (4) To consider and, if thought fit, to approve all matters relating to stock options and the Stock Option Plan of the Corporation as more particularly described in the accompanying Management Proxy Circular; (5) To consider and, if thought fit, to approve the board of directors remuneration proposals described in the accompanying Management Proxy Circular; (6) To ratify and confirm all acts, deeds and things done and proceedings taken by the directors and officers of the Corporation on its behalf since the last annual general meeting; (7) To consider and, if thought fit, to pass a Special Resolution authorizing the Corporation to apply for continuance under Swiss corporation law as if the Corporation had been incorporated thereunder, details of which, including a copy of the proposed Special Resolution, are contained in the accompanying Management Proxy Circular, and repealing the existing Articles of the Corporation on such continuation, all subject to the discretion of the Board of Directors to abandon the application without further approval of the shareholders; (8) To consider and, if thought fit, to pass a Special Resolution (a) ratifying, confirming, and approving with or without variation any By-Law or other form of document recommended by counsel in accordance with Swiss corporation law and adopted by the board of directors of the Corporation relating generally to the conduct and regulation of the business and affairs of the Corporation, such By-Law or other form of document to be effective on the date a Certificate of Continuance or similar certificate is issued to the Corporation under Swiss corporation law, and (b) repealing the existing By-Law Number One of the Corporation; all subject to the discretion of the Board of Directors to abandon the same without further approval of the shareholders; and (9) To transact such other business as may be properly transacted at the Meeting or at any adjournment thereof. TAKE NOTICE that pursuant to the Canada Business Corporations Act (the "CBC Act") a shareholder dissenting from the Special Resolution to continue the Corporation under Swiss corporation law is entitled to be paid the fair value of his shares in accordance with Section 190 of the CBC Act should the Corporation proceed with the continuation. Particulars of the level of shareholder approval required to pass the proposed special resolutions and the rights of dissent are more particularly discussed in the Management Proxy Circular accompanying this Notice. Members who are unable to attend the Meeting in person are requested to read the notes accompanying the instrument of proxy and complete and return the proxy to the Corporation's transfer agent, Computershare Trust Company of Canada, Proxy Dept. 100 University Avenue 9th Floor, Toronto, Ontario, Canada, M5J 2Y1, Fax: Within North American: 1-866-249-7775; Outside North America: (416) 263-9524, all not less than forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before the time fixed for the Meeting. DATED at the City of Vancouver, in the Province of British Columbia, Canada, as of the 4th day of June, 2004. By Order Of The Board Of Directors /s/ Gregory A. Sasges ---------------------------------------- GREGORY A. SASGES, Secretary IQ POWER TECHNOLOGY INC. MANAGEMENT PROXY CIRCULAR AS AT AND DATED JUNE 4, 2004 Solicitation of Proxies ----------------------- This Management Proxy Circular is furnished in connection with the solicitation of proxies by management of iQ Power Technology Inc. (hereinafter variously referred to as "we," "us," "our, and "the Corporation") for use at the 2004 annual general meeting (the "Meeting") of shareholders of the Corporation to be held on June 30, 2004, at the time and place and for the purposes set forth in the Notice of Meeting. The cost of this solicitation will be borne by the Corporation. Appointment and Revocation of Proxies ------------------------------------- The persons named in the accompanying form of proxy are directors of the Corporation. A shareholder desiring to appoint some other person (who need not be a shareholder) to represent him or her at the meeting may do so, either by striking out the printed names and inserting the desired person's name in the blank space provided in the form of proxy or by completing another proper form of proxy and in either case delivering the completed proxy to the office of Computershare Trust Company of Canada, Proxy Dept. 100 University Avenue 9th Floor, Toronto, Ontario, Canada, M5J 2Y1, Fax: Within North American: 1-866-249-7775; Outside North America: (416) 263-9524, or to the Corporation's office, all not less than forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before the time fixed for the Meeting. The chair of the Meeting will have the discretion to accept or reject proxies otherwise deposited. A shareholder who has given a proxy may revoke it by an instrument in writing delivered to the said office of Computershare Trust Company of Canada or the Corporation's office at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, or to the chair of the Meeting, or in any manner provided by law. Voting of Proxies ----------------- The securities represented by the proxy will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for, and if the shareholder specifies a choice with respect to any matter to be acted upon, the securities will be voted accordingly. The form of proxy confers authority upon the named proxyholder with respect to matters identified in the accompanying notice of Meeting. If a choice with respect to such matters is not specified, it is intended that the person designated by management in the form of proxy will vote the securities represented by the proxy in favour of each matter identified in the proxy and for the nominees of management for directors and auditor. The proxy confers discretionary authority upon the named proxyholder with respect to amendments to or variations in matters identified in the accompanying notice of Meeting and other matters that may properly come before the Meeting. As at the date of this Management Proxy Circular, management is not aware of any amendments, variations, or other matters. If such should occur, the persons designated by management will vote thereon in accordance with their best judgment, exercising discretionary authority. Voting Securities and Principal Holders Thereof ----------------------------------------------- The voting securities of the Corporation consist of an unlimited number of Common Shares without par value. As at the date of this Management Proxy Circular, 31,610,457 Common Shares without par value were issued and outstanding, each such share carrying the right to one (1) vote at the Meeting. By operation of the provisions of the Canada Business Corporations Act, the date immediately preceding the date of mailing of the accompanying Notice of Meeting is the record date for the purpose of determining those shareholders entitled to receive notice of, and to vote at the Meeting. -2- To the knowledge of the directors and senior officers of the Corporation, no person beneficially owns, directly or indirectly, or exercises control or direction over, voting securities carrying more than 10% of the voting rights attached to the voting securities of the Corporation. Other than the election of directors, the resolutions contained in the Notice of Meeting require the positive vote of more than 50% of the votes cast on the resolution with the exception of special resolutions that require the positive vote of not less than 66 2/3% of the votes cast on the special resolution. Number of Directors [proxy resolution 1] ---------------------------------------- The Articles of the Corporation provide for the election of a minimum of one and a maximum of ten directors. Currently the Corporation has six director positions and six directors on the board of directors. Management is proposing that shareholders establish the number of director positions for the ensuing year at four and proposing the nominees described in this Management Proxy Circular be elected to those positions. Election of Directors [resolution 2] ------------------------------------ The persons named in the following table are current directors of the Corporation, other than Dr. Herbert Weininger, and management's nominees to the board for the ensuing year. The current appointments of each of the existing directors expire on the date of the annual general meeting. Each director elected will hold office until the next annual general meeting or until his or her successor is duly elected or appointed unless his or her office is earlier vacated in accordance with the Articles of the Corporation or unless he or she becomes disqualified to act as a director. ---------------------------------------------------------------------------------------------------------------------------- Name of Nominee and Principal Occupation Period From Number of Present Position with Corporation at the present and for the Which Nominee Approximate preceding five years Has Been Director Voting Securities1 ---------------------------------------------------------------------------------------------------------------------------- Hans Ambos Senior executive in the high June 30, 1999 210,000 Munich, Germany technology field, including Director service with Daimler-Benz Aerospace, the German Ministry of Defence, Dornier Aerospace, the NATO MRCA Management Agency (NAMMA), and the NATO Industrial Advisory Group (NIAG) Peter Braun President and Chief August 25, 1998 1,030,000 Munich, Germany Executive Officer of iQ Director, Power Technology Inc.; Chief Executive Officer, President President of iQ Battery Research and Development GmbH Russell French President of 509049 B.C. December 20, 1994 300,001 Vancouver, BC, Canada Ltd. and Mayon Management Director Ltd.; Vice-President, Vice-President, Business Development Business Development of iQ Power Technology Inc. Dr. Herbert Weininger Chief Executive Officer of Sputz Nominee Nil Tutzing, Germany AG; Independent Lawyer, Nominee Director Consultant, and Financial Nominee Chief Financial Officer Adviser ------------------------------------------- 1 voting securities beneficially owned, directly or indirectly, or over which control or direction is exercised (exclusive of options but inclusive of incentive shares held in escrow).
All of the proposed nominees are ordinarily resident in Germany other than Russell French, who is ordinarily resident in Canada The board of directors has not appointed an executive committee. -3- The Corporation is required to have an audit committee. Hans Ambos, Rudolf Heinz, and Russell French currently comprise that committee. Gunther Bauer, Rudolf Heinz, and Gregory Sasges are stepping down as directors of the Corporation at the Meeting and a new audit committee will be constituted following the Meeting. Appointment of Auditor [resolution 3] ------------------------------------- The persons named in the enclosed instrument of proxy intend to vote for the re-appointment of Deloitte Touche, Chartered Accountants, as the Corporation's auditor until the next annual general meeting of shareholders at a remuneration to be fixed by the board of directors. Deloitte Touche were first appointed auditor of the Corporation in 1998 and have held the position since then. Statement of Executive Compensation ----------------------------------- Executive Compensation Compensation Of Directors And Officers The following table sets forth the compensation paid to our chief executive officer and each of our four most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 (each a "Named Executive Officer") during the fiscal year ended December 31, 2003, 2002, and 2001. Summary Compensation Table (in United States Dollars) Annual Compensation Long-Term Compensation ------------------- ---------------------- Awards Payouts Restricted Securities Shares or Fiscal Other Annual Under Restricted LTIP All Other Name and Year Salary Bonus Compensation Options/SARs Share Units Payouts Compensation Principal Position Ended (US$) (US$) (US$) Granted (#) (US$) (US$) ($) ----------------------------------------------------------------------------------------------------------------------------- Peter E. Braun, 2001 102,000 -- -- 280,000 -- -- -- President and Chief Executive Officer 2002 102,000 -- 5,146(1) -- -- 1,548(2) 2003 105,200 -- 400,000 -- -- Gunther C. Bauer, 2001 96,000 -- -- 280,000 -- -- -- Chief Technical Officer 2002 96,000 -- 5,146(1) -- -- -- 2003 99,000 -- -- 380,000 -- -- -- ----------------- (1) Represents pension fund contributions made on behalf of these named executive officers. (2) Represents payment on personal life insurance policy.
During our most recently completed financial year ended December 31, 2003, we did not have a general pension plan for our directors, officers or employees. Options to Purchase Securities ------------------------------ During our last completed fiscal year ended December 31, 2003, we granted incentive stock options to purchase 1,420,000 common shares of our capital stock for US$0.44 per share to our directors and officers, including the options reflected in the Summary Compensation Table as having been granted in 2003. -4- No stock appreciation rights ("SARs") were granted during this period. Options & SARs Granted to Named Executive Officers -------------------------------------------------- The following table sets forth particulars concerning individual grants of options to purchase or acquire our securities, if any, and stock appreciation rights ("SARs") made to each Named Executive Officer during the financial year ended December 31, 2003: Option/SAR Grants During the Most Recently Completed Financial Year ------------------------------------------------------------------------------------------------------------------------ % of Total Market Value of Securities Options Exercise Price Securities Date of Grant under Granted to or Base Price Underlying Expiration Name in 1998 Options/SARs Employees ($/Security) Options/SARs on Date Granted (#)1 in Date of Grant Financial ($/Security) Year ------------------------------------------------------------------------------------------------------------------------ Peter E. Braun, Dec. 17, 2003 400,000 30.06% $0.44 n/a Dec 17/13 President and Chief Executive Officer Gunther Bauer, Dec. 17, 2003 380,000 28.57% $0.44 n/a Dec 17/13 Chief Technical Officer
Options & SARs Exercised by Named Executive Officers ---------------------------------------------------- The following table sets out incentive stock options exercised by the Named Executive Officers during the last completed fiscal year as well as the fiscal year end value of stock options held by the named executive officers. During this period, no outstanding SARs were held by named executive officers: Aggregated Option/SAR Exercises during the Most Recently Completed Financial Year and Financial Year-End Option/SAR Values ------------------------------------------------------------------------------------------------------------------------ Value of Unexercised in Securities Aggregate Unexercised Options/SARs at the Money Options/SARs at Name Acquired on Value Realized FY-End (#) FY-End ($) Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(1) ------------------------------------------------------------------------------------------------------------------------ Peter E. Braun, 243,347 39,330 679,153/Nil 85,873/Nil President and Chief Executive Officer Gunther Bauer, 147,301 23,956 755,199/Nil 98,080/Nil Chief Technical Officer 1 Based on the US$0.55 per share closing price of the Corporation's common shares as quoted on the NASD OTCBB for December 31, 2003.
Stock Option Plan ----------------- In December 1998, our board of directors adopted the 1998 Stock Option Plan, which was amended in 1999, 2000, 2001 and 2002 to increase the number of shares authorized to be issued upon exercise of options granted under the plan (collectively as amended, the "Stock Option Plan"). The Stock Option Plan will continue in effect until all shares of Common Stock for issuance under the plan have been issued and all restrictions on such shares have lapsed. The Stock Option Plan is administered by the board of directors (or a committee thereof) and provides that options may be granted to our officers, directors, employees and other persons, including consultants, as determined by the Plan Administrator in its sole discretion. The options issued under the Stock Option Plan are exercisable at a price fixed by the Plan Administrator, in its sole discretion; provided that options granted in substitution for outstanding options of another corporation in connection with a merger, consolidation, acquisition of property or stock or other reorganization involving such corporation and us or any of our subsidiaries may be granted with an exercise price equal to the exercise price for the substituted option of the other corporation, subject to adjustment. Subject exceptions in the Stock Option Plan relating to death, -5- divorce and estate planning techniques, options granted under the Stock Option Plan are non-assignable and non-transferable. The maximum number of the shares reserved for issuance under the Stock Option Plan, as amended, is 4,714,000 shares. As of December 31, 2003, a total of 2,967,352 options were issued and unexercised under the Stock Option Plan. On December, 2003, we granted options exercisable to acquire 1,600,000 shares of which 100,000 shares were not vested on December 31, 2003. Set forth below is a table that reflects the history of the Corporation's option grants and the repricing for options outstanding as of December 31, 2003: Report On Repricing Of Options ------------------------------ Set forth below is a table that reflects the history of our Corporation's option grants and the repricing for options outstanding as of December 31, 2003: ----------------------------------------------------------------------------------------------------------------------------- Repriced Exercise Price Original Grant Date # of Options Original June 12, 2000 Jan 16, 2001 Jan 18, 2002 June 6, 2003 Outstanding as Exercise Price of Dec 31, 2003 ----------------------------------------------------------------------------------------------------------------------------- December 17, 2003 1,600,000 Jan 18, 2002 30,000 $1.00 - - - 0.40 June 28, 2001 904,153 $1.37 - - $1.00 0.40 Jan 16, 2001 142,000 $0.50 - - - 0.40 June 12, 2000 126,500 $1.50 - $0.50 - 0.40 Oct 15, 1999 20,000 $4.375 $1.50 $0.50 - 0.40 July 7, 1999 52,699 $3.75 $1.50 $0.50 - 0.40 June 28,1999 32,000 $2.50 $1.50 $0.50 - 0.40 Dec 1, 1998 60,000 $2.50 $1.50 $0.50 - 0.40 TOTAL 2,967,352
Peter Braun, our Chief Executive Officer, held 280,000 of the 1,295,000 options granted in June 2001 and January 2002 and repriced in 2003 as reflected in the above table. Mr. Braun also held 242,500 options of the 843,000 options granted on January 16, 2001 and prior and repriced in 2003 as reflected in the above table. Gunther C. Bauer, our Chief Technical Officer, held 280,000 of the 1,295,000 options granted in June 2001 and January 2002 and repriced in 2003 as reflected in the above table. Mr. Bauer also held 242,500 options of the 843,000 options granted on January 16, 2001 and prior and repriced in 2003 as reflected in the above table. On June 06, 2003, the Board of Directors determined that it was in the best interest of the Corporation to reprice the 1,295,000 issued and still outstanding stock options originally granted by the Corporation on January 18, 2002 and June 28, 2001. The Corporation's Board of Directors approved a stock option repricing program. Under the program, all stock options having an exercise price of $1.00 and granted under the Corporation's Stock Option Plan, including directors and Named Executive Officers, were repriced at an exercise price of $0.40 per share. At the same time, all options issued on June 20, 2000 and prior, and still outstanding, in total 843,00 options, were repriced from $0.50 to $0.40. The new exercise price represented a 2.5% premium over the then market price of $0.39 per share of common stock. Other than the lower exercise price, each repriced stock option under the repricing program retained the terms of the original grant, including the same vesting terms, number of shares and expiration date. The Board of Directors approved the stock option repricing program as a result of the significant reduction in the price of our common stock subsequent to the original grant of the options. The Board determined that the options having an exercise price of $1.00 no longer provided meaningful incentive to the option holders to remain in our employ and to maximize shareholder value. The Board believed that the exchange of new stock options with a lower exercise price for our existing stock options would once again provide incentive to our officers, directors and employees to continue to provide services to us and to maximize shareholder value. The following named executive officers held the following options that were repriced in 2003: -6- ----------------------------------------------------------------------------------------------------------------- Name Number of securities Exercise Price before Repriced Exercise Price underlying options Repricing ----------------------------------------------------------------------------------------------------------------- Peter E. Braun, 280,000 $1.00 $0.40 President and Chief 242,500 $0.50 $0.40 Executive Officer Gunther C. Bauer, 280,000 $1.00 $0.40 Chief Technical Officer 242,500 $0.50 $0.40
Ten-Year Option/SAR Repricings The following table reflects the participation of our Chief Executive Officer and each Named Executive Officer in any option repricing by our Corporation over the past 10 years: ------------------------------------------------------------------------------------------------------------------------ Length of Securities Market Price Original Underlying of Stock at Exercise Term Options/SAR Time of Price at Time New Remaining Repriced or Repricing or of Repricing Exercise at Date of Date Amended Amendment or Amendment Price Repricing or Name & Position (of Repricing) (%) ($) ($) ($) Amendment ------------------------------------------------------------------------------------------------------------------------ Peter E. Braun, June 12, 2000 320,000 $1.38 $2.50 $1.50 8.5 years President and June 12, 2000 80,000 $1.38 $3.75 $1.50 9.0 years Chief Executive Jan 16, 2001 320,000 $0.50 $1.50 $0.50 8.0 years Officer Jan 16, 2001 80,000 $0.50 $1.50 $0.50 8.5 years Jan 18, 2002 280,000 $0.95 $1.37 $1.00 9.5 years June 06, 2003 42,500 $0.39 $0.50 $0.40 7.0 years June 06, 2003 120,000 $0.39 $0.50 $0.40 5.5 years June 06, 2003 80,000 $0.39 $0.50 $0.40 6.0 years June 06, 2003 280,000 $0.39 $1.00 $0.40 8.0 years Gunther C. Bauer, June 12, 2000 320,000 $1.38 $2.50 $1.50 8.5 years Chief Technology June 12, 2000 80,000 $1.38 $3.75 $1.50 9.0 years Officer Jan 16, 2001 320,000 $0.50 $1.50 $0.50 8.0 years Jan 16, 2001 80,000 $0.50 $1.50 $0.50 8.5 years Jan 18, 2002 280,000 $0.95 $1.37 $1.00 9.5 years June 06, 2003 42,500 $0.39 $0.50 $0.40 7.0 years June 06, 2003 120,000 $0.39 $0.50 $0.40 5.5 years June 06, 2003 80,000 $0.39 $0.50 $0.40 6.0 years June 06, 2003 280,000 $0.39 $1.00 $0.40 8.0 years
Long-Term Incentive Plans The Corporation has a long-term incentive plan although no cash or non-cash compensation intended to serve as an incentive for performance (whereby performance is measured by reference to financial performance or the price of the Corporation's securities) was paid or distributed to the executive officer listed or any other person, company, or entity during the most recently completed financial year under that plan. The Incentive Plan was adopted by shareholders in 2001 and amended in 2002 and provides for the issue of up to 2,500,000 Common Shares to valued directors, key employees, and consultants of the Corporation and similar such persons to encourage those persons to acquire a greater proprietary interest in the Corporation, thereby strengthening their incentive to achieve the objectives of the shareholders of the Corporation, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons. The shares issued pursuant to the Incentive Plan will be issued at a discount to market price on the basis of resale restrictions prohibiting their being sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, by a plan participant until the Corporation meets certain performance requirements. Such restrictions on transfer shall, to the extent that such -7- shares of Common Stock have not previously been forfeited to the Corporation, lapse on the last day of the fiscal period in which the Corporation shall have generated cumulative net revenue from inception of $2,500,000 or more, calculated in accordance with United States generally accepted accounting principles. The shares awarded or sold under the Plan shall be forfeited to the Corporation if the Corporation shall not have generated cumulative net revenues from inception of $2,500,000 or more, calculated in accordance with United States generally accepted accounting principles, prior to December 31, 2006. Certificates for the shares shall be issued in the plan participant's respective names and shall be held in escrow by the Corporation until all restrictions lapse or such shares are forfeited. No incentive shares have been granted under this plan as of December 31, 2003. However, the board of directors decided on December 8, 2003, to grant 1,350,000 of these incentive shares in 2004. These incentive shares were granted on February 18, 2004, and are currently held in escrow. Director Compensation Other than compensation paid to Peter Braun and Gunther Bauer, as disclosed above under the sub-heading "Compensation of Directors and Officers," our directors have received cash compensation for their services rendered during our most recently completed financial year in accordance with the shareholder resolution as outlined below and the award of bonuses of US$3,000 to each of Peter Braun, Gunther Bauer, and Russell French, and US$1,500 to each of Hans Ambos, Rudolf Heinz, and Gregory Sasges, the payment of which bonuses was deferred to 2004 and applied to the subscription price for the incentive shares issued to the directors as referred to in the preceding section. Our shareholders approved the payment to each of our directors of an annual stipend of $2,500 together with an honorarium of $250 for each board meeting that our directors attend in the annual meetings of our shareholders held in each of 2001, 2002, and 2003. For the fiscal years ended December 31, 2002 and 2001, the directors deferred taking payment of the approved fees due to the financial position of our Corporation in those years. In fiscal 2003, the Corporation paid both the stipends and honorariums generally described above for fiscal years 2001 through 2003 in total of $47,500. Other than our Incentive Plan and its Stock Option Plan, we do not have any non-cash compensation plans for our directors and we do not propose to pay or distribute any non-cash compensation during the current financial year, other than by granting stock options or incentive shares. Employment and Consulting Agreements Effective September 1, 1998, Peter E. Braun and Dr. Gunther C. Bauer entered into employment agreements with us providing for annual salaries of $102,000 ($8,500 per month) and $96,000 ($8,000 per month), respectively. Mr. Braun's and Dr. Bauer's employment agreements are for a term of five (5) years. Both agreements were extended through June 30, 2004, at increased rates effective September 1, 2003, of $9,300 and $8,750 per month respectively. The laws of Germany govern each of our Named Executive Officer's employment agreements mentioned above. Management Agreements We are party to a consulting agreement dated August 25, 1998, with a company controlled by Russell French, our Vice-President for Business Development. The agreement was for an initial term of three years (with automatic one-year renewals in the absence of either party taking affirmative action to terminate the agreement). The agreement originally provided for a base annual fee of $72,000 ($6,000 per month) and for the reimbursement of reasonable expenses incurred on behalf of the Corporation. Effective April 1, 2003, the original consulting company assigned the agreement to another company also controlled by Mr. French. Effective September 2003, the monthly fee increased to $7,200 per month. Total management fees for the twelve months ended December 31, 2003, amounted to US$76,800. Termination of Employment, Change in Responsibilities and Employment Contracts There are no employment contracts between either the Corporation or its subsidiaries and the Named Executive Officers except as referred to above. -8- Neither the Corporation nor any of its subsidiaries have any plan or arrangement with respect to compensation to its executive officers which would result from the resignation, retirement or any other termination of the executive officers' employment with the Corporation and its subsidiaries or from a change of control of the Corporation or any subsidiary of the Corporation or a change in the executive officers' responsibilities following a change in control, where in respect of an executive officer the value of such compensation exceeds $100,000. Principal Shareholders The following table sets forth as of December 31, 2003, information concerning the beneficial ownership of our shares, by persons who are known by us to own beneficially more than 5% of shares, by each of our directors, by each of our Named Executive Officers and by all of our directors and executive officers as a group. The calculations in the table are based on an aggregate of 27,563,071 shares outstanding as of December 31, 2003. Unless otherwise noted all addresses of the beneficial owners are Erlenhof Park, Inselkammer Strasse 4, D-82008, Unterhaching, Germany. The symbol "*" indicates that the amount shown is less than 1% of outstanding shares. Name and Address Number of of Beneficial Owner shares Percentage of Class ------------------------------------------------------------------------------------------------------- Gunther Bauer (1) 1,655,199 5.84% Erlenhof Park Inselkammer Strasse 4 D-82008 Unterhaching, Germany Peter E. Braun (2) 1,409,153 4.99% Erlenhof Park Inselkammer Strasse 4 D-82008 Unterhaching, Germany Russell French (3) 420,001 1.50% Suite 708-A 1111 West Hastings Street Vancouver, B.C. V6E 2J3 Hans Ambos (4) 315,000 1.13% Erlenhof Park Inselkammer Strasse 4 D-82008 Unterhaching, Germany Rudolf Heinz (5) 90,000 * Erlenhof Park Inselkammer Strasse 4 D-82008 Unterhaching, Germany Gregory A. Sasges (6) 170,000 * Suite 708-A 1111 West Hastings Street Vancouver, B.C. V6E 2J3 All Directors and Officers as a Group (7) 4,059,353 13.56% ----------------- (1) Includes vested options exercisable to purchase 755,199 shares within 60 days of December 31, 2003. (2) Includes vested options exercisable to purchase 679,153 shares within 60 days of December 31, 2003. (3) Includes vested options exercisable to purchase 420,000 shares within 60 days of December 31, 2003.
-9- (4) Includes vested options exercisable to acquire 255,000 common shares within 60 days of December 31, 2003. (5) Includes vested options exercisable to acquire 90,000 common shares within 60 days of December 31, 2003. (6) Includes vested options exercisable to acquire 170,000 common shares within 60 days of December 31, 2003. (7) Includes vested options exercisable to purchase, in the aggregate, 2,369,352 shares within 60 days of December 31, 2003. * Less than 1%.
Securities Authorized for Issuance Under Compensatory Plans The following table includes information as of December 31, 2003, for all compensatory plans previously approved by our security holders and all compensatory plans not previously approved by our security holders. Equity Compensatory Plan Information Number of Securities to be Number of Securities Plan Category Issued Upon Remaining Available for Exercise of Weighted Average Exercise Future Issuance Under Outstanding Price of Outstanding Equity Compensation Options, Options, Warrants and Plans (excluding securities Warrants and Rights Rights reflected in column (a)) (a) (b) (c) --------------------------------------------------------------------------------------------------------------------- Equity Compensation Plans 2,967,352 $ 0.42 2,508,500(1) Approved by Security Holders Equity Compensation Plans Not Nil -- Nil Approved by Security Holders --------------------------------------------------------------------------------------------------------------------- Total 2,967,352 2,508,500 --------------------------------------------------------------------------------------------------------------------- (1) Includes 8,500 shares available for issuance under future stock grants and 2,500,000 shares available for issuance under our incentive stock plan (of which 1,350,000 were issued in 2004).
Termination of Employment, Change in Responsibilities and Employment Contracts There are no employment contracts between either the Corporation or its subsidiaries and the Named Executive Officers except as referred to under the heading "Employment and Consulting Agreements" above. Neither the Corporation nor any of its subsidiaries have any plan or arrangement with respect to compensation to its executive officers which would result from the resignation, retirement or any other termination of the executive officers' employment with the Corporation and its subsidiaries or from a change of control of the Corporation or any subsidiary of the Corporation or a change in the executive officers' responsibilities following a change in control, where in respect of an executive officer the value of such compensation exceeds Cdn$60,000 except as described above. Indebtedness of Directors and Senior Officers Other than Peter E. Braun and Gunther C. Bauer, none of the directors or senior officers of the Corporation or any of its associates or affiliates, are or have been indebted to the Corporation or any of its subsidiaries at any time since the beginning of the last completed financial year other than in the usual course of their employment in -10- connection with advances made on account of expenses to be incurred on behalf of the Corporation. At the commencement of the last completed financial year, Gunther C. Bauer owed a subsidiary of the Corporation US$27,462 and Peter E. Braun owed a subsidiary of the Corporation US$22,916. As of December 31, 2003, the aggregate amount due on account of these debts had been reduced to US$14,550. These loans arose from dealings with the subsidiary prior to its acquisition by the Corporation. Other than described above, none of our directors or senior officers or any of our associates or affiliates, are or have been indebted to us at any time since the beginning of the last completed financial year other than in the usual course of their employment in connection with advances made on account of expenses to be incurred on behalf of our Corporation. For further information please refer to the financial statements of the Corporation. Interest of Insiders In Material Transactions --------------------------------------------- The directors and officers of the Corporation have an interest in the resolutions concerning the election of directors, stock options, the other remuneration initiatives, and the approval of all acts of the directors since the last annual general meeting of the Corporation. Otherwise no director or senior officer of the Corporation or any associate of the foregoing has any substantial interest, direct or indirect, by way of beneficial ownership of shares or otherwise in the matters to be acted upon at the Meeting, except for any interest arising from the ownership of shares of the Corporation where the shareholder will receive no extra or special benefit or advantage not shared on a pro rata basis by all holders of shares in the capital of the Corporation. Particulars of Other Matters to be Acted Upon --------------------------------------------- Remuneration Initiatives Management has reviewed with the professional advisers of the Corporation the ability of the Corporation to attract and retain the services of directors, executives, and employees as the Corporation grows and commercializes its technology and has concluded that, in light of the limited ability of the Corporation to pay market-rate salaries, the Corporation must be a leader in the introduction of incentive packages for its personnel to ensure it can attract the directors, executives, and employees it needs to implement its business plan. It does so by using a range of remunerative options that it can offer targeted personnel it has engaged or is or may be in the future seeking to engage. -11- Stock Options [resolution 4] ---------------------------- The Stock Option Plan was originally structured for the purpose of reserving 20% of the issued and outstanding shares of the Corporation from time to time for issue under the Plan. Under US registration rules, the amount of shares reserved for grant under a plan must include shares reserved but not granted, shares reserved and subject to granted options, and shares reserved and issued on the exercise of options. As such, given the Plan has been operating for almost 6 years, management of the Corporation is seeking shareholder approval to a resolution which would allow the board to amend the Plan to reserve for issuance pursuant to the Plan, subject to such approvals as may be required by the regulatory bodies, in the aggregate, that number of shares equal to the sum of all shares reserved and issued on the exercise of options under the Plan together with 20% of the issued and outstanding shares of the Corporation under the two categories of shares reserved but not granted and shares reserved and subject to options (all amounts being determined as at the Meeting Date), subject to increase or decrease through subdivision or consolidation of the outstanding Common Shares of the Corporation. That amount is currently estimated at 8,238,0004 shares (although 1,938,000 such shares have already been issued leaving only 6,300,000 shares available for issue) and is subject to change should the Corporation complete any equity financings or issue any shares on the exercise of options or otherwise between the date of this Circular and the Meeting Date. The actual number will be calculated on the Meeting Date and provided to the Meeting before consideration of any motion concerning the stock options or the Stock Option Plan. The foregoing is an empowering resolution only and the board may determine not to proceed to implement the change. By passing the empowering resolution concerning stock options, shareholders will be approving all stock options granted in the past year, the amendment of any stock option agreements and stock options amended in the past year, the issue of any shares on the exercise of stock options in the past year or in the future, the granting of new stock options, and the amendment of the Stock Option Plan at such time as the Board of Directors determines the same is advisable as well as any new stock option agreements or stock options by the Corporation in the ensuing year, including all matters concerning stock options of the Corporation described herein. Board of Directors Remuneration [resolution 5] ---------------------------------------------- Shareholders of the Corporation approved an initiative in each of 2001, 2002, and 2003 providing for the cash compensation of directors in recognition of the services provided by the directors in serving on the board of directors of the Corporation and attending board meetings. The initiative provided for each director to receive an annual stipend of US$2,500 upon appointment to the board together with an honorarium of US$250 for each board meeting attended. The directors deferred payment of that remuneration until 2003 due to the cash position of the Corporation. Management is seeking ratification of that initiative for 2004. Management estimates the board will hold at least 4 board meetings in the next year. The Board of the Corporation determined on Dec 17, 2003, to grant 1,350,000 incentive shares from the Corporation's Incentive Plan to its directors in 2004 at a nominal deemed price. These incentive shares were issued to the six directors of the Corporation in February 2004 and are held in escrow in accordance with the terms of the Incentive Plan. None of the shares may currently be sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily, by the holder. Such restrictions on transfer shall, to the extent that such shares have not previously been forfeited to the Corporation, lapse on the last day of the fiscal period in which the Corporation shall have generated cumulative revenue from inception of US$2,500,000 or more. The shares awarded shall be forfeited to the Corporation if the Corporation shall not have generated cumulative net revenues from inception of US$2,500,000 prior to December 31, 2006. Approval of Acts of Directors [resolution 6] -------------------------------------------- Management is seeking shareholder approval to a resolution that would ratify and confirm all acts, deeds and things done and proceedings taken by the directors and officers of the Corporation on its behalf since the last annual general meeting as more particularly described in the news releases, publications, regulatory filings, and financial statements of the Corporation. Management knows of no other matters to come before the Meeting of members other than referred to in the Notice of Meeting. However, if any other matters which are not known to the management of the Corporation shall properly come before the said Meeting, the form of proxy given pursuant to the solicitation by management of the Corporation will be voted on such matters in accordance with the best judgment of the persons voting the proxy. -12- Proposal To Domesticate the Corporation Under Laws of Switzerland [resolutions 7 and 8] The Board of Directors is proposing to continue the Corporation as a corporation organized and existing under and governed by the laws of Switzerland. The reason for this proposed change of domicile arises from the fact that the Corporation operates primarily from Europe and European residents hold the majority of its shares. This has resulted in substantial difficulties and expenses for the Corporation that it expects will be dramatically reduced following a continuation out of Canada to Switzerland. By passing the proposed special resolutions, members effectively will be empowering the board of directors to continue the Corporation into Switzerland. The Proposed Continuation will have certain effects on the charter documents of the Corporation and the rights of Members, the majority of which are summarized under "Certain Substantive Differences in Corporation Laws" below. The Board of Directors believes that the Proposed Continuation will serve the best interests of the Corporation and the Members. The following discussion summarizes certain aspects of the Proposed Continuation. Special Resolutions The Proposed Continuation will be initiated by the adoption of special resolutions in forms to be prescribed by the Corporation's solicitors and presented to the Members at the Meeting. The proposed Special Resolutions required in connection with the Continuation are attached as Schedule "A" to this Management Proxy Circular. By passing the special resolutions proposed, members will effectively be approving all items of business described in those resolutions and any Exhibits thereto. Continuance If the special resolutions concerning the continuation and domestication are approved by the Members, the Board of Directors intend to file the documents required to effect the changes authorized by members, unless the Board of Directors determines that it is not in the best interest of the Corporation to proceed given the nature of the authorized changes and the circumstances associated with proceeding, including the number of shares of Common Stock with respect to which Members may have exercised their right to dissent. Adoption of By-Laws The Proposed Continuation of the Corporation will require the Corporation adopt new constating documents and the repeal of its existing Articles and By-laws. The proposed constating documents to be adopted will be in a form satisfactory to the Board of Directors and the Corporation's solicitors, will be presented to Members present at the Meeting, and will be available for inspection prior to the Meeting at the registered office of the Corporation. Dissenters' Rights The CBC Act, which will apply to the Corporation at the time the Special Resolution concerning the continuance of the Corporation is considered and voted upon at the Meeting, provides in Section 190 that a shareholder of the Corporation may dissent with respect to that Resolution. Such a shareholder (a "Dissenting Shareholder") may send at or before the meeting to the Corporation a written objection (a "Notice of Dissent") to that Resolution. In addition to any other right he may have, such a shareholder who complies with the dissent procedure of Section 190 of the CBC Act is entitled to be paid by the Corporation the fair value of the shares held by him determined as at the close of business on the day before the Resolution is passed. A Dissenting Shareholder may claim under Section 190 only with respect to all shares held by him on behalf of any one beneficial owner and registered in his name. A shareholder who wishes to invoke the provisions of Section 190 must send a Notice of Dissent to the registered office of the Corporation, to the attention of the Secretary, at or -13- before the Meeting. The filing of a Notice of Dissent does not deprive a shareholder of his right to vote on the Resolution and voting against the Resolution does not constitute Notice of Dissent. Within ten (10) days after the shareholders of the Corporation adopt the Resolution, the Corporation is required to notify in writing each Dissenting Shareholder that the Resolution has been adopted. A Dissenting Shareholder shall, within 20 days after he receives notice of adoption of the Resolution or, if he does not receive such notice, within 20 days of leaning that the resolution has been adopted, send to the Corporation written notice (the "Demand for Payment") containing his name and address, the number and class of shares in respect of which he dissents and a Demand for Payment of the fair value of such shares. Within 30 days of sending his Demand for Payment, the Dissenting Shareholder shall send the certificates representing the shares in respect of which he dissents to the Corporation or its transfer agent. The Corporation shall endorse thereon notice that the shareholder thereof is a Dissenting Shareholder and forthwith return the share certificates to the Dissenting Shareholder. After sending a Demand for Payment a Dissenting Shareholder ceases to have any rights as a shareholder other than the right to be paid the fair value of the shares of the Corporation held by him unless the Dissenting Shareholder withdraws his Demand for Payment before the Corporation makes an offer to pay (the "Offer to Pay") or the Corporation fails to make an Offer to Pay and the Dissenting Shareholder withdraws his notice, or the directors revoke the resolution to continue the Corporation, in which case his rights as a shareholder are reinstated as of the date he sent the notice referred to above. Not later than seven (7) days after the day the Corporation receives the Demand for Payment, the Corporation shall send to each Dissenting Shareholder who has sent a Demand for Payment an Offer to Pay for the shares of the Dissenting Shareholder in the amount considered by the directors of the Corporation to be the fair value thereof accompanied by a statement showing how the fair value was determined. Every Offer to Pay for shares held by the Dissenting Shareholder shall be on the same terms. Any Offer to Pay accepted by a Dissenting Shareholder shall be paid by the Corporation within ten (10) days of the acceptance but an Offer to Pay lapses if the Corporation has not received an acceptance thereof within thirty (30) days of the making of the Offer to Pay. If any Offer to Pay is not made by the Corporation or a Dissenting Shareholder fails to accept an Offer to Pay, the Corporation may, within fifty (50) days after the action approved by the Resolution is effective or in such further period as the Court may allow, apply to a Court to fix a fair value for the shares of any Dissenting Shareholder. If the Corporation fails to apply to a Court under the foregoing provision, a Dissenting Shareholder may apply to a Court for the same purpose within a further period of twenty (20) days or such further period as a Court may allow. Any such application shall be made to the Supreme Court of British Columbia being the Court, which has jurisdiction in the place where the registered office of the Corporation is located, or to the Supreme or Superior Court of the Province where the Dissenting Shareholder making the application resides if the Corporation carries on business in that Province. A Dissenting Shareholder is not required to give security for costs in any application to a Court, and all Dissenting Shareholders whose shares have not been purchased by the Corporation shall be joined as parties and bound by the decision of the Court. The Corporation shall notify each affected Dissenting Shareholder of the date, place and consequence of any application and of the right of a Dissenting Shareholder to appear and be heard in person or by counsel. The Court shall fix a fair value for the shares of all Dissenting Shareholders and may in its discretion allow a reasonable rate of interest on the amount payable to each Dissenting Shareholder from the date of the domestication under the DGC Law and is effective until the date of payment of the amount ordered by the Court. The cost of any application to a Court by the Corporation or a Dissenting Shareholder will be under the discretion of the Court. The above is only a summary of the provisions of Section 190 of the CBC Act, which are technical and complex. It is suggested that any holder of shares of the Corporation wishing to avail himself of his right of dissent under the CBC Act seek his own legal advice as failure to comply strictly with the provisions of that Act may prejudice his right of dissent. -14- Certain Substantive Differences In Corporation Laws Refer to Schedule "B" for a summary of some of the significant differences between the Canada Business Corporations Act (referred to in this section as the "CBC Act"), and Art. 620 ff. of the Swiss Code of Obligations (CO). The Continuance of the Corporation to Switzerland, and the adoption of new charter documents are subject to documentation in support being accepted for filing by the appropriate corporate authorities in Switzerland as well as The Director, under the CBC Act. Specifically, the Corporation must receive authorization from shareholders by special resolution and the Corporation must establish to the satisfaction of the Director under the CBC Act that the proposed continuance in Switzerland will not adversely affect creditors or shareholders of the Corporation. Tax Disclosure for IQ Power --------------------------- Canadian Federal Income Tax Considerations In the opinion of Borden Ladner Gervais LLP, Canadian tax counsel to the Corporation, the following summary fairly sets out the principal Canadian federal income tax consequences to the Corporation and to its shareholders, including those who choose to exercise dissent rights ("Dissenting Shareholders"), arising from the continuance of the Corporation to Switzerland. This summary only applies to shareholders who are and remain at all relevant times resident in Canada for purposes of the Income Tax Act (Canada) (the "Tax Act"). This summary is not exhaustive of all possible Canadian federal income tax considerations applicable to the Corporation or a shareholder. This summary is of a general nature only and is not intended to be legal or tax advice to the Corporation or a shareholder. Shareholders should consult their own tax advisors for advice with respect to the tax consequences of the continuance of the Corporation based on their particular circumstances. This summary is based upon the facts set out in this Management Proxy Circular, the current provisions of the Tax Act including the regulations thereunder (the "Regulations") and counsel's understanding of the current administrative practices of the Canada Revenue Agency ("CRA") and certificates received by counsel from the Corporation. The summary also takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced by the Minister of Finance prior to the date hereof (the "Tax Proposals") and assumes that the Tax Proposals will be enacted substantially as proposed, although no assurance in this regard can be given. This summary does not otherwise take into account or anticipate any changes in laws whether by judicial, governmental or legislative decision or action nor does it take into account provincial or foreign income tax legislation or considerations. The Corporation While the Corporation is incorporated in Canada, it is deemed to be resident in Canada for purposes of the Tax Act. When the Corporation is granted "articles of continuance" or similar such constitutional documents confirming its continuance in Switzerland, thereafter it will be considered to have been incorporated in Switzerland and will cease to be deemed to be a resident in Canada. Based on certificates provided to counsel by the Corporation, the Corporation should cease to be resident in Canada following continuance in Switzerland because, and at the time (the "Emigration Time") when, its "central management and control" will be located in Switzerland. Following the Emigration Time, the Corporation will be taxable in Canada if it carries on business in Canada or disposes of taxable Canadian property or receives dividends, interest, royalties or similar income from a person resident in Canada. The taxation of such Canadian-source income may be subject to the provisions of the Canada-Switzerland Income Tax Convention. The Corporation has advised counsel that the Corporation does not expect to earn such Canadian-source income following the Emigration Time. The Corporation will be deemed to have a taxation year-end immediately before the Emigration Time. There will also be a deemed disposition of each property owned by the Corporation immediately before such taxation year-end for proceeds of disposition equal to its fair market value at that time. Any income or loss realized by the Corporation on the deemed disposition of a property (other than a capital property) will be taken into account in computing the taxable income of the Corporation for its taxation year ending immediately before the Emigration Time. One-half of capital gains or one-half of capital losses (to the extent of one-half of capital gains) realized by the Corporation on the deemed disposition of a capital property will be taken into account in computing the taxable income of the Corporation for its taxation year ending immediately before the Emigration Time. The Corporation may reduce its -15- taxable income for its taxation year ending immediately before the Emigration Time through the application of non-capital losses available from other taxation years in accordance with the provisions of the Tax Act. The Corporation has advised counsel that the Corporation does not expect any tax payable as a result of the deemed disposition of its properties. The Corporation will also be required to pay a one time tax upon emigration from Canada equal to 25% of the amount by which (a) the aggregate fair market value of the property of the Corporation immediately before the Emigration Time exceeds (b) the aggregate of the paid-up capital of issued and outstanding capital stock of the Corporation and of the debts of the Corporation, each determined immediately before the Emigration Time. Provided, as the Corporation advises counsel, that the Corporation is resident in Switzerland following the Emigration Time, the rate of such tax will be reduced from 25% to 5%. Shareholders Except as described below under "Dissenting Shareholders", a shareholder of the Corporation should not be considered, or be deemed under the provisions of the Tax Act, to dispose of his or her shares of the Corporation solely as a consequence of its continuance. The adjusted cost base of his or her shares of the Corporation will remain the same. Dissenting Shareholders The following assumes that a Dissenting Shareholder utilizes the statutory dissent rights available to him or her. Additional or different income tax considerations may be relevant to a Dissenting Shareholder who fails to perfect or withdraw his or her claim pursuant to the statutory right of dissent. A Dissenting Shareholder will be entitled to be paid by the Corporation the fair value of the shares of the Corporation held by the Dissenting Shareholder. The Dissenting Shareholder will dispose of his or her shares of the Corporation while the Corporation is incorporated under Canadian law and prior to the continuance of the Corporation to Switzerland. The Dissenting Shareholder will be deemed to receive a taxable dividend equal to the amount by which the amount received (other than in respect of interest awarded by a Court) exceeds the paid-up capital of the shares held by the Dissenting Shareholder. Such deemed dividend will be subject to the provisions of the Tax Act normally applicable to dividends received from a taxable Canadian corporation including the gross-up and dividend tax credit rules applicable to individuals. Subject to comments which follow, a shareholder of the Corporation that is a corporation may be entitled to deduct in computing taxable income the amount of the deemed dividend otherwise included in its income. Certain shareholders that are private corporations may be subject to a 33-1/3% refundable tax in respect of the deemed dividend. Such tax will be refunded when the corporation pays taxable dividends to its shareholders. Where the Dissenting Shareholder is a corporation, in some circumstances, the amount of such deemed dividend may be treated as proceeds of disposition and not as a dividend. A shareholder of the Corporation that is a corporation should consult its tax advisors in this regard. The Dissenting Shareholder will be considered to have disposed of the shares. For purposes of determining the Dissenting Shareholder's capital gain (or a capital loss), the proceeds of disposition will be equal to the amount received in respect of his or her share of the Corporation less the aggregate of amount of any deemed dividend referred to above and of interest awarded by the Court. One half of the capital gain (capital loss) will be included (deducted) in the income of the Dissenting Shareholder in accordance with the provisions of the Tax Act. Interest awarded to the Dissenting Shareholder by a Court will be included in the Dissenting Shareholder's income for the purposes of the Tax Act. Dividends Received after Continuation Dividends received or deemed to be received by a shareholder from the Corporation after it has been continued to Switzerland will be required to be included in computing the shareholder's income for purposes of the Tax Act. Dividends or deemed dividends received by a shareholder who is an individual will not be subject to the gross-up and dividend tax credit rules generally applicable to taxable dividends received by an individual from taxable Canadian corporations. Generally, a shareholder that is a corporation will not be entitled to deduct the amount of -16- the dividends or deemed dividends in computing its taxable income. A shareholder that is a Canadian-controlled private corporation (as defined in the Tax Act) may be liable to pay an additional refundable tax of 6 2/3 % on the dividends or deemed dividends. Such tax will be refundable when the corporate shareholder pays taxable dividends to its shareholders. The amount of dividends or deemed dividends on the shares of the Corporation will include the foreign country's withholding tax, if any, imposed in respect of the dividends. To the extent the foreign country's withholding tax is imposed in respect of dividends or deemed dividends on the shares, the amount of such tax generally will be eligible for foreign tax credit or deduction treatment where applicable, subject to the detailed rules and limitations under the Tax Act. A shareholder is advised to consult his or her own tax advisor with respect to the availability of a credit or deduction to him or her having regard to his or her particular circumstances. Interest Expense on Money Borrowed to Acquire Shares In computing a taxpayer's income, a taxpayer is generally allowed to deduct interest expense on money borrowed to purchase common shares of a corporation. On October 31, 2003, tax proposals were released by the Department of Finance (the "October 31 Tax Proposals") and are proposed to have effect for taxation years commencing after 2004. If the October 31 Tax Proposals are enacted as proposed then for years after 2004, a shareholder will only be entitled to deduct interest expense incurred on borrowed money used to purchase the shares of the Corporation if it is reasonable to expect that the shareholder will realize a cumulative profit from the shares of the Corporation during the period the shares of the Corporation are held, or can reasonably be expected to be held. The October 31, 2003 Tax Proposals expressly provide that profit for this purpose will not include capital gains or losses. There is no provision for any carry forward of a loss that cannot be claimed as a result of the application of the October 31, 2003 Tax Proposals. If the October 31, 2003 Tax Proposals are enacted in their current form, subject to the administrative practice which may be developed by the CRA in applying the October 31, 2003 Tax Proposals, shareholders may no longer be able to deduct interest paid on money borrowed to purchase shares of the Corporation for taxation years commencing after 2004. Shareholders with Tax-Exempt Status Currently, and following the continuance of the Corporation, a share of the Corporation is not, and will not be, a "qualified investment" for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans and registered education savings plans, each as defined in the Tax Act (collectively, the "Plans"). When the Corporation continues into Switzerland, shares of the Corporation will also constitute "foreign property" for the purposes of the additional tax imposed under Part XI of the Tax Act on the Plans (except registered education savings plans), registered pension plans, and certain other persons exempt from tax under Part I of the Tax Act. Registered education savings plans are not subject to the foreign property rules. A share of the Corporation will continue to not be a suitable investment for the Plans after continuance. A shareholder that is a Plan or a person subject to the foreign property rules should obtain independent tax advice with regard to their particular situation. Future Shareholder Proposals ---------------------------- The final date by the Corporation must receive a proposal for any matter that a person entitled to vote at an annual meeting proposes to raise at the next annual meeting of the Corporation is 90 days before the annual anniversary of the date of this Management Proxy Circular. No shareholder proposals were received for this Meeting. The contents of this Management Proxy Circular and its sending to Shareholders have been approved by the Directors of the Corporation. By Order Of The Board Of Directors /s/ Gregory A. Sasges ---------------------------------------- GREGORY A. SASGES, Secretary -17- SCHEDULE "A" To consider and, if thought fit, to approve the following as a Special Resolution of the Corporation pursuant to Section 188 of the Canada Business Corporations Act (the "CBC Act"): Resolved, as a Special Resolution, that: 1. The Corporation make application to the Director under the Canada Business Corporations Act for a Letter of Satisfaction, file Articles of Incorporation under Swiss corporation law continuing the Corporation as if it had been incorporated under those laws, and make application to the Director for a Certificate of Discontinuance; 2. The Articles of Incorporation of the Corporation under the CBC Act, which have been submitted to the Annual General Meeting of the Corporation held the 28th day of June, 2004, the form of which were initialed by the Chairman at the meeting, are approved and all amendments to the Articles and By-Laws of the Corporation reflected therein are approved; 3. The existing Articles of the Corporation are repealed effective upon the Continuation of the Corporation under Swiss corporation law; 4. The Officers and Directors of the Corporation are hereby authorized to take any action and execute and deliver any documents which are necessary or desirable for the implementation of this Special Resolution, including certifying that the Corporation is in good standing and that the continuation will not adversely affect shareholders' or creditors' rights; 5. The Directors of the Corporation are hereby authorized to abandon the application without further approval of the shareholders. ------------------------------------------------------------------------------- To consider and, if thought fit, to approve the following as a Special Resolution of the Corporation: Resolved, as a Special Resolution, that effective upon the Continuation of the Corporation under Swiss corporation law: 1. the By-Law or other form of document recommended by counsel in accordance with Swiss corporation law and adopted by the board of directors of the Corporation relating generally to the conduct and regulation of the business and affairs of the Corporation, which has been submitted to the Annual General Meeting of the Corporation held the 28th day of June, 2004, the form of which was initialed by the Chairman at the meeting, is approved and all amendments to the Articles and By-Laws of the Corporation reflected therein are ratified, confirmed, and approved; and 2. the existing By-Law 1 of the Corporation is repealed. -18- Schedule "B" ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 1. Under the CBC Act, the charter documents of the Under Swiss corporation law the charter Charter Corporation are its Articles of Incorporation. documents are the Articles of Incorporation. Documents. These Articles set forth the name of the Corporation, These Articles have to set forth at least the the Canadian province in which its registered office name of the corporation, the Swiss Canton, in is located, the authorized capital of the Corporation, which its registered office is located and the that there are no restrictions on share transfers, domicile, the purpose of the corporation, the the number of directors, and any restrictions on the issued capital and contributions made thereto, types of business that the Corporation may conduct. whether there are restrictions on share transfers, the number and the par value and the type of shares, the calling of a general meeting of shareholders and the voting rights of the shareholders, the bodies for the administration and the audit, and finally the form in which the corporation shall publish its notices. ----------------------------------------------------------------------------------------------------------------------------- 2. Under the CBC Act, certain types of actions must be Under Swiss corporation law a resolution of Majority approved by a special resolution of the members. the General Meeting of Shareholders passed by Required for A special resolution of the members under the CBC Act at least two thirds of the votes represented Special must be passed by not less than two-thirds of the and the absolute majority of the par value of Resolution/ votes cast by the members who voted in respect of shares represented, shall be required for the Extraordinary that resolution. Special resolutions are required to change of the corporation purpose, the creation Action approve an amendment to charter documents, a of shares with privileged voting right, the liquidation, an amalgamation (merger), a variation in restriction of the transferability of registered the special rights or restrictions attached to shares, shares, an increase of capital either authorized an increase in the authorized capital, a subdivision or subject to a condition, the limitation or or consolidation of the share capital or the sale or withdrawal of preemptive rights, the change of other transfer of substantially all of the assets. the domicile of the corporation, or the dissolution of the corporation without liquidation. Of course, the Articles of Incorporation can declare other resolutions being subject to qualified majorities. ----------------------------------------------------------------------------------------------------------------------------- 3. The corporate records of a CBC Act corporation are The corporate records of a Swiss corporation Access to maintained at its registered office or at any other are maintained at its registered office and Corporate place in Canada designated by its directors. the cantonal commercial register. The commercial Records register maintains all corporate records and changes thereof. Furthermore, the commercial register is publicly available. Therefore, every interested person has access to corporate information such as names of the members of the Board of Directors and all information provided by the Articles of Incorporation. ----------------------------------------------------------------------------------------------------------------------------- 4. A CBC Act corporation may authorize an unlimited In Switzerland we do not know authorized capital, Share Capital number of shares. A CBC Act corporation may not but only issued capital. A Swiss corporation may hold shares in a parent company. The CBC Act issue an unlimited number of shares, whereas the allows financial assistance in connection with the minimum capital is CHF 100'000.00. The share purchase of its shares unless there are reasonable capital can also be paid in by contributions in grounds for believing that the assistance would kind but this requires a report from a specially render the corporation unable to pay its liabilities qualified auditor. as they become due or that its assets would be less than the aggregate of its liabilities and stated capital. -----------------------------------------------------------------------------------------------------------------------------
-19- ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 5. Under the CBC Act, a lost or stolen stock certificate Shares can be issued either in the name of a Stock is valid against the issuer in the hands of a bona fide holder (registered shares) or to bearer. Both Certificates purchaser without knowledge of any defect in title. In types of shares may exist side by side in the other words, a subsequent purchaser can in some proportion determined by the Articles of circumstances obtain good title to shares of stock from Incorporation. Bearer shares and registered one without title to such shares. shares are basically transferable without restriction, but the transferability of registered shares can be restricted by the Articles of Incorporation. Bearer shares are transferred by hand over of the share certificate and registered shares have to be duly endorsed for transferral. By amending the Articles of Incorporation the General Meeting of Shareholders is authorized to split shares into shares with lower par value or to consolidate shares into shares with higher par value, whereas the consolidation of shares requires the approval of shareholders. ----------------------------------------------------------------------------------------------------------------------------- 6. Under the CBC Act, the members may restrict the powers The members of the Board of Directors have to Directors of the directors by a unanimous member agreement. be elected by the General Meeting of Shareholders. Given the number of members of the Corporation, it is The Swiss corporate law requires the election of doubtful that a unanimous member agreement could be directors by the General Meeting of Shareholders adopted. The CBC Act requires the election of for a term not to exceed six years, whereas directors by the members for a term not to exceed three re-election is possible. Under Swiss law the years. The CBC Act allows removal of directors by a majority of the members of the Board of Directors 50% member vote. Under the CBC Act, except in special have to be either Swiss or European Union Citizens cases, at least 25% of the directors of a company must and have to be domiciled in Switzerland. The be resident Canadians. Under the CBC Act Directors are federal Council may grant exceptions to this rule empowered to amend By-Laws subject to the ratification for companies whose principal purpose consists in by the members at the next meeting. The CBC allows holding participations in other enterprises, indemnification of directors against liability incurred provided the majority of these enterprises are by the director as a director without court approval. abroad. Only shareholders are eligible to the The CBC Act specifically provides for the maintenance Board of Directors, whereas fiduciary of insurance for the benefit of a director. shareholding is sufficient. The Board of Directors has certain non-transferable and inalienable duties, such as the ultimate management of the corporation and the giving of the necessary directives, the establishment of the organization, the structuring of the accounting system and of the financial controls as well as the financial planning insofar as this is necessary to manage the corporation, the appointment and removal of the persons entrusted with the management and the representation, the preparation of the business report as well as the preparation of the General Meeting of the Shareholders and the implementing of its resolutions and the notification of the judge in the case of over indebtedness. The members of the Board of Directors and all persons engaged in the management are liable not only to the corporation, but also to each shareholder and to the corporation's obligees for the damage caused by intentional or negligent violation of their duties. There are specific insurances covering those risks. -----------------------------------------------------------------------------------------------------------------------------
-20- ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 7. Under the CBC Act, annual meetings of members must be The General Meeting of Shareholders is the Members/ held every 15 months. The CBC Act has specific supreme corporate body of the corporation. It Stockholders provisions regarding the fixing of record dates for has certain inalienable powers, such as the persons entitled to notice of meetings and the nature adoption and the amending of the Articles of of the notice. The notice required under the CBC Act Incorporation, the election of the members of must state the nature of any special business to be the Board of Directors and of the auditors, the transacted in sufficient detail to permit the members approval of the annual report and of the annual to form a reasoned judgment thereon and must include financial statement as well as the resolution on the text of any special resolution to be submitted to the use of the balance sheet profit, in particular, the meeting. the declaration of dividends and the release of the members of the Board of Directors. The ordinary General Meeting of Shareholders takes place annually within six months after the close of the business year, special meetings are called according to need. The General Meeting of Shareholders is called by the Board of Directors and if necessary by the auditors at the latest twenty days prior to the day of the meeting. The calling of a general Meeting of Shareholders may also be requested by one or more shareholders representing together at least ten percent of the share capital. The calling has to state the agenda items as well as the motions of the Board of Directors and of the shareholders who have requested the holding of a General Meeting of Shareholders or the inclusion of an item in the agenda. No resolution may be passed on motions concerning agenda items which have not been duly announced. -----------------------------------------------------------------------------------------------------------------------------
-20- ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 8. A CBC Act corporation need not place a report of the Under Swiss law the business report and the Financial directors before the annual meeting of members. For auditor's report of the particular business Disclosure CBC Act corporations, audited financial statements year have to be made available for inspection not more than six months old must be presented to the at the corporation's domicile no later than members at the annual meeting. The CBC Act twenty days prior to the ordinary General specifically provides that the financial statements Meeting of Shareholders. Any shareholder may must be approved by the directors and may not be request that a copy of these documents be circulated unless accompanied by the report of the immediately sent to him. Any shareholder may auditors of the corporation. still request from the corporation the business report in the form approved by the Under the CBC Act, the auditor of the corporation General Meeting of Shareholders, as well as must be independent and, before replacing a previous the auditor's report, during the year following auditor, a new auditor must request a written the General Meeting of Shareholders. At the statement of the circumstances and reasons for the General Meeting of Shareholders any shareholder replacement of the auditor, in his or her opinion. is entitled to request information from the Board of Directors concerning the affairs of the corporation and from the auditor concerning the execution and the results of their examination. The corporation has to give information to the extent necessary for the exercising of shareholders' rights. Information may be refused if business secrets or other interests of the corporation worth being protected are jeopardized. Auditors must be independent from the Board of Directors and from any shareholder who has a majority vote. In particular, they shall not be employees of the corporation to be audited, and they shall not perform work for it incompatible with the auditing mandate. If the shares of the corporation are listed on the stock exchange, the auditors must meet special professional qualifications. The auditor can be replaced based on the regulation in the Articles of Incorporation. -----------------------------------------------------------------------------------------------------------------------------
-21- ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 9. Dissent proceedings allow a member to require a The Board of Directors and any shareholder may Dissent corporation to purchase his or her shares at an take legal actions against the corporation to Proceedings/ appraised price if the corporation takes certain challenge resolutions of the General Meeting Appraisal triggering actions from which the member dissents. of Shareholders, which violate the law or the Rights Under the CBC Act, the triggering actions include Articles of Incorporation. Decisions are (1) the amendment of the charter documents to change or particularly challengeable if they withdraw or remove any restrictions on the types of business the limit shareholders' rights thereby violating Corporation may conduct; (2) the continuance of the the law or the Articles of Incorporation. Corporation under the laws of another jurisdiction; Decisions are also challengeable if they (3) the lease, sale or exchange of substantially all withdraw or limit shareholders' rights without of the assets of the corporation; (4) the amalgamation proper reason or if they withdraw the profit (merger) of the Corporation with another company; and orientation of the corporation without the (5) the change or removal of any provisions restricting consent of all shareholders. If the legal action or constraining the transfer of ownership of shares. by the shareholder is successful a judgement Also, an amalgamation of a CBC Act corporation with will annul the resolution of the General Meeting. its wholly-owned subsidiary or another wholly-owned In Switzerland there are no appraisal rights subsidiary of the same parent corporation does not give provided by law but in a merger the merging rise to dissent proceedings. corporations can contractually agree on a possibility for shareholders to opt for a cash-out. -----------------------------------------------------------------------------------------------------------------------------
-22- ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 10. Under the CBC Act, court approval of the amalgamation In Switzerland by July 1, 2004, the new Swiss Amalgamation is not required. Instead, the Director of the Merger Act becomes effective. The Swiss Merger (Merger) Corporations Branch (of the Canadian federal government) Act provides two forms of merger. In what is must be satisfied on statutory declaration evidence that referred to as an absorption, a target creditors will not be prejudiced by the amalgamation. corporation merges into an acquiring corporation. The CBC Act also provides for a "short-form By operation of law, the acquirer not only amalgamation" when a subsidiary is amalgamating with its becomes the owner of the assets of the target parent corporation or two or more wholly-owned corporation but also becomes subject to the actual subsidiary corporations of the same parent corporation and contingent liabilities of the target. Upon are amalgamating. The short form amalgamation needs finalizing the transaction, the target corporation only to be approved by a resolution of the directors disappears, and its dissolution is registered in of each of the amalgamating corporations. the commercial register. Thus, it ceases to exist while the acquiring corporation continues to exist. The CBC Act also allows for "triangular amalgamations." Characteristic of this form of merger is that, In other words, it is not necessary that shares of the prior to the merger, the acquiring corporation has amalgamating corporation be given to the members of previously existed as a legal entity. In what is the amalgamated corporation; instead, shares of the referred to as a combination, two (or more) parent of the amalgamating corporation can be used. companies merge on equal terms and form a newly established entity. It is the characteristic of this merger that the acquiring corporation originates from the transaction itself. The Merger Act stipulates specific guidelines regarding mergers between companies that are in a control relationship (parent/subsidiary) to each other as well as for mergers between small and medium enterprises. On the other hand, additional legal constrains apply if one of the merging firms is in liquidation or if one corporation is over indebted or reports that half of its equity is no longer covered. ----------------------------------------------------------------------------------------------------------------------------- 11. In a take-over situation, the CBC Act provides for The Swiss corporate law does not contain any Take-Over-Bids compulsory acquisition of shares of "hold-out" members. regulations referring compulsory acquisitions. Only and The compulsory acquisition applies where a member if a corporation is registered with the Swiss Stock Compulsory declines to sell his or her shares to a take-over Exchange (SWIX) the specific rules of the Stock Acquisitions bidder who then obtains 90% acceptance from other Exchange Act apply. The Swiss Stock Exchange Act members. A take-over-bidder who receives more than contains several regulations such as opting up, 90% acceptance from other members. A take-over bidder opting out, squeeze out, squeeze in, etc. The new who receives more than 90% acceptance can then require Swiss Merger Act contains the possibility for the "hold-out" members to sell. The CBC Act gives the merging corporations to contractually opt for a hold-out members the alternate right of accepting the squeeze-out of minority shareholders if at least bid price or demanding an independent valuation of 90% of the shareholders of the transferring their shares. corporation agree. ----------------------------------------------------------------------------------------------------------------------------- 12. A derivative action is one brought or defended by a Contrary to the Canadian Statutory Regulations Derivative member for an on behalf of the corporation. The CBC there is no such thing as derivative actions in Actions Act provides for commencing or defending and action on Switzerland. behalf of the Corporation and for intervening if an action has already been commenced or defended by the Corporation. -----------------------------------------------------------------------------------------------------------------------------
-23- ----------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of Corporations Act the Swiss Code of Obligations (CO) ----------------------------------------------------------------------------------------------------------------------------- 13. The CBC Act provides oppression remedies for members See Section 9 above Oppression who believe that the affairs of the Corporation are being conducted in a manner that is oppressive or unfairly prejudicial to one or more members of the Corporation. The CBC Act extends this oppression remedy to include other security holders, creditors, directors and officers. These remedies provide a broad jurisdiction to the Court to provide relief from the oppressive or unfairly prejudicial acts. -----------------------------------------------------------------------------------------------------------------------------
PROXY ANNUAL GENERAL MEETING OF MEMBERS OF IQ POWER TECHNOLOGY INC. (the "Corporation") TO BE HELD AT BOARDROOM, 708-A- 1111 WEST HASTINGS STREET, VANCOUVER, B.C., CANADA ON WEDNESDAY, JUNE 30, 2004, AT 4:00 P.M. The undersigned member ("Registered Shareholder") of the Corporation hereby appoints, Russell French, a Director of the Corporation, or failing this person, Gregory Sasges, a Director of the Corporation, or in the place of the foregoing, ______________________________ as proxyholder for and on behalf of the Registered Shareholder with the power of substitution to attend, act and vote for and on behalf of the Registered Shareholder in respect of all matters that may properly come before the Meeting of the Registered Shareholders of the Corporation and at every adjournment thereof, to the same extent and with the same powers as if the undersigned Registered Shareholder was present at the said Meeting, or any adjournment thereof. The Registered Shareholder hereby directs the proxyholder to vote the securities of the Corporation registered in the name of the Registered Shareholder as specified herein. Resolutions (For full detail of each item, please see the enclosed Notice of Meeting and Information Circular. Please indicate your vote by placing an "X" in the appropriate column opposite the resolution) For Against 1. To determine the number of Directors at 4 ----------- ----------- For Withhold 2.a To elect as Director, Hans Ambos ----------- ----------- 2.b. To elect as Director, Peter E. Braun ----------- ----------- 2.c To elect as Director, Russell French ----------- ----------- 2.d To elect as Director, Dr. Herbert Weininger ----------- ----------- 3. To appoint Deloitte Touche as Auditor of the Corporation at a remuneration to be fixed by the Directors ----------- ----------- For Against 4. To approve Stock Options and the amendment of the Stock Option Plan ----------- ----------- 5. To approve the directors Remuneration Proposal ----------- ----------- 6. To approve the acts of the Directors ----------- ----------- 7. To approve the Special Resolution to continue the Corporation in Switzerland ----------- ----------- 8. To approve the Special Resolution adopting a new By-law and repealing By-law Number One ----------- ----------- 9. To transact such other business as may properly come before the Meeting ----------- -----------
The undersigned Registered Shareholder hereby revokes any proxy previously given to attend and vote at said Meeting. SIGN HERE: --------------------------------------------------- Please Print Name: --------------------------------------------------- Date: --------------------------------------------------- Number of Shares Represented by Proxy: --------------------------------------------------- THIS PROXY FORM IS NOT VALID UNLESS IT IS SIGNED. SEE IMPORTANT INFORMATION AND INSTRUCTIONS ON REVERSE INSTRUCTIONS FOR COMPLETION OF PROXY 1. This Proxy is solicited by the Management of the Corporation. 2. This form of proxy ("Instrument of Proxy") must be signed by you, the Registered Shareholder, or by your attorney duly authorized by you in writing, or, in the case of a corporation, by a duly authorized officer or representative of the corporation; and if executed by an attorney, officer, or other duly appointed representative, the original or a notarial copy of the instrument so empowering such person, or such other documentation in support as shall be acceptable to the Chairman of the Meeting, must accompany the Instrument of Proxy. 3. If this Instrument of Proxy is not dated in the space provided, it is deemed to bear the date on which it is mailed to you by the person making the solicitation. 4. A Registered Shareholder who wishes to attend the Meeting and vote on the resolutions in person, may simply register with the scrutineers before the Meeting begins. 5. A Registered Shareholder who is not able to attend the Meeting in person but wishes to vote on the resolutions, may do the following: (a) appoint one of the management proxyholders named on the Instrument of Proxy, by leaving the wording appointing a nominee as is (i.e. do not strike out the management proxyholders shown and do not complete the blank space provided for the appointment of an alternate proxyholder). Where no choice is specified by a Registered Shareholder with respect to a resolution set out in the Instrument of Proxy, a management appointee acting as a proxyholder will vote in favour of each matter identified on this Instrument of Proxy and for the nominees of management for directors and auditor as identified in this Instrument of Proxy; OR (b) appoint another proxyholder, who need not be a Registered Shareholder of the Corporation, to vote according to the Registered Shareholder's instructions, by striking out the management proxyholder names shown and inserting the name of the person you wish to represent you at the Meeting in the space provided for an alternate proxyholder. If no choice is specified, the proxyholder has discretionary authority to vote as the proxyholder sees fit. 6. The securities represented by this Instrument of Proxy will be voted or withheld from voting in accordance with the instructions of the Registered Shareholder on any poll of a resolution that may be called for and, if the Registered Shareholder specifies a choice with respect to any matter to be acted upon, the securities will be voted accordingly. Further, the securities will be voted by the appointed proxyholder with respect to any amendments or variations of any of the resolutions set out on the Instrument of Proxy or matters that may properly come before the Meeting as the proxyholder in its sole discretion sees fit. If a Registered Shareholder has submitted an Instrument of Proxy, the Registered Shareholder may still attend the Meeting and may vote in person. To do so, the Registered Shareholder must record his/her attendance with the scrutineers before the commencement of the Meeting and revoke, in writing, the prior votes. ================================================================================ To be represented at the Meeting, this proxy form must be received at the office of Computershare Trust Company of Canada by mail or by fax no later than forty eight (48) hours (excluding Saturdays, Sundays and holidays) prior to the time of the Meeting, or adjournment thereof or may be accepted by the Chairman of the Meeting prior to the commencement of the Meeting. The mailing address is: Computershare Trust Company of Canada Proxy Dept. 100 University Avenue 9th Floor Toronto Ontario M5J 2Y1 Fax: Within North American: 1-866-249-7775 Outside North America: (416) 263-9524 ================================================================================ iQ POWER TECHNOLOGY INC. NOTICE OF JULY 30, 2004 CONTINUATION OF MEETING AND SUPPLEMENTAL MANAGEMENT PROXY CIRCULAR FOR THE CONTINUATION OF THE 2004 ANNUAL MEETING OF THE SHAREHOLDERS OF iQ POWER TECHNOLOGY INC. ORIGINALLY HELD ON JUNE 30, 2004 iQ POWER TECHNOLOGY INC. NOTICE OF CONTINUATION OF 2004 ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 2004 annual general meeting (the "Meeting") of members of iQ Power Technology Inc. (the "Corporation") originally held on June 30, 2004, will be continued in the Boardroom at 1111 West Hastings Street, Suite 708-A, Vancouver, British Columbia, Canada, on July 30, 2004, at the hour of 4:00 p.m. (Pacific Time) for the following specific purposes: (1) To consider and, if thought fit, to pass a Special Resolution authorizing the Corporation to apply for continuance under Swiss corporation law as if the Corporation had been incorporated thereunder, details of which, including a copy of the proposed Special Resolution, are contained in the accompanying Supplemental Management Proxy Circular, subject to the discretion of the Board of Directors to abandon the application without further approval of the shareholders, (2) To consider and, if through fit, to pass a Special Resolution authorizing the Corporation to change its name to iQ Power AG effective upon the continuance of the Corporation under Swiss corporation law; (3) To consider and, if thought fit, to pass a Special Resolution (a) repealing the existing Articles of the Corporation, and (b) adopting new Articles of the Corporation effective upon the continuance of the Corporation under Swiss corporation law, details of which, including a copy of the proposed Special Resolution, are contained in the accompanying Supplemental Management Proxy Circular subject to the discretion of the Board of Directors to abandon the application without further approval of the shareholders; (4) To consider and, if thought fit, to pass a Resolution repealing the existing By-Law Number One of the Corporation to be effective upon the continuance of the Corporation under Swiss corporation law, and all subject to the discretion of the Board of Directors to abandon the same without further approval of the shareholders; (5) To consider and, if thought fit, to pass a Resolution ratifying, confirming, and approving with or without variation any By-Law or other form of document recommended by counsel in accordance with Swiss corporation law and adopted by the board of directors of the Corporation relating generally to the conduct and regulation of the business and affairs of the Corporation, such By-Law or other form of document to be effective upon the continuance of the Corporation under Swiss corporation law, and all subject to the discretion of the Board of Directors to abandon the same without further approval of the shareholders; and (6) To transact such other business as may be properly transacted at the Meeting or at any adjournment thereof. TAKE NOTICE that pursuant to the Canada Business Corporations Act (the "CBC Act") a shareholder dissenting from the Special Resolution to continue the Corporation under Swiss corporation law is entitled to be paid the fair value of his shares in accordance with Section 190 of the CBC Act should the Corporation proceed with the continuation. Particulars of the level of shareholder approval required to pass the proposed special resolutions and the rights of dissent are more particularly discussed in the Supplemental Management Proxy Circular accompanying this Notice. Members who are unable to attend the Meeting in person are requested to read the notes accompanying the instrument of proxy and complete and return the proxy to the Corporation's transfer agent, Computershare Trust Company of Canada, Proxy Dept. 100 University Avenue 9th Floor, Toronto, Ontario, Canada, M5J 2Y1, Fax: Within North American: 1-866-249-7775; Outside North America: (416) 263-9524, all not less than forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before the time fixed for the Meeting. DATED at the City of Vancouver, in the Province of British Columbia, Canada, as of the 7th day of June, 2004. By Order Of The Board Of Directors /s/ Gregory A. Sasges -------------------------------------------- GREGORY A. SASGES, Secretary Note to United States Shareholders ---------------------------------- The transactions contemplated by the Special Resolution authorizing the Corporation to apply for the Continuance are subject to the CBC Act and the Swiss Code of Obligations. The Continuance is deemed to be an offer for the securities of a foreign corporation, iQ Power Technology Inc., by the continued corporation. The Continuance is subject to the disclosure requirements of a foreign country that are different from those of the United States. If the Continuance is completed, we (as a Swiss corporation) will be deemed to have issued new securities to our security holders, including common shares to our common shareholders, options to our option holders, warrants to our warrant holders and debt securities to our debt holders (collectively, the "Securities"). These Securities will be offered in the United States pursuant to an exemption from the U.S. tender offer rules provided by Rule 14d-1(c) under the Securities Exchange Act of 1934, as amended, and pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the "1933 Act"), provided by Rule 802 thereunder. The Securities to be issued pursuant to the Continuance will be unregistered restricted securities within the meaning of Rule 144 under the 1933 Act to the same extent and proportion that the securities tendered or exchanged by the holder in that transaction were restricted securities. Consequently, shareholders holding unrestricted securities of the Corporation will be deemed to exchange their securities in the Continuance for unrestricted Securities that are freely transferable under United States federal securities laws, except for such shares held by persons who are "affiliates" (as such term is defined under Rule 144(a)(1) of the Securities Act) of the Corporation. The Securities held by such affiliates may be resold by them only in transactions permitted by the resale provisions of Rule 145(d)(1), (2), or (3) promulgated under the 1933 Act or as otherwise permitted under the 1933 Act, including pursuant to exemptions from registration available under Regulation S promulgated under the 1933 Act. Rule 144(a)(1) defines affiliates as "a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control of such issuer," and the term generally includes the directors, officers or 10% shareholders of an issuer. Shareholders who reside in the United States or who are U.S. citizens have been advised to seek their own legal counsel with respect to the effect the proposed Continuance may have on their right to trade the Securities deemed to be received by them. The Securities offered in connection with the Continuance have not been and will not be registered under the 1933 Act or under the securities laws of any state or district of the United States. Neither the U.S. Securities and Exchange Commission nor any U.S. state securities commission has approved the Securities, or determined if this document is accurate or complete. Any representation to the contrary is a criminal offence. IT MAY BE DIFFICULT FOR YOU TO ENFORCE YOUR RIGHTS OR BRING ANY CLAIM YOU MAY HAVE ARISING UNDER THE FEDERAL SECURITIES LAWS, SINCE THE CORPORATION IS LOCATED IN A FOREIGN COUNTRY, AND SOME OR ALL OF ITS OFFICERS AND DIRECTORS MAY BE RESIDENTS OF A FOREIGN COUNTRY. YOU MAY NOT BE ABLE TO SUE A FOREIGN COMPANY OR ITS OFFICERS OR DIRECTORS IN A FOREIGN COURT FOR VIOLATIONS OF THE U.S. SECURITIES LAWS. IT MAY BE DIFFICULT TO COMPEL A FOREIGN COMPANY AND ITS AFFILIATES TO SUBJECT THEMSELVES TO A U.S. COURT'S JUDGMENT. iQ POWER TECHNOLOGY INC. SUPPLEMENTAL MANAGEMENT PROXY CIRCULAR as at and dated June 30, 2004 Solicitation of Proxies ----------------------- This Supplemental Management Proxy Circular is furnished in connection with the solicitation of proxies by management of iQ Power Technology Inc. (hereinafter variously referred to as "we," "us," "our, and "the Corporation") for use at the Continuation of the 2004 annual general meeting (collectively the "Meeting") of shareholders of the Corporation to be held on July 30, 2004, at the time and place and for the purposes set forth in the Notice of Continuation of 2004 Annual General Meeting. The cost of this solicitation will be borne by the Corporation. Appointment and Revocation of Proxies ------------------------------------- The persons named in the accompanying form of proxy are a director and the secretary of the Corporation. A shareholder desiring to appoint some other person (who need not be a shareholder) to represent him or her at the meeting may do so, either by striking out the printed names and inserting the desired person's name in the blank space provided in the form of proxy or by completing another proper form of proxy and in either case delivering the completed proxy to the office of Computershare Trust Company of Canada, Proxy Dept. 100 University Avenue 9th Floor, Toronto, Ontario, Canada, M5J 2Y1, Fax: Within North American: 1-866-249-7775; Outside North America: (416) 263-9524, or to the Corporation's office, all not less than forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before the time fixed for the Meeting. The chair of the Meeting will have the discretion to accept or reject proxies otherwise deposited. A shareholder who has given a proxy may revoke it by an instrument in writing delivered to the said office of Computershare Trust Company of Canada or the Corporation's office at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, or to the chair of the Meeting, or in any manner provided by law. Voting of Proxies ----------------- The securities represented by the proxy will be voted or withheld from voting in accordance with the instructions of the shareholder on any ballot that may be called for, and if the shareholder specifies a choice with respect to any matter to be acted upon, the securities will be voted accordingly. The form of proxy confers authority upon the named proxyholder with respect to matters identified in the accompanying notice of Meeting. If a choice with respect to such matters is not specified, it is intended that the person designated by management in the form of proxy will vote the securities represented by the proxy in favour of each matter identified in the proxy and for the nominees of management for directors and auditor. The proxy confers discretionary authority upon the named proxyholder with respect to amendments to or variations in matters identified in the accompanying notice of Meeting and other matters that may properly come before the Meeting. As at the date of this Supplemental Management Proxy Circular, management is not aware of any amendments, variations, or other matters. If such should occur, the persons designated by management will vote thereon in accordance with their best judgment, exercising discretionary authority. Voting Securities and Principal Holders Thereof ----------------------------------------------- The voting securities of the Corporation consist of an unlimited number of Common Shares without par value. As at the date of this Management Proxy Circular, 31,610,457 Common Shares without par value were issued and outstanding, each such share carrying the right to one (1) vote at the Meeting. By operation of the provisions of the Canada Business Corporations Act (the "CBC Act"), June 3, 2004, was established as the record date for the purpose of determining those shareholders entitled to receive notice of, and to vote at the June 30, 2004, Annual Meeting and, therefore, the July 30, 2004, Continuation thereof. To the knowledge of the directors and senior officers of the Corporation, no person beneficially owns, directly or indirectly, or exercises control or direction over, voting securities carrying more than 10% of the voting rights attached to the voting securities of the Corporation. -2- Other than the election of directors, the resolutions contained in the Notice of Meeting require the positive vote of more than 50% of the votes cast on the resolution with the exception of special resolutions that require the positive vote of not less than 66 2/3% of the votes cast on the special resolution. Interest of Insiders In Material Transactions --------------------------------------------- No director or senior officer of the Corporation or any associate of the foregoing has any substantial interest, direct or indirect, by way of beneficial ownership of shares or otherwise in the matters to be acted upon at the Meeting Continuation, except for any interest arising from the ownership of shares of the Corporation where the shareholder will receive no extra or special benefit or advantage not shared on a pro rata basis by all holders of shares in the capital of the Corporation. Particulars of Matters to be Acted Upon --------------------------------------- Proposal To Continue the Corporation Under Laws of Switzerland -------------------------------------------------------------- The Board of Directors is proposing to continue the Corporation as a corporation organized and existing under and governed by the laws of Switzerland (the "Continuance"). The reason for this proposed change of domicile arises from the fact that the Corporation operates primarily from Europe and European residents hold the majority of its shares. This has resulted in substantial difficulties and expenses for the Corporation that it expects will be dramatically reduced following a continuation out of Canada to Switzerland. By passing the proposed special resolutions, members effectively will be empowering the board of directors to continue the Corporation into Switzerland. The proposed Continuance will have certain effects on the charter documents of the Corporation and the rights of Members, the majority of which are summarized under "Certain Substantive Differences in Corporation Laws" below. The Board of Directors believes that the proposed Continuance will serve the best interests of the Corporation and the Members. The following discussion summarizes certain aspects of the Proposed Continuation. Special and Ordinary Resolutions The Proposed Continuance will be initiated by the adoption of a special resolution in the form prescribed by the Corporation's solicitors and presented to the Members at the Meeting. The change of name is being sought to meet Swiss legal requirements with respect to denoting the limited liability status of the Corporation. Likewise, the repeal of the existing Articles of the Corporation and the adoption of new Articles is required to bring the Articles of the Corporation into compliance with Swiss law on the Continuance. The proposed Special Resolutions required in connection with the Continuance are attached as Schedule "A" to this Supplemental Management Proxy Circular. Finally the repeal of the existing By-Law Number One and the ratification of any new By-law that may be recommended by counsel in accordance with Swiss corporation law and adopted by the board of directors of the Corporation relating generally to the conduct and regulation of the business and affairs of the Corporation is also required to bring the By-laws of the Corporation into compliance with Swiss law on the Continuance. Any new form of proposed by-law will be made available for review by shareholders at the registered office of the Corporation immediately upon its approval by the Directors of the Corporation. The final form of all new constating documents and by-laws to be adopted will be in a form satisfactory to the Board of Directors and the Corporation's solicitors, will be presented to Members present at the Meeting, and will be available for inspection prior to the Meeting at the registered office of the Corporation. By passing the special resolutions proposed, members will effectively be approving all items of business described -3- in those resolutions and any Exhibits thereto. Continuance Section 188 of the CBC Act effectively provides that the Corporation may apply to the appropriate official or public body of another jurisdiction requesting that the Corporation be continued as if it had been incorporated under the laws of that other jurisdiction if the Corporation (a) is authorized by the shareholders in accordance with section 188 to make the application; and (b) establishes to the satisfaction of the Director under the CBC Act that its proposed continuance in the other jurisdiction will not adversely affect creditors or shareholders of the corporation. An application for continuance becomes authorized when the shareholders voting thereon have approved of the continuance by a special resolution The CBC Act also provides that the Corporation shall not be continued as a body corporate under the laws of another jurisdiction unless those laws provide in effect that (a) the property of the Corporation continues to be the property of the body corporate; (b) the body corporate continues to be liable for the obligations of the Corporation; (c) an existing cause of action, claim or liability to prosecution is unaffected; (d) a civil, criminal or administrative action or proceeding pending by or against the Corporation may be continued to be prosecuted by or against the body corporate; and (e) a conviction against, or ruling, order or judgment in favour of or against, the Corporation may be enforced by or against the body corporate. If the special resolutions concerning the continuation are approved by the Members, the Board of Directors intend to file the documents required to effect the changes authorized by members, unless the Board of Directors determines that it is not in the best interest of the Corporation to proceed given the nature of the authorized changes and the circumstances associated with proceeding, including the number of shares of Common Stock with respect to which Members may have exercised their right to dissent. Dissenters' Rights The CBC Act, which will apply to the Corporation at the time the Special Resolution concerning the Continuance of the Corporation is considered and voted upon at the Meeting, provides in Section 190 that a shareholder of the Corporation may dissent with respect to that Resolution. Such a shareholder (a "Dissenting Shareholder") may send at or before the meeting to the Corporation a written objection (a "Notice of Dissent") to that Resolution. In addition to any other right he may have, such a shareholder who complies with the dissent procedure of Section 190 of the CBC Act is entitled to be paid by the Corporation the fair value of the shares held by him determined as at the close of business on the day before the Resolution is passed. A Dissenting Shareholder may claim under Section 190 only with respect to all shares held by him on behalf of any one beneficial owner and registered in his name. A shareholder who wishes to invoke the provisions of Section 190 must send a Notice of Dissent to the registered office of the Corporation, to the attention of the Secretary, at or before the Meeting. The filing of a Notice of Dissent does not deprive a shareholder of his right to vote on the Resolution and voting against the Resolution does not constitute Notice of Dissent. Within ten (10) days after the shareholders of the Corporation adopt the Resolution, the Corporation is required to notify in writing each Dissenting Shareholder that the Resolution has been adopted. A Dissenting Shareholder shall, within 20 days after he receives notice of adoption of the Resolution or, if he does not receive such notice, within 20 days of leaning that the resolution has been adopted, send to the Corporation written notice (the "Demand for Payment") containing his name and address, the number and class of shares in respect of which he dissents and a Demand for Payment of the fair value of such shares. Within 30 days of sending his Demand for Payment, the Dissenting Shareholder shall send the certificates representing the shares in respect of which he dissents to the Corporation or its transfer agent. The Corporation shall endorse thereon notice that the shareholder thereof is a Dissenting Shareholder and forthwith return the share certificates to the Dissenting Shareholder. After sending a Demand for Payment a Dissenting Shareholder ceases to have any rights as a shareholder other than the right to be paid the fair value of the shares of the Corporation held by him unless the Dissenting -4- Shareholder withdraws his Demand for Payment before the Corporation makes an offer to pay (the "Offer to Pay") or the Corporation fails to make an Offer to Pay and the Dissenting Shareholder withdraws his notice, or the directors revoke the resolution to continue the Corporation, in which case his rights as a shareholder are reinstated as of the date he sent the notice referred to above. Not later than seven (7) days after the day the Corporation receives the Demand for Payment, the Corporation shall send to each Dissenting Shareholder who has sent a Demand for Payment an Offer to Pay for the shares of the Dissenting Shareholder in the amount considered by the directors of the Corporation to be the fair value thereof accompanied by a statement showing how the fair value was determined. Every Offer to Pay for shares held by the Dissenting Shareholder shall be on the same terms. Any Offer to Pay accepted by a Dissenting Shareholder shall be paid by the Corporation within ten (10) days of the acceptance but an Offer to Pay lapses if the Corporation has not received an acceptance thereof within thirty (30) days of the making of the Offer to Pay. If any Offer to Pay is not made by the Corporation or a Dissenting Shareholder fails to accept an Offer to Pay, the Corporation may, within fifty (50) days after the action approved by the Resolution is effective or in such further period as the Court may allow, apply to a Court to fix a fair value for the shares of any Dissenting Shareholder. If the Corporation fails to apply to a Court under the foregoing provision, a Dissenting Shareholder may apply to a Court for the same purpose within a further period of twenty (20) days or such further period as a Court may allow. Any such application shall be made to the Supreme Court of British Columbia being the Court, which has jurisdiction in the place where the registered office of the Corporation is located, or to the Supreme or Superior Court of the Province where the Dissenting Shareholder making the application resides if the Corporation carries on business in that Province. A Dissenting Shareholder is not required to give security for costs in any application to a Court, and all Dissenting Shareholders whose shares have not been purchased by the Corporation shall be joined as parties and bound by the decision of the Court. The Corporation shall notify each affected Dissenting Shareholder of the date, place and consequence of any application and of the right of a Dissenting Shareholder to appear and be heard in person or by counsel. The Court shall fix a fair value for the shares of all Dissenting Shareholders and may in its discretion allow a reasonable rate of interest on the amount payable to each Dissenting Shareholder from the date of the continuance under the Swiss and is effective until the date of payment of the amount ordered by the Court. The cost of any application to a Court by the Corporation or a Dissenting Shareholder will be under the discretion of the Court. The above is only a summary of the provisions of Section 190 of the CBC Act, which are technical and complex. It is suggested that any holder of shares of the Corporation wishing to avail himself of his right of dissent under the CBC Act seek his own legal advice as failure to comply strictly with the provisions of that Act may prejudice his right of dissent. Certain Substantive Differences In Corporation Laws Refer to Schedule "B" for a summary of some of the significant differences between the Canada Business Corporations Act (referred to in this section as the "CBC Act"), and Art. 620 ff. of the Swiss Code of Obligations (CO). The Continuance of the Corporation to Switzerland, and the adoption of new charter documents are subject to documentation in support being accepted for filing by the appropriate corporate authorities in Switzerland as well as The Director, under the CBC Act. Specifically, the Corporation must receive authorization from shareholders by special resolution and the Corporation must establish to the satisfaction of the Director under the CBC Act that the proposed Continuance in Switzerland will not adversely affect creditors or shareholders of the Corporation. Tax Disclosure for iQ Power --------------------------- Canadian Federal Income Tax Considerations In the opinion of Borden Ladner Gervais LLP, Canadian tax counsel to the Corporation, the following summary fairly sets out the principal Canadian federal income tax consequences to the Corporation and to its shareholders, including those who choose to exercise dissent rights ("Dissenting Shareholders"), arising from the Continuance of the Corporation to Switzerland. This summary only applies to shareholders who are and remain at all relevant -5- times resident in Canada for purposes of the Income Tax Act (Canada) (the "Tax Act"). This summary is not exhaustive of all possible Canadian federal income tax considerations applicable to the Corporation or a shareholder. This summary is of a general nature only and is not intended to be legal or tax advice to the Corporation or a shareholder. Shareholders should consult their own tax advisors for advice with respect to the tax consequences of the Continuance of the Corporation based on their particular circumstances. This summary is based upon the facts set out in this Management Proxy Circular, the current provisions of the Tax Act including the regulations thereunder (the "Regulations") and counsel's understanding of the current administrative practices of the Canada Revenue Agency ("CRA") and certificates received by counsel from the Corporation. The summary also takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced by the Minister of Finance prior to the date hereof (the "Tax Proposals") and assumes that the Tax Proposals will be enacted substantially as proposed, although no assurance in this regard can be given. This summary does not otherwise take into account or anticipate any changes in laws whether by judicial, governmental or legislative decision or action nor does it take into account provincial or foreign income tax legislation or considerations. The Corporation While the Corporation is incorporated in Canada, it is deemed to be resident in Canada for purposes of the Tax Act. When the Corporation is granted "articles of continuance" or similar such constitutional documents confirming its Continuance in Switzerland, thereafter it will be considered to have been incorporated in Switzerland and will cease to be deemed to be a resident in Canada. Based on certificates provided to counsel by the Corporation, the Corporation should cease to be resident in Canada following Continuance in Switzerland because, and at the time (the "Emigration Time") when, its "central management and control" will be located in Switzerland. Following the Emigration Time, the Corporation will be taxable in Canada if it carries on business in Canada or disposes of taxable Canadian property or receives dividends, interest, royalties or similar income from a person resident in Canada. The taxation of such Canadian-source income may be subject to the provisions of the Canada-Switzerland Income Tax Convention. The Corporation has advised counsel that the Corporation does not expect to earn such Canadian-source income following the Emigration Time. The Corporation will be deemed to have a taxation year-end immediately before the Emigration Time. There will also be a deemed disposition of each property owned by the Corporation immediately before such taxation year-end for proceeds of disposition equal to its fair market value at that time. Any income or loss realized by the Corporation on the deemed disposition of a property (other than a capital property) will be taken into account in computing the taxable income of the Corporation for its taxation year ending immediately before the Emigration Time. One-half of capital gains or one-half of capital losses (to the extent of one-half of capital gains) realized by the Corporation on the deemed disposition of a capital property will be taken into account in computing the taxable income of the Corporation for its taxation year ending immediately before the Emigration Time. The Corporation may reduce its taxable income for its taxation year ending immediately before the Emigration Time through the application of non-capital losses available from other taxation years in accordance with the provisions of the Tax Act. The Corporation has advised counsel that the Corporation does not expect any tax payable as a result of the deemed disposition of its properties. The Corporation will also be required to pay a one time tax upon emigration from Canada equal to 25% of the amount by which (a) the aggregate fair market value of the property of the Corporation immediately before the Emigration Time exceeds (b) the aggregate of the paid-up capital of issued and outstanding capital stock of the Corporation and of the debts of the Corporation, each determined immediately before the Emigration Time. Provided, as the Corporation advises counsel, that the Corporation is resident in Switzerland following the Emigration Time, the rate of such tax will be reduced from 25% to 5%. Shareholders Except as described below under "Dissenting Shareholders", a shareholder of the Corporation should not be considered, or be deemed under the provisions of the Tax Act, to dispose of his or her shares of the Corporation solely as a consequence of its Continuance. The adjusted cost base of his or her shares of the Corporation will remain the same. -6- Dissenting Shareholders The following assumes that a Dissenting Shareholder utilizes the statutory dissent rights available to him or her. Additional or different income tax considerations may be relevant to a Dissenting Shareholder who fails to perfect or withdraw his or her claim pursuant to the statutory right of dissent. A Dissenting Shareholder will be entitled to be paid by the Corporation the fair value of the shares of the Corporation held by the Dissenting Shareholder. The Dissenting Shareholder will dispose of his or her shares of the Corporation while the Corporation is incorporated under Canadian law and prior to the Continuance of the Corporation to Switzerland. The Dissenting Shareholder will be deemed to receive a taxable dividend equal to the amount by which the amount received (other than in respect of interest awarded by a Court) exceeds the paid-up capital of the shares held by the Dissenting Shareholder. Such deemed dividend will be subject to the provisions of the Tax Act normally applicable to dividends received from a taxable Canadian corporation including the gross-up and dividend tax credit rules applicable to individuals. Subject to comments which follow, a shareholder of the Corporation that is a corporation may be entitled to deduct in computing taxable income the amount of the deemed dividend otherwise included in its income. Certain shareholders that are private corporations may be subject to a 33-1/3% refundable tax in respect of the deemed dividend. Such tax will be refunded when the corporation pays taxable dividends to its shareholders. Where the Dissenting Shareholder is a corporation, in some circumstances, the amount of such deemed dividend may be treated as proceeds of disposition and not as a dividend. A shareholder of the Corporation that is a corporation should consult its tax advisors in this regard. The Dissenting Shareholder will be considered to have disposed of the shares. For purposes of determining the Dissenting Shareholder's capital gain (or a capital loss), the proceeds of disposition will be equal to the amount received in respect of his or her share of the Corporation less the aggregate of amount of any deemed dividend referred to above and of interest awarded by the Court. One half of the capital gain (capital loss) will be included (deducted) in the income of the Dissenting Shareholder in accordance with the provisions of the Tax Act. Interest awarded to the Dissenting Shareholder by a Court will be included in the Dissenting Shareholder's income for the purposes of the Tax Act. Dividends Received after Continuation Dividends received or deemed to be received by a shareholder from the Corporation after it has been continued to Switzerland will be required to be included in computing the shareholder's income for purposes of the Tax Act. Dividends or deemed dividends received by a shareholder who is an individual will not be subject to the gross-up and dividend tax credit rules generally applicable to taxable dividends received by an individual from taxable Canadian corporations. Generally, a shareholder that is a corporation will not be entitled to deduct the amount of the dividends or deemed dividends in computing its taxable income. A shareholder that is a Canadian-controlled private corporation (as defined in the Tax Act) may be liable to pay an additional refundable tax of 6 2/3 % on the dividends or deemed dividends. Such tax will be refundable when the corporate shareholder pays taxable dividends to its shareholders. The amount of dividends or deemed dividends on the shares of the Corporation will include the foreign country's withholding tax, if any, imposed in respect of the dividends. To the extent the foreign country's withholding tax is imposed in respect of dividends or deemed dividends on the shares, the amount of such tax generally will be eligible for foreign tax credit or deduction treatment where applicable, subject to the detailed rules and limitations under the Tax Act. A shareholder is advised to consult his or her own tax advisor with respect to the availability of a credit or deduction to him or her having regard to his or her particular circumstances. Interest Expense on Money Borrowed to Acquire Shares In computing a taxpayer's income, a taxpayer is generally allowed to deduct interest expense on money borrowed to purchase common shares of a corporation. On October 31, 2003, tax proposals were released by the Department of Finance (the "October 31 Tax Proposals") and are proposed to have effect for taxation years commencing after 2004. If the October 31 Tax Proposals are enacted as proposed then for years after 2004, a shareholder will only be entitled to deduct interest expense incurred on borrowed money used to purchase the shares of the Corporation if it is reasonable to expect that the shareholder will realize a cumulative profit from the shares of the Corporation during the period the shares of the Corporation are held, or can reasonably be expected -7- to be held. The October 31, 2003 Tax Proposals expressly provide that profit for this purpose will not include capital gains or losses. There is no provision for any carry forward of a loss that cannot be claimed as a result of the application of the October 31, 2003 Tax Proposals. If the October 31, 2003 Tax Proposals are enacted in their current form, subject to the administrative practice which may be developed by the CRA in applying the October 31, 2003 Tax Proposals, shareholders may no longer be able to deduct interest paid on money borrowed to purchase shares of the Corporation for taxation years commencing after 2004. Shareholders with Tax-Exempt Status Currently, and following the Continuance of the Corporation, a share of the Corporation is not, and will not be, a "qualified investment" for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans and registered education savings plans, each as defined in the Tax Act (collectively, the "Plans"). When the Corporation continues into Switzerland, shares of the Corporation will also constitute "foreign property" for the purposes of the additional tax imposed under Part XI of the Tax Act on the Plans (except registered education savings plans), registered pension plans, and certain other persons exempt from tax under Part I of the Tax Act. Registered education savings plans are not subject to the foreign property rules. A share of the Corporation will continue to not be a suitable investment for the Plans after Continuance. A shareholder that is a Plan or a person subject to the foreign property rules should obtain independent tax advice with regard to their particular situation. This Supplemental Management Proxy Circular and the accompanying Notice Of Continuation Of 2004 Annual General Meeting replace the Management Proxy Circular and its accompanying Notice Of Meeting mailed to shareholders in support of the June 30, 2004, annual meeting of shareholders of the Corporation insofar as there exists a conflict between two sets of documents. The contents of this Supplemental Management Proxy Circular and its sending to Shareholders have been approved by the Directors of the Corporation. By Order Of The Board Of Directors ----------------------------------------- /s/ Gregory A. Sasges GREGORY A. SASGES, Secretary SCHEDULE "A" 1. UPON MOTION DULY MADE AND SECONDED, IT WAS RESOLVED, AS A SPECIAL RESOLUTION, THAT: a. the Corporation make application to the Director under the Canada Business Corporations Act for a Letter of Satisfaction, file Articles of Incorporation under Swiss corporation law continuing the Corporation as if it had been incorporated under those laws, and make application to the Director for a Certificate of Discontinuance; and b. the Directors of the Corporation be authorized to forego, to delay the implementation of, to revoke, or to abandon this special resolution before it is acted on without further approval of the shareholders of the Corporation. 2. UPON MOTION DULY MADE AND SECONDED, IT WAS RESOLVED, AS A SPECIAL RESOLUTION, THAT: a. the name of the Corporation be changed from iQ Power Technology Inc. to iQ Power AG or such other name as the Board of Directors may approve; b. the Articles of the Corporation be amended accordingly, wherever the name of the Corporation appears therein, c. the By-laws of the Corporation be amended accordingly, wherever the name of the Corporation appears therein, and d. the Directors of the Corporation be authorized to forego, to delay the implementation of, to revoke, or to abandon this special resolution before it is acted on without further approval of the shareholders of the Corporation. 3. UPON MOTION DULY MADE AND SECONDED, IT WAS RESOLVED, AS A SPECIAL RESOLUTION, THAT: a. the existing Articles of the Corporation be repealed; b. the new Articles of the Corporation in the form attached as Exhibit 1 to this special resolution [subject to such changes thereto as may be made on the advice of counsel to the Corporation and approved by the President of the Corporation prior to the Continuation of the Meeting at which shareholder consideration of this special resolution is being sought] be adopted effective upon the Continuance of the Corporation under Swiss corporation law; and c. the Directors of the Corporation be authorized to forego, to delay the implementation of, to revoke, or to abandon this special resolution before it is acted on without further approval of the shareholders of the Corporation. EXHIBIT 1 --------- ARTICLES OF INCORPORATION OF iQ POWER AG -------------------------------------------------------------------------------- I. Company name, domicile, duration and purpose of the Company -------------------------------------------------------------- Article 1 Company name, domicile, duration Under the corporate name of iQ Power AG there exists for an unlimited duration a Company pursuant to art. 620 et seq. of the Swiss Code of Obligations (hereinafter "CO") with domicile in Zug, Switzerland. Article 2 Purpose The purpose of the Company is to develop and commercialize any electrical power source and energy management technologies in the automotive industry and other industries, including the aerospace and defense industry. The Company may open branches and subsidiaries in Switzerland and abroad, and may acquire participations in other companies, either in Switzerland or abroad. It may acquire, hold, transfer and exploit intellectual property rights such as patents, trade marks etc. The Company may acquire, hold, and sell real estate. The Company may engage in and carry out any commercial and financial transactions which are related directly or indirectly to the purpose of the Company. II. Share capital and shares ---------------------------- Article 3 Share capital The share capital of the Company amounts to [to be inserted at the time of applying for continuance based on issued common shares of the Corporation multiplied by the par value per share] and is divided into [to be inserted at the time of applying for continuance based on issued common shares of the Corporation] registered shares with a par value of CHF 0.01 per share. The share capital is fully paid in. Article 4 Share certificates, Conversion The Company is entitled to issue share certificates which represent one or more shares in lieu of certificates for individual shares. The ownership or the usufruct of a share title, or share certificate and any exercise of shareholders' rights, automatically entails recognition of the version of the Articles of Incorporation then in force. The General Meeting of Shareholders may, at any time, convert registered shares into bearer shares or bearer shares into registered shares through an amendment to the Articles of Incorporation. Article 5 Share register, transfer of shares The Board of Directors shall maintain a share register in which the names and addresses of the owners and usufructuaries are to be entered. The entry in the share register requires a certificate as to the acquisition of the share for ownership or as to the establishment of a usufruct. Only those registered in the share register shall be recognized as shareholders or usufructuaries vis-a-vis the Company. The transfer of shares, whether for ownership or for usufruct, is in every case subject to the approval by the Board of Directors [to be altered if possible prior to -2- Continuance]. The approval can only be refused for the reasons listed in Art. 685d CO [have to be defined accurately prior to the Meeting Continuation]. III. Organization of the Company -------------------------------- Article 6 Corporate bodies The corporate bodies of the Company are A. the General Meeting of Shareholders B. the Board of Directors C. the Auditors. A. General Meeting of Shareholders Article 7 Powers The supreme corporate body of the Company is the General Meeting of Shareholders. It has the following powers which are inalienable: 1. to adopt and amend the Articles of Incorporation; 2. to elect and recall the members of the Board of Directors and the Auditors; 3. to approve the annual report and the annual financial statements as well as to pass resolutions on the use of the balance sheet profit, in particular, the declaration of dividends and of profit sharing by directors; 4. to release the members of the Board of Directors; 5. to pass resolutions on matters which are by law or by the Articles of Incorporation reserved to the General Meeting of Shareholders or which are presented to it by the Board of Directors. Article 8 Calling of meeting The ordinary meeting shall take place annually within six months after the close of the business year. Extraordinary General Meeting of Shareholders shall be called as often as necessary, in particular, in all cases required by law. Extraordinary General Meeting of Shareholders shall be called by the Board of Directors if shareholders representing at least ten percent of the share capital request it in writing (including telefax), listing the items and the motions. Article 9 Form of Calling and Universal Meeting of Shareholders The General Meeting of Shareholders shall be called by the Board of Directors, if necessary by the Auditors. The liquidators shall also be entitled to call a General Meeting of Shareholders. The General Meeting of Shareholders shall be called by mail to the shareholders at the latest twenty days prior to the day of the meeting. The calling shall state the agenda items as well as the motions of the Board of Directors and of the shareholders who have requested the holding of a General Meeting of Shareholders or the inclusion of an item in the agenda. Subject to the provisions of the Universal Meeting of Shareholders, no resolutions may be passed on matters which have not been announced in this way; excepted are motions for the calling of an extraordinary meeting of shareholders or the initiating of a special audit. The making of motions within the scope of agenda items and the discussion without passing resolutions does not require announcement in advance. The owners or their proxies of all the shares may, if no objection is raised, hold a General Meeting of Shareholders without observing the formalities for the calling of a meeting (Universal Meeting of Shareholders). As long as the owners or proxies of all shares are present, items within the powers of a General Meeting of Shareholders may -3- validly be discussed and decided upon at such meeting. The annual business report and the auditors' report must be submitted for examination by the shareholders at the domicile of the Company at the latest twenty days prior to the date of the ordinary General Meeting of Shareholders. Reference thereto shall be made in the calling of the General Meeting of Shareholders. Article 10 Chair, minutes The General Meeting of Shareholders shall be chaired by the Chairman, or, in his absence, by another member of the Board of Directors or by another chairman elected for that day by the General Meeting of Shareholders. The Chairman designates a Secretary for the minutes and persons for counting the votes, who need not be shareholders. The Board of Directors is responsible for keeping the minutes, which are to be signed by the Chairman and by the Secretary. Article 11 Voting, elections Each share entitles to one vote. Each shareholder may be represented at the General Meeting of Shareholders by a third person who is authorized by a written proxy. The General Meeting of Shareholders shall pass resolutions and carry out elections by absolute majority of the votes allocated to the shares represented, to the extent the law or the Articles of Incorporation do not provide otherwise. If an election cannot be completed upon the first ballot, there shall be a second ballot at which the relative majority shall decide. The Chairman shall have no casting vote. Elections and voting shall take place openly provided that neither the Chairman nor one of the shareholders request a secret ballot. Article 12 Qualified majority A resolution of the General Meeting of Shareholders passed by at least two thirds of the votes allocated to shares represented as well as the absolute majority of the par value of shares represented shall be required, in addition to the cases listed in art. 704 CO, for: 1. the alleviating or withdrawal of restrictions of the transferability of registered shares; 2. the converting of registered shares into bearer shares; 3. the dissolution of the Company followed by liquidation. B. The Board of Directors Article 13 Composition The Board of Directors shall be composed of one or more members. The members of the Board of Directors shall, as a rule, be elected by the ordinary General Meeting of Shareholders, in each case for a term of one year. The term of office of a member of the Board of Directors shall, subject to prior resignation or removal, expire upon the day of the next ordinary General Meeting of Shareholders. Newly-appointed members shall complete the term of office of their predecessors. The members of the Board of Directors may be re-elected without limitation. The Board of Directors shall organize itself. It designates its Chairman and the Secretary who needs not be a -4- member of the Board of Directors. Article 14 Duties and delegation The Board of Directors is entrusted with the ultimate direction of the Company and the supervision of the management. It shall represent the Company vis-a-vis third parties and shall attend to all matters which are not delegated to another corporate body pursuant to the law, the Articles of Incorporation or the organizational regulations. The Board of Directors may delegate the management of the Company in whole or in part as well as the power of representation to one or several members (managing directors) or third parties (managers) who need not be shareholders of the Company, pursuant to the organizational regulations. In this case, the Board of Directors shall adopt the organizational regulations according to the minimal requirements of art. 716b para. 2 CO and arrange for the appropriate contractual relationship between the Company and the managing directors or managers. The Board of Directors has the following non-transferable and inalienable duties: 1. to ultimately manage the Company and give the necessary directives; 2. to establish the organization; 3. to structure the accounting system, the financial control, as well as the financial planning; 4. to appoint and remove the persons entrusted with the management and representation of the Company and to grant the signatory power; 5. to ultimately supervise the persons entrusted with the management, in particular with respect to compliance with the law and with the Articles of Incorporation, the regulations and directives; 6. to prepare the business report, as well as the General Meeting of Shareholders and to implement the latter's resolutions; 7. to notify the judge in case of over-indebtedness; 8. to pass resolutions regarding the subsequent payment of capital with respect to not fully paid-in shares; 9. to pass resolutions confirming increases of share capital and regarding the amendments to the Articles of Incorporation entailed thereby; 10. to examine the professional qualifications of the specially qualified auditors in those cases in which the law provides for the use of such auditors. Article 15 Organization In the absence of organizational regulations, the Board of Directors shall fix the basic elements of its organization in minutes, including the organization of the meetings, the quorum requirements for attendance and the passing of resolutions at meetings of the Board of Directors. A single member of the Board of Directors is authorized to declare that an increase of capital has been made, that further capital has been paid in, or that full capital has been paid in, and to make the corresponding amendments by notarization to the Articles of Incorporation. The chairman shall have the casting vote. Unless otherwise provided by organizational regulations, resolutions may also be adopted by way of written consent to a proposition (including telefax), unless a member requests discussion. Minutes are to be kept of the deliberations and resolutions (including circular resolutions) of the Board of Directors. The minutes are to be signed by the Chairman and the Secretary of the Board of Directors. Article 16 Expenses and remuneration The members of the Board of Directors are entitled to reimbursement of expenses incurred by them in the interests of the Company and to remuneration of their activities, as determined by the Board of Directors itself. -5- C. The Auditors Article 17 Election, duties The General Meeting of Shareholders shall elect each year one or several persons or legal entities as Auditors pursuant to art. 727 et seq. CO with all the rights and duties as defined by the law. IV. Annual Financial Statement and Distribution of Profits ---------------------------------------------------------- Article 18 Business year The business year is determined by the Board of Directors. The annual financial statement, consisting of the profit and the loss statement, the balance sheet and the attachment as well as the consolidated statements of account, if applicable, shall be drawn up in accordance with the provisions of the Swiss Code of Obligations, in particular art. 662a et seq. CO, and in accordance with generally accepted commercial principles and principles customary in this business. Article 19 Use of the balance sheet profit Subject to the statutory provisions regarding the distribution of profits, in particular art. 671 et seq. CO, the balance sheet profit may be allocated by the General Meeting of Shareholders at its discretion. Article 20 Shares of profits The allocation of shares of profits to members of the Board of Directors shall be governed by the provisions of art. 677 CO. V. Dissolution and Liquidation ------------------------------ Article 21 Dissolution and liquidation The General Meeting of Shareholders may at any time resolve the dissolution and liquidation of the Company in accordance with the statutory provisions and the Articles of Incorporation. The liquidation shall be carried out by the Board of Directors unless the General Meeting of Shareholders has not delegated it to other persons. The liquidation of the Company shall take place in accordance with art. 742 et seq. CO. The liquidators are entitled to sell assets (including real estate) in private transactions. Upon satisfaction of all liabilities, the net assets shall be distributed to the shareholders in proportion to the amounts paid in. VI. Information --------------- Article 22 Notices and Announcements Callings and notices to the shareholders shall be made in writing to the addresses indicated in the share register. Announcements to the creditors shall be made, in the instances prescribed by the law, by publication in the Swiss Gazette of Commerce, the Company's official instrument for publication. Schedule "B" -------------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of the Corporations Act Swiss Code of Obligations (CO) -------------------------------------------------------------------------------------------------------------------------------- 1. Under the CBC Act, the charter Under Swiss corporation law the charter documents are its Charter documents of the Corporation are its Articles of Incorporation. These Articles have to set forth Documents. Articles of Incorporation. These at least the name of the corporation, the Swiss Canton, in Articles set forth the name of the which its registered office is located and the domicile, the Corporation, the Canadian province in purpose of the corporation, the issued capital and which its registered office is contributions made thereto, whether there are restrictions located, the authorized capital of the on share transfers, the number and the par value and the Corporation, that there are no type of shares, the calling of a general meeting of restrictions on share transfers, the shareholders and the voting rights of the shareholders, the number of directors, and any bodies for the administration and the audit, and finally the restrictions on the types of business form in which the corporation shall publish its notices. that the Corporation may conduct -------------------------------------------------------------------------------------------------------------------------------- 2. Under the CBC Act, certain types of Under Swiss corporation law a resolution of the General Majority actions must be approved by a special Meeting of Shareholders passed by at least two thirds of the Required for resolution of the members. A special votes represented and the absolute majority of the par value Special resolution of the members under the of shares represented, shall be required for the change of Resolution/ CBC Act must be passed by not less the corporation purpose, the creation of shares with Extraordinary than two-thirds of the votes cast by privileged voting right, the restriction of the Action the members who voted in respect of transferability of registered shares, an increase of capital that resolution. Special resolutions either authorized or subject to a condition, the limitation are required to approve an amendment or withdrawal of preemptive rights, the change of the to charter documents, a liquidation, domicile of the corporation, or the dissolution of the an amalgamation (merger), a variation corporation without liquidation. Of course, the Articles of in the special rights or restrictions Incorporation can declare other resolutions being subject to attached to shares, an increase in the qualified majorities. authorized capital, a subdivision or consolidation of the share capital or the sale or other transfer of substantially all of the assets. -------------------------------------------------------------------------------------------------------------------------------- 3. The corporate records of a CBC Act The corporate records of a Swiss corporation are maintained Access to corporation are maintained at its at its registered office and the cantonal commercial Corporate registered office or at any other register. The commercial register maintains all corporate Records place in Canada designated by its records and changes thereof. Furthermore, the commercial directors. register is publicly available. Therefore, every interested person has access to corporate information such as names of the members of the Board of Directors and all information provided by the Articles of Incorporation. -------------------------------------------------------------------------------------------------------------------------------- 4. A CBC Act corporation may authorize an In Switzerland we do not know authorized capital, but only Share Capital unlimited number of shares. A CBC Act issued capital. A Swiss corporation may issue an unlimited corporation may not hold shares in a number of shares, whereas the minimum capital is CHF parent company. The CBC Act allows 100'000.00. The share capital can also be paid in by financial assistance in connection contributions in kind but this requires a report from a with the purchase of its shares unless specially qualified auditor. there are reasonable grounds for believing that the assistance would render the corporation unable to pay its liabilities as they become due or that its assets would be less than the aggregate of its liabilities and stated capital. --------------------------------------------------------------------------------------------------------------------------------
-2- -------------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of the Corporations Act Swiss Code of Obligations (CO) -------------------------------------------------------------------------------------------------------------------------------- 5. Under the CBC Act, a lost or stolen Shares can be issued either in the name of a holder Stock stock certificate is valid against the (registered shares) or to bearer. Both types of shares may Certificates issuer in the hands of a bona fide exist side by side in the proportion determined by the purchaser without knowledge of any Articles of Incorporation. Bearer shares and registered defect in title. In other words, a shares are basically transferable without restriction, but subsequent purchaser can in some the transferability of registered shares can be restricted circumstances obtain good title to by the Articles of Incorporation. Bearer shares are shares of stock from one without title transferred by hand over of the share certificate and to such shares. registered shares have to be duly endorsed for transferral. By amending the Articles of Incorporation the General Meeting of Shareholders is authorized to split shares into shares with lower par value or to consolidate shares into shares with higher par value, whereas the consolidation of shares requires the approval of shareholders. -------------------------------------------------------------------------------------------------------------------------------- 6. Under the CBC Act, the members may The members of the Board of Directors have to be elected by Directors restrict the powers of the directors the General Meeting of Shareholders. The Swiss corporate law by a unanimous member agreement. requires the election of directors by the General Meeting of Given the number of members of the Shareholders for a term not to exceed six years, whereas Corporation, it is doubtful that a re-election is possible. Under Swiss law the majority of the unanimous member agreement could be members of the Board of Directors have to be either Swiss or adopted. The CBC Act requires the European Union Citizens and have to be domiciled in election of directors by the members Switzerland. The federal Council may grant exceptions to for a term not to exceed three years. this rule for companies whose principal purpose consists in The CBC Act allows removal of holding participations in other enterprises, provided the directors by a 50% member vote. Under majority of these enterprises are abroad. Only shareholders the CBC Act, except in special cases, are eligible to the Board of Directors, whereas fiduciary at least 25% of the directors of a shareholding is sufficient. The Board of Directors has company must be resident Canadians. certain non-transferable and inalienable duties, such as the Under the CBC Act Directors are ultimate management of the corporation and the giving of the empowered to amend By-Laws subject to necessary directives, the establishment of the organization, the ratification by the members at the the structuring of the accounting system and of the next meeting. The CBC allows financial controls as well as the financial planning insofar indemnification of directors against as this is necessary to manage the corporation, the liability incurred by the director as appointment and removal of the persons entrusted with the a director without court approval. management and the representation, the preparation of the The CBC Act specifically provides for business report as well as the preparation of the General the maintenance of insurance for the Meeting of the Shareholders and the implementing of its benefit of a director. resolutions and the notification of the judge in the case of over indebtedness. The members of the Board of Directors and all persons engaged in the management are liable not only to the corporation, but also to each shareholder and to the corporation's obligees for the damage caused by intentional or negligent violation of their duties. There are specific insurances covering those risks. --------------------------------------------------------------------------------------------------------------------------------
-3- -------------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of the Corporations Act Swiss Code of Obligations (CO) -------------------------------------------------------------------------------------------------------------------------------- 7. Under the CBC Act, annual meetings of The General Meeting of Shareholders is the supreme corporate Members/ members must be held every 15 months. body of the corporation. It has certain inalienable powers, Stockholders The CBC Act has specific provisions such as the adoption and the amending of the Articles of regarding the fixing of record dates Incorporation, the election of the members of the Board of for persons entitled to notice of Directors and of the auditors, the approval of the annual meetings and the nature of the report and of the consolidated statements of account, the notice. The notice required under the approval of the annual financial statement as well as the CBC Act must state the nature of any resolution on the use of the balance sheet profit, in special business to be transacted in particular, the declaration of dividends and the release of sufficient detail to permit the the members of the Board of Directors. The ordinary General members to form a reasoned judgment Meeting of Shareholders takes place annually within six thereon and must include the text of months after the close of the business year, special any special resolution to be submitted meetings are called according to need. The General Meeting to the meeting. of Shareholders is called by the Board of Directors and if necessary by the auditors at the latest twenty days prior to the day of the meeting. The calling of a general Meeting of Shareholders may also be requested by one or more shareholders representing together at least ten percent of the share capital. The calling has to state the agenda items as well as the motions of the Board of Directors and of the shareholders who have requested the holding of a General Meeting of Shareholders or the inclusion of an item in the agenda. No resolution may be passed on motions concerning agenda items which have not been duly announced. -------------------------------------------------------------------------------------------------------------------------------- 8. A CBC Act corporation need not place a Under Swiss law the business report and the auditor's report Financial report of the directors before the of the particular business year have to be made available Disclosure annual meeting of members. For CBC for inspection at the corporation's domicile no later than Act corporations, audited financial twenty days prior to the ordinary General Meeting of statements not more than six months Shareholders. Any shareholder may request that a copy of old must be presented to the members these documents be immediately sent to him. Any shareholder at the annual meeting. The CBC Act may still request from the corporation the business report specifically provides that the in the form approved by the General Meeting of Shareholders, financial statements must be approved as well as the auditor's report, during the year following by the directors and may not be the General Meeting of Shareholders. At the General Meeting circulated unless accompanied by the of Shareholders any shareholder is entitled to request report of the auditors of the information from the Board of Directors concerning the corporation. affairs of the corporation and from the auditor concerning the execution and the results of their examination. The Under the CBC Act, the auditor of the corporation has to give information to the extent necessary corporation must be independent and, for the exercising of shareholders' rights. Information may before replacing a previous auditor, a be refused if business secrets or other interests of the new auditor must request a written corporation worth being protected are jeopardized. Auditors statement of the circumstances and must be independent from the Board of Directors and from any reasons for the replacement of the shareholder who has a majority vote. In particular, they auditor, in his or her opinion. shall not be employees of the corporation to be audited, and they shall not perform work for it incompatible with the auditing mandate. If the shares of the corporation are listed on the stock exchange, the auditors must meet special professional qualifications. The auditor can be replaced based on the regulation in the Articles of Incorporation. --------------------------------------------------------------------------------------------------------------------------------
-4- -------------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of the Corporations Act Swiss Code of Obligations (CO) -------------------------------------------------------------------------------------------------------------------------------- 9. Dissent proceedings allow a member to The Board of Directors and any shareholder may take legal Dissent require a corporation to purchase his actions against the corporation to challenge resolutions of Proceedings/ or her shares at an appraised price if the General Meeting of Shareholders, which violate the law Appraisal the corporation takes certain or the Articles of Incorporation. Decisions are particularly Rights triggering actions from which the challengeable if they withdraw or limit shareholder' rights member dissents. Under the CBC Act, thereby violating the law or the Articles of Incorporation. the triggering actions include (1) the Decisions are also challengeable if they withdraw or limit amendment of the charter documents to shareholders' rights without proper reason or if they change or remove any restrictions on withdraw the profit orientation of the corporation without the types of business the Corporation the consent of all shareholders. If the legal action by the may conduct; (2) the continuance of shareholder is successful a judgement will annul the the Corporation under the laws of resolution of the General Meeting. In Switzerland there are another jurisdiction; (3) the lease, no appraisal rights provided by law but in a merger the sale or exchange of substantially all merging corporations can contractually agree on a of the assets of the corporation; (4) possibility for shareholders to opt for a cash-out. the amalgamation (merger) of the Corporation with another company; and (5) the change or removal of any provisions restricting or constraining the transfer of ownership of shares. Also, an amalgamation of a CBC Act corporation with its wholly-owned subsidiary or another wholly-owned subsidiary of the same parent corporation does not give rise to dissent proceedings. -------------------------------------------------------------------------------------------------------------------------------- 10. Under the CBC Act, court approval of In Switzerland by July 1, 2004, the new Swiss Merger Act Amalgamation an amalgamation is not required. becomes effective. The Swiss Merger Act provides two forms (Merger) Instead, the Director of the of merger. In what is referred to as an absorption, a target Corporations Branch (of the Canadian corporation merges into an acquiring corporation. By federal government) must be satisfied operation of law, the acquirer not only becomes the owner of on statutory declaration evidence that the assets of the target corporation but also becomes creditors will not be prejudiced by subject to the actual and contingent liabilities of the the amalgamation. The CBC Act also target. Upon finalizing the transaction, the target provides for a "short-form corporation disappears, and its dissolution is registered in amalgamation" when a subsidiary is the commercial register. Thus, it ceases to exist while the amalgamating with its parent acquiring corporation continues to exist. Characteristic of corporation or two or more wholly- this form of merger is that, prior to the merger, the owned subsidiary corporations of the acquiring corporation has previously existed as a legal same parent corporation are entity. In what is referred to as a combination, two (or amalgamating. The short form more) companies merge on equal terms and form a newly amalgamation needs only to be approved established entity. It is the characteristic of this merger by a resolution of the directors of that the acquiring corporation originates from the each of the amalgamating transaction itself. The Merger Act stipulates specific corporations. guidelines regarding mergers between companies that are in a control relationship (parent / subsidiary) to each other as The CBC Act also allows for well as for mergers between small and medium enterprises. On "triangular amalgamations." In other the other hand, additional legal constrains apply if one of words, it is not necessary that shares the merging firms is in liquidation or if one corporation is of the amalgamating corporation be over indebted or reports that half of its equity is no given to the members of the longer covered. amalgamated corporation; instead, shares of the parent of the amalgamating corporation can be used --------------------------------------------------------------------------------------------------------------------------------
-5- -------------------------------------------------------------------------------------------------------------------------------- Canada Business The Corporation according to Art. 620 ff. of the Corporations Act Swiss Code of Obligations (CO) -------------------------------------------------------------------------------------------------------------------------------- 11. In a take-over situation, the CBC Act The Swiss corporate law does not contain any regulations Take-Over Bids provides for compulsory acquisition of referring compulsory acquisitions. Only if a corporation is and shares of "hold-out" members. The registered with the Swiss Stock Exchange (SWIX) the specific Compulsory compulsory acquisition applies where a rules of the Stock Exchange Act apply. The Swiss Stock Acquisitions member declines to sell his or her Exchange Act contains several regulations such as opting up, shares to a take-over bidder who then opting out, squeeze out, squeeze in, etc. The new Swiss obtains 90% acceptance from other Merger Act contains the possibility for merging corporations members. A take-over bidder who to contractually opt for a squeeze-out of minority receives more than 90% acceptance can shareholders if at least 90% of the shareholders of the then require the "hold-out" members to transferring corporation agree. sell. The CBC Act gives the hold-out members the alternate right of accepting the bid price or demanding an independent valuation of their shares. -------------------------------------------------------------------------------------------------------------------------------- 12. A derivative action is one brought or Contrary to the Canadian Statutory Regulations there is no Derivative defended by a member for and on behalf such thing as derivative actions in Switzerland. Actions of the corporation. The CBC Act provides for commencing or defending an action on behalf of the Corporation and for intervening if an action has already been commenced or defended by the Corporation. -------------------------------------------------------------------------------------------------------------------------------- 13. The CBC Act provides oppression See Section 9 above. Oppression remedies for members who believe that the affairs of the Corporation are being conducted in a manner that is oppressive or unfairly prejudicial to one or more members of the Corporation. The CBC Act extends this oppression remedy to include other security holders, creditors, directors and officers. These remedies provide a broad jurisdiction to the Court to provide relief from the oppressive or unfairly prejudicial acts. --------------------------------------------------------------------------------------------------------------------------------
ANNUAL GENERAL MEETING OF MEMBERS OF IQ POWER TECHNOLOGY INC. (the "Corporation") TO BE HELD AT BOARDROOM, 708-A- 1111 WEST HASTINGS STREET, VANCOUVER, B.C., CANADA ON WEDNESDAY, JUNE 30, 2004, AT 4:00 P.M. The undersigned member ("Registered Shareholder") of the Corporation hereby appoints, Russell French, a Director of the Corporation, or failing this person, Gregory Sasges, a Director of the Corporation, or in the place of the foregoing, ______________________________ as proxyholder for and on behalf of the Registered Shareholder with the power of substitution to attend, act and vote for and on behalf of the Registered Shareholder in respect of all matters that may properly come before the Meeting of the Registered Shareholders of the Corporation and at every adjournment thereof, to the same extent and with the same powers as if the undersigned Registered Shareholder was present at the said Meeting, or any adjournment thereof. The Registered Shareholder hereby directs the proxyholder to vote the securities of the Corporation registered in the name of the Registered Shareholder as specified herein. Resolutions (For full detail of each item, please see the enclosed Notice of Meeting and Information Circular. Please indicate your vote by placing an "X" in the appropriate column opposite the resolution) For Against 1. To determine the number of Directors at 4 ----------- ----------- For Withhold 2.a To elect as Director, Hans Ambos ----------- ----------- 2.b. To elect as Director, Peter E. Braun ----------- ----------- 2.c To elect as Director, Russell French ----------- ----------- 2.d To elect as Director, Dr. Herbert Weininger ----------- ----------- 3. To appoint Deloitte Touche as Auditor of the Corporation at a remuneration to be fixed by the Directors ----------- ----------- For Against 4. To approve Stock Options and the amendment of the Stock Option Plan ----------- ----------- 5. To approve the directors Remuneration Proposal ----------- ----------- 6. To approve the acts of the Directors ----------- ----------- 7. To approve the Special Resolution to continue the Corporation in Switzerland ----------- ----------- 8. To approve the Special Resolution adopting a new By-law and repealing By-law Number One ----------- ----------- 9. To transact such other business as may properly come before the Meeting ----------- -----------
The undersigned Registered Shareholder hereby revokes any proxy previously given to attend and vote at said Meeting. SIGN HERE: --------------------------------------------------- Please Print Name: --------------------------------------------------- Date: --------------------------------------------------- Number of Shares Represented by Proxy: --------------------------------------------------- THIS PROXY FORM IS NOT VALID UNLESS IT IS SIGNED. SEE IMPORTANT INFORMATION AND INSTRUCTIONS ON REVERSE INSTRUCTIONS FOR COMPLETION OF PROXY 1. This Proxy is solicited by the Management of the Corporation. 2. This form of proxy ("Instrument of Proxy") must be signed by you, the Registered Shareholder, or by your attorney duly authorized by you in writing, or, in the case of a corporation, by a duly authorized officer or representative of the corporation; and if executed by an attorney, officer, or other duly appointed representative, the original or a notarial copy of the instrument so empowering such person, or such other documentation in support as shall be acceptable to the Chairman of the Meeting, must accompany the Instrument of Proxy. 3. If this Instrument of Proxy is not dated in the space provided, it is deemed to bear the date on which it is mailed to you by the person making the solicitation. 4. A Registered Shareholder who wishes to attend the Meeting and vote on the resolutions in person, may simply register with the scrutineers before the Meeting begins. 5. A Registered Shareholder who is not able to attend the Meeting in person but wishes to vote on the resolutions, may do the following: (a) appoint one of the management proxyholders named on the Instrument of Proxy, by leaving the wording appointing a nominee as is (i.e. do not strike out the management proxyholders shown and do not complete the blank space provided for the appointment of an alternate proxyholder). Where no choice is specified by a Registered Shareholder with respect to a resolution set out in the Instrument of Proxy, a management appointee acting as a proxyholder will vote in favour of each matter identified on this Instrument of Proxy and for the nominees of management for directors and auditor as identified in this Instrument of Proxy; OR (b) appoint another proxyholder, who need not be a Registered Shareholder of the Corporation, to vote according to the Registered Shareholder's instructions, by striking out the management proxyholder names shown and inserting the name of the person you wish to represent you at the Meeting in the space provided for an alternate proxyholder. If no choice is specified, the proxyholder has discretionary authority to vote as the proxyholder sees fit. 6. The securities represented by this Instrument of Proxy will be voted or withheld from voting in accordance with the instructions of the Registered Shareholder on any poll of a resolution that may be called for and, if the Registered Shareholder specifies a choice with respect to any matter to be acted upon, the securities will be voted accordingly. Further, the securities will be voted by the appointed proxyholder with respect to any amendments or variations of any of the resolutions set out on the Instrument of Proxy or matters that may properly come before the Meeting as the proxyholder in its sole discretion sees fit. If a Registered Shareholder has submitted an Instrument of Proxy, the Registered Shareholder may still attend the Meeting and may vote in person. To do so, the Registered Shareholder must record his/her attendance with the scrutineers before the commencement of the Meeting and revoke, in writing, the prior votes. ================================================================================ To be represented at the Meeting, this proxy form must be received at the office of Computershare Trust Company of Canada by mail or by fax no later than forty eight (48) hours (excluding Saturdays, Sundays and holidays) prior to the time of the Meeting, or adjournment thereof or may be accepted by the Chairman of the Meeting prior to the commencement of the Meeting. The mailing address is: Computershare Trust Company of Canada Proxy Dept. 100 University Avenue 9th Floor Toronto Ontario M5J 2Y1 Fax: Within North American: 1-866-249-7775 Outside North America: (416) 263-9524 ================================================================================