Pacific Rim Mining Corp.: Exhibit 99.2 - Filed by newsfilecorp.com
#1050 – 625 Howe Street,
Vancouver, B.C. V6C 2T6
INFORMATION CIRCULAR
(Containing information as at July 23, 2012, unless indicated
otherwise)
SOLICITATION OF PROXIES
This Information Circular is furnished in connection with the
solicitation of proxies by the management of PACIFIC RIM MINING CORP.
(the “Company”) to the shareholders of the Company
(“Shareholders”) for use at the Annual General and Special Meeting of
Shareholders (and any adjournment thereof) to be held on Thursday, September 6,
2012 (the “Meeting”), at the time and place and for the purposes set
forth in the accompanying Notice of Meeting. While it is expected that the
solicitation will be primarily by mail, proxies may be solicited personally or
by telephone by the directors (the “Directors”), officers and regular
employees or a proxy agent, if any, of the Company at nominal cost. All costs of
solicitation by management will be borne by the Company.
The contents and the sending of this Information Circular have
been approved by the Directors of the Company.
The term “Shareholders” used throughout this Information
Circular refers to both registered and non-registered shareholders unless
otherwise specified, except in the sections of this Information Circular titled
“Appointment of Proxyholder”, “Revocation of Proxies” and “Voting Shares and
Principal Holders Thereof” below, and in the accompanying form of proxy and
Notice of Meeting, where the term “Shareholders” refers to registered
shareholders only.
APPOINTMENT OF PROXYHOLDER
The purpose of a proxy is to designate persons who will vote
the proxy on a Shareholder’s behalf in accordance with the instructions given by
the Shareholder in the proxy. The individuals named in the accompanying form of
proxy are Directors. A SHAREHOLDER WISHING TO APPOINT SOME OTHER PERSON (WHO
NEED NOT BE A SHAREHOLDER) TO REPRESENT THE SHAREHOLDER AT THE MEETING HAS THE
RIGHT TO DO SO, EITHER BY STRIKING OUT THE NAMES OF THOSE PERSONS NAMED IN THE
ACCOMPANYING FORM OF PROXY AND INSERTING THE DESIRED PERSON’S NAME
IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING ANOTHER FORM
OF PROXY. A proxy will not be valid unless the completed form of proxy is
received by Computershare Trust Company of Canada at its offices at Proxy Dept.,
100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1, not less
than 48 hours (excluding Saturdays, Sundays and holidays) before the time for
holding the Meeting or any adjournment thereof.
REVOCATION OF PROXIES
A Shareholder who has given a proxy may revoke it by an
instrument in writing executed by the Shareholder or by such Shareholder’s
attorney authorized in writing or, where the Shareholder is a corporation or
association, by a duly authorized officer or attorney of that corporation or
association, and delivered to the registered office of the Company located on
the 10th Floor, 595 Howe Street, Vancouver, British Columbia, V6C
2T5, at any time up to and including the last business day preceding the day of
the Meeting, or if adjourned, any reconvening thereof, or to the Chairman of the
Meeting on the day of the Meeting or, if adjourned, any reconvening thereof or
in any other manner provided by law. A revocation of a proxy does not affect any
matter on which a vote has been taken prior to the revocation.
INFORMATION FOR NON-REGISTERED SHAREHOLDERS
Only registered Shareholders or duly appointed proxyholders
are permitted to vote at the Meeting. Most Shareholders of the Company are
“non-registered” Shareholders because the shares
they own are not registered in their names but are instead registered in the
names of a brokerage firm, bank or other intermediary or in the name of a clearing agency.
Shareholders who do not hold their shares in their own name (referred to herein
as “Beneficial Shareholders”) should note that only
registered Shareholders may vote at the Meeting. If common shares are listed
in an account statement provided to a Shareholder by a broker, then in almost
all cases those common shares will not be registered in such Shareholder’s name
on the records of the Company. Such common shares will more likely be registered
under the name of the Shareholder’s broker or an agent of that broker. In
Canada, the vast majority of such shares are registered under the name of CDS
& Co. (the registration name for The Canadian Depository for Securities,
which company acts as nominee for many Canadian brokerage firms). Common shares
held by brokers (or their agents or nominees) on behalf of a broker’s client can
only be voted (for or against resolutions) at the direction of the Beneficial
Shareholder. Without specific instructions, brokers and their agents and
nominees are prohibited from voting shares for the brokers’ clients. Therefore, each Beneficial Shareholder should ensure that voting instructions
are communicated to the appropriate person well in advance of the Meeting.
1
In accordance with National Instrument 54-101 -
Communication with Beneficial Owners of Securities of a Reporting Issuer,
the Company has distributed copies of the Notice of Meeting, this Information
Circular and the form of proxy to the clearing agencies and intermediaries for
onward distribution to Beneficial Shareholders.
Existing regulatory policy requires brokers and other
intermediaries to seek voting instructions from Beneficial Shareholders in
advance of shareholders’ meetings. The various brokers and other intermediaries
have their own mailing procedures and provide their own return instructions to
clients, which should be carefully followed by Beneficial Shareholders in order
to ensure that their common shares are voted at the Meeting. Often the form of
proxy supplied to a Beneficial Shareholder by its broker is identical to the
form of proxy provided by the Company to the registered Shareholders. However,
its purpose is limited to instructing the registered shareholder (i.e. the
broker or agent of the broker) how to vote on behalf of the Beneficial
Shareholder. The majority of brokers now delegate responsibility for obtaining
instructions from clients to Broadridge Investor Communications Solutions
(“Broadridge”). Broadridge typically prepares machine-readable voting
instruction forms (“VIFs”), mails those forms to the Beneficial
Shareholders and asks Beneficial Shareholders to return the forms to Broadridge,
or otherwise communicate voting instructions to Broadridge (by way of the
internet or telephone, for example). Broadridge then tabulates the results of
all instructions received and provides appropriate instructions respecting the
voting of common shares to be represented at the Meeting. A Beneficial
Shareholder who receives a Broadridge VIF cannot use that form to vote common
shares directly at the Meeting. The VIF must be returned to Broadridge (or
instructions respecting the voting of common shares must be communicated to
Broadridge) well in advance of the Meeting in order to have the common shares
voted.
VOTING OF PROXIES
The shares represented by a properly executed proxy in favour
of persons proposed by management as proxyholders in the accompanying form of
proxy will:
| |
(a) |
be voted or withheld from voting in accordance with the
instructions of the person appointing the proxyholder on any ballot that
may be called for; and |
| |
(b) |
where a choice with respect to any matter to be acted
upon has been specified in the form of proxy, be voted in accordance with
the specification made in such proxy. |
ON A POLL SUCH SHARES WILL BE VOTED IN FAVOUR OF EACH
MATTER FOR WHICH NO CHOICE HAS BEEN SPECIFIED.
The enclosed form of proxy when properly completed and
delivered (and not revoked) confers discretionary authority upon the person
appointed proxy thereunder to vote with respect to amendments or variations of
matters identified in the Notice of Meeting, and with respect to other matters
which may properly come before the Meeting. In the event that amendments or
variations to matters identified in the Notice of Meeting are properly brought
before the Meeting or any further or other business is properly brought before
the Meeting, it is the intention of the persons designated in the enclosed form
of proxy to vote in accordance with their best judgment on such matters or
business. At the time of the printing of this Information Circular, the
management of the Company knows of no such amendment, variation or other matter
that may be presented to the Meeting.
2
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
| Authorized Capital: |
unlimited common shares without par value
|
| Issued and Outstanding: |
168,801,708(1) common shares without
par value |
(1) As at July 23, 2012
Only Shareholders of record at the close of business on July
20, 2012 (the “Record Date”) who either personally attend the
Meeting or who have completed and delivered a form of proxy in the manner and
subject to the provisions described above shall be entitled to vote or to have
their shares voted at the Meeting.
On a show of hands, every individual who is present and is
entitled to vote as a Shareholder, or as a representative of one or more
corporate Shareholders, or who is holding a proxy on behalf of a Shareholder who
is not present at the Meeting, will have one vote (no matter how many shares he
holds). On a poll, every Shareholder present in person or represented by a proxy
and every person who is a representative of one or more corporate Shareholders
will have one vote for each common share registered in the name of the
Shareholder on the register of Shareholders, which is available for inspection
during normal business hours at Computershare Trust Company of Canada and will
be available at the Meeting.
To the knowledge of the Directors and executive officers of the
Company, no person beneficially owns, or controls or directs, directly or
indirectly, shares carrying 10% or more of the voting rights attached to all
outstanding common shares of the Company as at the Record Date.
ELECTION OF DIRECTORS
The Company’s board of directors (the “Board of
Directors” or the “Board”) presently consists of five (5) Directors.
The Board of Directors has fixed the number of Directors at five (5) for the
ensuing year.
The term of office of each of the present Directors expires at
the Meeting. The persons named below will be presented for election at the
Meeting as management’s nominees and the persons named in the accompanying form
of proxy intend to vote for the election of these nominees. Management does not
contemplate that any of these nominees will be unable to serve as a Director.
Each Director elected will hold office until the next annual general meeting of
the Company or until his or her successor is elected or appointed, unless his or
her office is earlier vacated in accordance with the Articles of the Company, or
in accordance with the provisions of the Business Corporations Act (British Columbia).
In the following table and notes thereto is stated the name of
each person proposed to be nominated by management for election as a Director,
the province or state in which he or she is ordinarily resident, all offices of
the Company now held by him or her, his or her principal occupation, the period
of time for which he or she has been a Director of the Company, and the number
of common shares of the Company beneficially owned, or controlled or directed,
directly or indirectly, by him or her, as at the date hereof. The members of
each committee of the Board of Directors are noted in footnotes to the table.
Name and Jurisdiction of
Residence(1)
|
Principal Occupation,
Business or
Employment(1)
|
Previous Service
as a Director of
the Company |
Number
of
Shares(2)
|
Catherine McLeod-
Seltzer
British
Columbia, Canada
|
Chairman and Director of the Company,
Director and Chairman of Bear Creek Mining
Corporation, Director
of Kinross Gold
Corporation, Director of Troon Ventures Ltd.
and
Director of Major Drilling Group
International Inc. |
Since
April 11, 2002(3)
|
3,672,800
|
Thomas Shrake(5)
Nevada, USA |
President, CEO and Director of
the Company
|
Since
April 11,
2002(3) |
509,100(8)
|
William Myckatyn
(4)(5)(6)(7)
British Columbia, Canada
|
Corporate Director. Lead
Director of the
Company, Director of First Point Minerals
Corp.,
Director of San Marco Resources Inc
and. Director of OceanaGold
Corporation |
Since
April 11,
2002(3)
|
287,660
|
David K. Fagin(4)(6)
Colorado, USA |
Corporate Director. Director of
the Company,
and Director of Atna Resources Ltd. |
Since
April 11,
2002(3) |
223,000
|
3
Name and Jurisdiction of
Residence(1)
|
Principal Occupation,
Business or
Employment(1)
|
Previous Service
as a Director of
the Company |
Number
of
Shares(2)
|
Timothy C. Baker(5)(6)(7)
Ontario,
Canada
|
Corporate Director. Director of the Company,
Director of Eldorado Gold Corp., Director of
Augusta Resource
Corporation, Director,
Director of Antofagasta Plc. |
Since
March 5, 2012
|
0
|
| (1) |
The information as to the province or state of residence
and principal occupation, not being within the knowledge of the Company,
has been furnished by the respective Directors individually. |
| (2) |
The information as to shares beneficially owned or over
which a Director exercises control or direction, not being within the
knowledge of the Company, has been furnished by the respective Directors
individually. |
| (3) |
April 11, 2002 was the effective date of the amalgamation
of Dayton Mining Corporation (“Dayton”) and the Company; Fagin, McLeod-
Seltzer and Myckatyn were former directors of Dayton and McLeod-Seltzer,
Myckatyn and Shrake were Directors of the Company prior to the
amalgamation with Dayton. |
| (4) |
Denotes member of Compensation Committee. |
| (5) |
Denotes member of Health, Safety and Environmental
Committee. |
| (6) |
Denotes member of Audit Committee. |
| (7) |
Denotes member of Nominating Committee. |
| (8) |
50,000 of these shares are owned jointly with Anne B.
Shrake in the “Tom and Anne Shrake Family Trust”. |
AUDIT COMMITTEE
Under National Instrument 52-110 – Audit Committees
(“NI 52-110”), companies are required to provide disclosure with respect
to the audit committee including the text of the audit committee’s charter,
composition of the audit committee and the fees paid to the external auditor.
This information is provided in the Company’s Form 20-F for the year ended April
30, 2012, under the headings “Audit Committee” and “Principal Accountant Fees
and Services”. The Form 20-F is available for review by the public on the SEDAR
website located at www.sedar.com under the Company's profile, “Pacific
Rim Mining Corp”. Management of the Company strongly encourages Shareholders to
review the Form 20-F.
STATEMENT OF EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Philosophy
The Company’s compensation philosophy for
executive officers is based on two basic objectives: (1) to attract, motivate
and retain individuals with the appropriate skills; and, (2) to provide
incentives to management to meet the Company’s strategic objectives, which works
to align the interests of management with those of the Shareholders.
Executive Compensation
The Company has adopted a compensation philosophy
consisting of two main components: (1) base salaries and, at the Compensation
Committee’s discretion, a bonus; and (2) long term incentives in the form of
stock options. Generally, executive compensation has been designed to be
competitive with the executive compensation offered by companies comparable to
the Company in terms of size, assets and stage of development within the
precious metals mining industry. The Company has targeted total compensation to
be near the median for those junior mining companies of comparable project
development stage and market capitalization, with the relative importance of
salary and stock options being equal. The Board of Directors does not benchmark
its executive compensation program, but from time to time does review
compensation practices of companies of similar size and stage of development to
ensure the compensation paid is competitive within the Company's industry and
geographic location while taking into account the financial and other resources
of the Company. To date, due to the limited cash available to the Company, the
Board believes that the total level of compensation has been at the lower end of
the range of comparable companies; however, given the buoyant market place for
metals and the demand for competent people, compensation packages for qualified
executives and staff are continuing to rise within the industry, and the Company
will need to be competitive with this increase in compensation in order to
attract and retain qualified management.
Owing to the Company’s small size and limited executive pool,
the Company’s process for determining executive compensation is relatively
simple and does not include formal targets, criteria or analysis. While the
Compensation Committee and the Board of Directors do not formally analyse risks
associated with the Company’s compensation policies and practices, these
policies and practices do not include structural inconsistencies that are likely
to unduly encourage or cause an executive officer to expose the Company to inappropriate or excessive risks. Directors and NEO’s are not
permitted to purchase financial instruments designed to hedge or offset a
decrease in market value of equity securities granted as compensation or
otherwise held by the Director or NEO.
4
President and Chief Executive Officer and Chairman’s Compensation
The President and Chief Executive Officer’s salary is specified in his
employment contract and not generally subject to annual adjustment by the
Compensation Committee. In setting the base salary of the President and Chief
Executive Officer, the Compensation Committee targeted the median compensation
levels of individuals at other similar sized junior exploration companies with
the same position and function and similar experience levels as the Company’s
President and Chief Executive Officer. The Compensation Committee annually
re-confirms the cash compensation of the President and Chief Executive Officer
bearing in mind the cash available to the Company for the current financial
year.
The salary of the President and Chief Executive Officer is
US$250,000 per year. Since November 2008, in light of economic and market
conditions, Thomas Shrake has voluntarily taken only US$180,000 in salary per
year, representing 72% of his official salary. Catherine McLeod-Seltzer, the
Company’s Chairman, has not received a salary from the Company since September
30, 2008.
Base
Salary and Bonus
To ensure that the Company will continue to attract and
retain qualified and experienced executives, base salaries are reviewed and if
necessary, adjusted annually, in order to ensure that they remain at a level at
near the median for comparable companies. The Company has not adjusted base
salaries for executives since September 2006. Bonuses, if any, are based upon a
combination of individual and Company performances and are weighted more against
Company performance for senior executives. The Company did not pay any bonuses
during the current financial year.
Long
Term Incentives – Stock Options
The Company grants stock
options to executives in recognition that its base salary levels are at the
lower end of industry norms for comparable executives at similar sized junior
mining companies, to ensure significant incentive exists to maximize Shareholder
value, and to reward those executives making a long-term commitment and
contribution to the Company. Options granted under the Plan expire not later
than the tenth anniversary of the date the options were granted. The Company has
traditionally limited the expiry to five years and vesting provisions for issued
options are determined at the discretion of the Board. The amount of outstanding
options and the terms thereof are considered before granting new options to
ensure the grants are as consistent as possible.
Performance Graphs
The following chart compares the yearly percentage change in
the cumulative total Shareholder return on the Company’s common shares against
the cumulative total shareholder return of the S&P/TSX Composite Index for
the period April 30, 2007 to April 30, 2012.
5
Five-Year Cumulative Return on $100 Investment
April 30,
2007 – April 30, 2012
The Company’s share price has suffered significant declines
over the past 5 year period and as such, has underperformed returns of the
S&P/TSX Composite Index. A $100 investment in each of the Company’s shares
and the S&P/TSX Composite Index on April 30, 2007 would be worth $8.85 and
$91.62, respectively, at April 30, 2012. As the Compensation Committee believes
the decline in the Company’s share price, and hence relative
underperformance, is primarily due to factors outside of the control of
the Company’s senior executives, it has not recommended a comparative decrease
in executive compensation at this time.
Option-based Awards
The Evergreen Plan (described below) has been and will be used
to provide share purchase options which are granted in consideration of the
level of responsibility and tenure of the executive as well as his or her impact
or contribution to the longer-term operating performance of the Company. A
proposal for option grants, indicating the number of options proposed to be
granted to each executive, is provided from time to time, on a roughly annual
basis, to the Compensation Committee by the President and Chief Executive
Officer. The Compensation Committee reviews all elective option grant proposals
and provides its recommendations to the Board of Directors, the members of which
vote to approve or deny the proposed grant. In determining the number of options
to be granted to the executive officers, the Board takes into account the number
of options, if any, previously granted to each executive officer, and the
exercise price of any outstanding options to ensure that such grants are in
accordance with the policies of the Toronto Stock Exchange (“TSX”), and
closely align the interests of the executive officers with the interests of the
Shareholders.
The Compensation Committee has the responsibility to administer
the compensation policies related to the executive management of the Company,
including option-based awards.
Compensation Governance
Compensation Committee
The Compensation Committee is currently composed
of Messrs Fagin (Chair) and Myckatyn, both of whom are independent based
upon the tests for independence set forth in NI 52-110. Neither of the committee
members is or was during the most recently completed financial year an employee
of the Company or any of its subsidiaries, nor has either of the Committee
members been an officer or an employee of the Company or any of its subsidiaries
in the past three years. Messrs Fagin and Myckatyn have each been involved in
the mineral exploration and mining industries for well over 40 years, most
of which includes executive- and director-level experience relevant to executive
compensation.
6
The Compensation Committee is responsible for reviewing the
salary levels for Named Executive Officers (see Summary Compensation Table
below) and other senior executives on a regular basis. It considers
independent salary surveys as well as informal surveys prepared by the Company
which are specific to mining and exploration companies. The Committee reviews
the performance of senior executive officers with the President and CEO and, in
an executive session without the President and CEO present, reviews the
performance of the President and CEO.
Summary Compensation Table
The following table (presented in accordance with National
Instrument Form 51-102F6 (“Form 51-102F6”)) sets forth all annual and
long term compensation for services in all capacities to the Company (to the
extent required by Form 51-102F6) for the three most recently completed
financial years of the Company, being the years ended April 30, 2010, April 30,
2011 and April 30, 2012, in respect of each Chief Executive Officer and Chief
Financial Officer who acted in such capacity for all or any portion of the most
recently completed financial year, and each of the other three most highly
compensated executive officers of the Company, or the three most highly
compensated individuals acting in a similar capacity (other than the Chief
Executive Officer and the Chief Financial Officer), as at April 30, 2012, whose
total compensation, for the most recently completed financial year,
individually, exceeded CDN$150,000, and any individual who would have satisfied
these criteria but for the fact that individual was neither an executive officer
of the Company, nor acting in a similar capacity, at the end of the most
recently completed financial year (collectively the “Named Executive
Officers” or “NEOs”).
Name and
Principal
Position |
Year
Ended
April 30 |
Salary
US($)
|
Share-
Based
Awards
US($) |
Option-Based
Awards
US($)(1) |
Non-Equity
Incentive
Plan Compensation
($)
|
Pension
Value
US($) |
All Other
Compensation
US($) |
Total
Compensation
US($) |
Annual
Incentive
Plans |
Long-term
Incentive
Plans |
Thomas
Shrake
CEO |
2010
2011
2012 |
180,000(2)
180,000(2)
180,000(2) |
Nil
Nil
Nil |
54,240
65,835
91,236
|
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
234,240
245,835
271,236 |
Steven
Krause (3)
CFO |
2010
2011
2012 |
Nil
Nil
Nil |
Nil
Nil
Nil |
33,900
65,835
28,366
|
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
33,900
65,835
28,366
|
William
Gehlen
VP Exploration
|
2010
2011
2012 |
120,000
120,000
120,000 |
Nil
Nil
Nil |
27,120
39,501
34,039
|
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
Nil
Nil
Nil |
147,120
159,501
154,039 |
| |
(1) |
The Company used the Black-Scholes model as the
methodology to calculate the grant date fair value, and relied on the
following the key assumptions and estimates for each calculation: expected
dividend yield 0%, expected stock price volatility 102 and 105%, risk free
interest rate 1.28 and 1.49%, and expected life of options of between 4.3
and 5 years. The Company chose this methodology as it is the standard for
exploration companies in Canada and has been consistently applied by the
Company for valuing option-based awards since 2003. The stock-based awards
are determined in Canadian funds and then translated into US funds at the
2011 average foreign currency exchange rate of $1.00US/$1.03CDN |
| |
|
|
| |
(2) |
Mr. Shrake’s official annual salary is US$250,000 per
year. Since November 2008, in light of economic and market conditions,
Thomas Shrake has voluntarily taken only US$180,000 in salary per year,
representing 72% of his official salary. |
| |
|
|
| |
(3) |
Mr. Krause, as CFO, was not an employee of the Company.
He is employed by Avisar Chartered Accountants (“Avisar”). The portion of
the compensation paid to Mr. Krause by Avisar during the fiscal period
ended April 30, 2012 and 2011 and which Avisar attributed to the CFO
services provided by Mr. Krause to the Company (based on Avisar’s revenue
received from the Company as per its service agreement (see below) as a
percentage of its total revenues) was $13,284 and $11,331, respectively.
During the 2012 fiscal year, Avisar charged the Company CDN$136,950 for
accounting, tax and financial consulting services. |
Mr. Shrake is employed by the Company under an employment
agreement. Mr. Krause is engaged by the Company under a consulting agreement for
his services as CFO, and a company in which Mr. Krause is a principal is engaged
by the Company under a separate service agreement for the provision of
accounting and tax services. Mr. Gehlen is employed by a subsidiary of the
Company under an employment agreement. These employment and consulting agreements are more thoroughly
described below under the heading “Termination and Change of
Control Benefits for NEOs”.
7
None of the options granted to Messrs Shrake, Krause or Gehlen
were re-priced during the current fiscal year.
Incentive Plan Awards
Outstanding Share-Based Awards and Option-Based Awards
The following table sets forth information concerning all
awards outstanding under incentive plans of the Company pursuant to which
compensation that depends on achieving certain performance goals or similar
conditions within a specified period, at the end of the most recently completed
financial year, including awards granted before the most recently completed
financial year, to each of the NEOs:
| |
Option-Based
Awards |
Share-Based Awards |
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#) |
Option
Exercise
Price
US($)(2) |
Option
Expiration
Date |
Value of
Unexercised In-
The-Money
Options (1,2)
US($) |
Number of
Shares or Units
of Shares That
Have Not Vested
(#) |
Market or
Payout Value of
Share-Based
Awards That
Have Not Vested
US($) |
Thomas Shrake
CEO
|
300,000
500,000
400,000
500,000
800,000 |
1.19
0.17
0.21
0.21
0.16 |
03/09/2013
12/29/2013
01/26/2015
12/16/2015
09/28/2016 |
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A |
Steven Krause
CFO
|
250,000
250,000
250,000
250,000
250,000 |
0.17
0.21
0.20
0.21
0.16 |
12/29/2013
01/26/2015
06/10/2015
12/16/2015
09/28/2016 |
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A |
Bill Gehlen
VP Exploration
|
125,000
200,000
200,000
300,000
300,000 |
1.19
0.17
0.21
0.21
0.16 |
03/09/2013
12/29/2013
01/26/2015
12/16/2015
09/28/2016 |
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A |
| |
(1) |
This amount is calculated based on the difference between
the market value of the securities underlying the options at the end of
the most recently completed financial year, which was CDN$0.10 per share,
and the exercise or base price of the option. If the exercise price of the
option is lower than the year-end market value of the securities
underlying the options, options are not In- the-Money and their value is
Nil. |
| |
|
|
| |
(2) |
The Company’s options are set with an exercise price in
CDN dollars and were converted to US dollars at the April 30, 2012 foreign
currency exchange rate of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117
US. The value of the unexercised in-the- money options is determined in
Canadian funds and then translated into US funds at the exchange rate
quoted above.. |
Incentive Plan Awards - Value Vested Or Earned During The
Year
The value vested or earned during the most recently
completed financial year of incentive plan awards granted to NEOs is as
follows:
NEO Name
|
Option-Based Awards
–
Value Vested
During
The Year (1)
US($) |
Share-Based Awards
-
Value Vested
During The Year
US($) |
Non-Equity Incentive
Plan
Compensation -
Value
Earned
During The Year
US($)
|
Thomas Shrake
CEO |
1,349
|
Nil
|
Nil
|
| Steven Krause |
427 |
Nil |
Nil
|
8
NEO Name
|
Option-Based Awards
–
Value Vested
During
The Year (1)
US($) |
Share-Based Awards
-
Value Vested
During The Year
US($) |
Non-Equity Incentive
Plan
Compensation -
Value
Earned
During The Year
US($)
|
| CFO |
|
|
|
William Gehlen
VP Exploration
|
506
|
Nil
|
Nil
|
| |
(1) |
This amount is the dollar value that would have been
realized had the newly vested options been exercised on the vesting date,
computed by obtaining the difference between the market price of the
underlying securities at exercise and the exercise price of the options
under the option-based award on the vesting date. As the Company’s stock
options and share price are quoted in $CDN, the value was computed in $CDN
and converted to $US at the April 30, 2012 foreign currency exchange rate
of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117
US. |
The Company’s stock option awards normally vest as follows: 1/3
upon the date of grant; 1/3 upon the first anniversary of the grant date; and
1/3 upon the second anniversary of the grant date. During the period from May 1,
2011 to April 30, 2012, the following options vested: the last third of options
granted on to the NEOs on January 27, 2010; the second third of options granted
on December 17, 2010; and the first third of options granted on September 29,
2011.
Description of Incentive Plan
In 2006 the Company established an Evergreen Incentive Stock
Option Plan (the “Evergreen Plan”), which was approved by Shareholders on
August 29, 2006. On August 26, 2009, Shareholders re-approved the Evergreen
Plan. The Evergreen Plan requires Shareholder approval every three years and its
approval will be sought at the Meeting.
A description of the Evergreen Plan is provided below under the
heading “Special Matters to be Voted Upon at the Meeting”.
All options currently granted to the NEO’s as well as to the
directors, employees and consultants of the Company are governed by the
Evergreen Plan.
Pension Plan Benefits
The Company does not have a pension plan that provides for
payments or benefits to the Named Executive Officers at, following, or in
connection with retirement.
Termination and Change of Control Benefits for NEOs
Thomas Shrake, President and CEO
The Company has a current employment agreement with Thomas
Shrake, President and CEO, which includes termination and change of control
benefits.
In Mr. Shrake’s employment agreement, “change of control” is
defined as any change in the effective control or direction of the Company and
includes:
| |
(a) |
an acquisition of 20% or more of the voting rights
attached to all outstanding shares of the Company by a person or
combination of persons acting in concert by virtue of an agreement,
arrangement, commitment or understanding; or |
| |
|
|
| |
(b) |
a change in the Company’s officers or Directors, which
alters the effective control or direction of the
Company. |
An “event of termination” is defined in the employment
agreement as the occurrence of any of the following events at any time after a
“change of control”, without the executive’s written consent:
| |
(a) |
a change (other than changes that are clearly and
exclusively consistent with a promotion) in the executive’s position or
duties (including any position or duties as a Director of the Company),
responsibilities (including, without limitation, the person(s) to whom the
executive reports, and who report to the executive), title or office in effect
immediately prior to the change of control, which includes any removal of
the executive from or any failure to re-elect or re-appoint the executive
to any such positions or offices; |
9
| |
(b) |
any failure by the Company to increase the executive’s
remuneration in a manner consistent (both as to frequency and as to
percentage increase) with increases granted generally to the Company’s
other senior personnel; |
| |
|
|
| |
(c) |
the Company permanently relocating the executive to any
place other than the location at which he reported to work on a regular
basis immediately prior to the change of control; |
| |
|
|
| |
(d) |
the Company taking any action to deprive the executive of
any material fringe benefits enjoyed by him immediately prior to the
change of control or the Company failing to increase or improve such
material fringe benefits on a basis consistent with increases or
improvements granted to the Company’s other senior personnel; |
| |
|
|
| |
(e) |
any breach of the Company of any provision of the
employment agreement; |
| |
|
|
| |
(f) |
the good faith determination by the executive that, as a
result of the change of control or any action or event thereafter, the
executive’s status or responsibility in the Company has been diminished or
the executive is effectively being prevented from carrying out his duties
and responsibilities as they existed immediately prior to the change of
control; or |
| |
|
|
| |
(g) |
failure by the Company to obtain, in a form satisfactory
to the executive, an effective assumption of its obligations hereunder by
a successor to the Company, including a successor to a material portion of
its business. |
If, as a result of a “change of control” of the Company, Mr.
Shrake experiences an “event of termination” as described above, Mr. Shrake is
entitled to a severance payment of 24 months’ salary (based on his official
annual salary of US$250,000) and is able to exercise any stock options
previously granted within 45 business days in the event of termination after a
change of control. In addition, the estimated incremental value of his
non-vested stock options that would vest assuming a triggering event took place
on the last day of the most recently completed financial year would have been
$Nil as the Company’s closing share price on April 30, 2012 was CDN $0.10, lower
than the exercise price of all vested and non-vested stock options granted to
Mr. Shrake.
Steven Krause, CFO
Steven Krause has a consulting agreement with the Company which
includes a “change of control” clause. In this consulting agreement, “change of
control” means the acquisition by any person or by any person and joint actor,
whether directly or indirectly, of voting securities as defined in the
Securities Act of British Columbia, as amended from time to time (the
“BC Securities Act”), which, when added to all other voting
securities of the Company at the time held by such person or by such person and
a person acting “jointly or in concert with” another person as that phrase is
interpreted by the BC Securities Act, totals for the first time not less than
fifty percent (50%) of the outstanding voting securities of the Company or the
votes attached to those securities are sufficient, if exercised, to elect a
majority of the Board of Directors.
Should a “change of control” occur, all outstanding stock
options held by Mr. Krause will become fully vested in accordance with the terms
of the Amended Evergreen Plan whereupon such options may be exercised in whole
or in part by Mr. Krause. In addition, the estimated incremental value of his
non-vested stock options that would vest assuming a triggering event took place
on the last day of the most recently completed financial year would have been
$Nil as the Company’s closing share price on April 30, 2012 was CDN $0.10, lower
than the exercise price of all vested and non-vested stock options granted to
Mr. Krause.
William Gehlen, Vice President Exploration
William Gehlen has an employment agreement with a subsidiary of
the Company that includes termination and change of control conditions which are
the same as those in Mr. Shrake’s employment agreement described above. If, as a
result of a “change of control” of the Company, Mr. Gehlen experiences an “event
of termination” as defined above, Mr. Gehlen is entitled to a severance payment
of 12 months’ salary, plus one month’s salary per year of service after one
year, up to a maximum of 24 months’ salary, and is able to exercise any stock
options previously granted within 30 calendar days in the event
of termination after a change of control. In addition, the estimated incremental
value of his non-vested stock options that would vest assuming a triggering
event took place on the last day of the most recently completed financial year
would have been $Nil as the Company’s closing share price on April 30, 2012 was CDN $0.10,
lower than the exercise price of all vested and non-vested stock options granted
to Mr. Gehlen.
10
Other than as set forth above, neither the Company nor its
subsidiaries has a contract, agreement, plan or arrangement that provides for
payments to a Named Executive Officer following or in connection with any
termination (whether voluntary, involuntary or constructive), resignation,
retirement, a change of control of the Company or its subsidiaries, or a change
in responsibilities of the Named Executive Officer following a change in
control.
Estimated Incremental Payment on Change of Control
Under the terms of Thomas Shrake’s employment agreement, the
estimated incremental payment to Mr. Shrake upon termination by the Company on a
change of control of the Company, would be approximately US $500,000 (calculated
as at April 30, 2012) based upon an amount equal to 24 months’ salary, plus any
amounts owed in respect of accrued vacation and the accelerated option value of
his existing stock options.
There are no provisions in Steven Krause’s consulting agreement
that would require the Company to make any payments to Mr. Krause upon a change
of control of the Company.
Under the terms of William Gehlen’s employment agreement, the
estimated incremental payment to Mr. Gehlen upon termination by the Company’s
subsidiary on a change of control of the Company, would be approximately US
$240,000 (calculated as at April 30, 2012) based upon an amount equal to 12
months’ salary plus one months’ salary for every year of service beyond one year
to a maximum of 24 months’ salary, plus any amounts owed in respect of accrued
vacation and the accelerated option value of his existing stock options.
Director Compensation
The following table sets forth all amounts of compensation
provided to the Directors, who are not also Named Executive Officers, for the
Company’s most recently completed financial year:
Director
Name (1) |
Fees
Earned
US($) |
Share-Based
Awards
US($) |
Option-
Based
Awards
US($)(2) |
Non-Equity
Incentive Plan
Compensation
US($) |
Pension
Value
US($) |
All Other
Compensation
US($) |
Total
US($) |
| William Myckatyn |
10,099 |
Nil |
16,310 |
Nil |
Nil |
Nil |
26,409 |
| David Fagin |
10,099 |
Nil |
16,310 |
Nil |
Nil |
Nil |
26,409 |
Catherine
McLeod-Seltzer |
Nil
|
Nil
|
57,023
|
Nil
|
Nil
|
Nil
|
57,023
|
| Anthony Petrina(3) |
10,099 |
Nil |
16,310 |
Nil |
Nil |
Nil |
26,409 |
| Tim Baker(4) |
Nil |
Nil |
19,702 |
Nil |
Nil |
Nil |
19,702 |
(1) Relevant disclosure has been
provided in the Summary Compensation Table above, for Mr. Shrake, a
Director who is also a Named Executive Officer. Mr. Shrake’s total compensation
is related to his role as CEO, and he receives no compensation for his services
as a Director.
(2) The Company used the Black-Scholes
model as the methodology to calculate the grant date fair value, and relied on
the following the key assumptions and estimates for each calculation: expected
dividend yield 0%, expected stock price volatility 102 and 105%, risk free
interest rate 1.28 and 1.49%, and expected life of options of between 4.3 and 5
years. The Company chose this methodology as it is the standard for exploration
companies in Canada and has been consistently applied by the Company for valuing
option-based awards since 2003. The stock-based awards are determined in
Canadian funds and then translated into US funds at the 2011 average foreign
currency exchange rate of $1.00US/ $1.03CDN.
(3) Mr. Petrina retired as a Director
of the Company effective March 2, 2012.
(4) Mr. Baker became a Director of the
Company effective March 5, 2012
The Company has no arrangements, standard or otherwise,
pursuant to which Directors are compensated by the Company or its subsidiaries
for their services in their capacity as Directors, or for committee
participation, involvement in special assignments, or for services as a
consultant or expert during the most recently completed financial year or
subsequently, up to and including the date of this Information Circular, except
as follows:
11
- The Company’s three independent Directors (Messrs Myckatyn, Fagin and
Baker) are each entitled to receive an annual fee of CDN$10,000 to be paid
upon his election or re-election to the Board at the annual general meeting of
the Company.
- Each independent Director is currently entitled to receive a grant of
100,000 stock options upon his election or re-election at the Company’s annual
general meeting under the Evergreen Plan, which options immediately vest in
full.
- Directors are reimbursed for individual travel and other ancillary
expenses incurred in connection with attending Board and committee meetings.
The Evergreen Plan, as described above and more full below,
allows for the granting of incentive stock options to the officers, employees
and Directors. The purpose of granting such options is to assist the Company in
compensating, attracting, retaining and motivating the Directors of the Company
and to closely align the personal interests of such persons to that of the
Shareholders.
Incentive Plan Awards - Outstanding Share-Based Awards and
Option-Based Awards
The following table sets forth information concerning all
awards outstanding at the end of the most recently completed financial year,
including awards granted before the most recently completed financial year, to
the Directors who are not Named Executive Officers:
| |
Option-Based
Awards |
Share-Based Awards |
Director
Name |
Number of
Securities
Underlying
Unexercised
Options
(#) |
Option
Exercise
Price
US($) |
Option
Expiration
Date |
Value
of
Unexercised
In-The-Money
Options (1,2)
US($) |
Number of
Shares Or Units
Of Shares That
Have Not
Vested
(#)
|
Market or
Payout Value
Of Share-
Based
Awards
That Have Not
Vested
US($) |
William Myckatyn
|
75,000
15,000
125,000
75,000
75,000
50,000
75,000
50,000
75,000
50,000 |
0.97
1.19
0.17
0.17
0.21
0.21
0.17
0.21
0.19
0.16 |
08/27/2012
03/09/2013
12/29/2013
12/29/2013
08/25/2014
01/26/2015
08/25/2015
12/16/2015
09/18/2016
09/28/2016 |
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A |
David Fagin
|
75,000
125,000
75,000
75,000
50,000
75,000
50,000
75,000
50,000 |
0.97
0.17
0.17
0.21
0.21
0.17
0.21
0.19
0.16 |
08/27/2012
12/29/2013
12/29/2013
08/25/2014
01/26/2015
08/25/2015
12/16/2015
09/18/2016
09/28/2016 |
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A |
Catherine
McLeod-Seltzer
|
125,000
300,000
200,000
300,000
75,000
50,000 |
1.19
0.17
0.21
0.21
0.19
0.16 |
03/09/2013
12/29/2013
01/26/2015
12/16/2015
09/18/2016
09/28/2016 |
Nil
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A
N/A |
12
| |
Option-Based
Awards |
Share-Based Awards |
Director
Name |
Number of
Securities
Underlying
Unexercised
Options
(#) |
Option
Exercise
Price
US($) |
Option
Expiration
Date |
Value
of
Unexercised
In-The-Money
Options (1,2)
US($) |
Number of
Shares Or Units
Of Shares That
Have Not
Vested
(#)
|
Market or
Payout Value
Of Share-
Based
Awards
That Have Not
Vested
US($) |
Anthony Petrina(3)
|
75,000
125,000
75,000
75,000
50,000
75,000
50,000
75,000
50,000 |
0.97
0.17
0.17
0.21
0.21
0.17
0.21
0.19
0.16 |
08/27/2012
12/29/2013
12/29/2013
03/02/2014(3)
03/02/2014(3)
03/02/2014(3)
03/02/2014(3)
03/02/2014(3)
03/02/2014(3) |
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil |
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A |
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A |
| Tim Baker (4) |
200,000 |
0.13 |
03/26/2017 |
Nil |
N/A |
N/A
|
| |
(1) |
This amount is calculated based on the difference between
the market value of the securities underlying the options at the end of
the most recently completed financial year, which was CDN$0.10 per share,
and the exercise or base price of the option. If the exercise price of the
option is lower than the year-end market value of the securities
underlying the options, options are not In-the- Money and their value is
Nil. |
| |
|
|
| |
(2) |
The Company’s options are set with an exercise price in
CDN dollars and were converted to US dollars at the April 30, 2012 foreign
currency exchange rate of $1.00 US = $0.9884 CDN or $1.00 CDN = $1.0117
US. The value of the unexercised in-the- money options is determined in
Canadian funds and then translated into US funds at the exchange rate
quoted above.. |
| |
|
|
| |
(3) |
Mr. Petrina retired as a Director of the Company
effective March 2, 2012. In acknowledgement of Mr. Petrina’s lengthy
service to the Company, with the approval of the Directors (absent Mr.
Petrina) and the Toronto Stock Exchange, the Company extended the expiry
date of all of Mr. Petrina’s vested options to the earlier of their
original expiry date or March 2, 2014. |
| |
|
|
| |
(4) |
Mr. Baker became a Director of the Company effective
March 5, 2012. |
Incentive Plan Awards - Value Vested Or Earned During The
Year
The value vested or earned during the most recently
completed financial year of incentive plan awards granted to Directors who are
not Named Executive Officers is as follows:
Director
Name |
Option-Based Awards
-
Value Vested
During The Year
(1)
US($) |
Share-Based Awards
-
Value Vested
During The Year
US($) |
Non-Equity
Incentive
Plan Compensation -
Value
Earned
During The Year
US($)
|
| William Myckatyn |
84 |
N/A |
N/A |
| David Fagin |
84 |
N/A |
N/A |
| Catherine McLeod-Seltzer |
840 |
N/A |
N/A |
| Anthony Petrina |
84 |
N/A |
N/A |
| Tim Baker |
Nil |
N/A |
N/A
|
(1) This amount is the dollar value
that would have been realized had the newly vested options been exercised on the
vesting date, computed by obtaining the difference between the market price of
the underlying securities at exercise and the exercise price of the options
under the option-based award on the vesting date. As the Company’s stock options
and share price are quoted in $CDN, the value was computed in $CDN and converted
to $US at the April 30, 2012 foreign currency exchange rate of $1.00 US =
$0.9884 CDN or $1.00 CDN = $1.0117 US.
(2) Mr. Petrina retired as a Director
of the Company effective March 2, 2012.
(3) Mr. Baker became a Director of the
Company effective March 5, 2012.
13
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
Plan
Category |
Number of
Securities to be
issued upon exercise of
outstanding options,
warrants and
rights |
Weighted
average
exercise price of
outstanding
options,
warrants and rights
CDN($) |
Number of
securities
remaining available for future
issuance under equity
compensation
plans
(excluding securities
reflected
in column (a)) |
Equity compensation plans
approved by securityholders
|
12,800,000
|
0.27
|
4,060,170
|
Equity compensation plans
not approved
by
securityholders |
Nil
|
N/A
|
N/A
|
|
Total: |
12,800,000 |
0.28 |
4,060,170 |
Details of the Company’s Evergreen Plan are set out above under
the heading “Description of Incentive Plan”, and more thoroughly below under the
heading “Special Matters to be Voted Upon at the Meeting” as well as in the
notes to the Company's audited financial statements, which may be accessed at
the Company’s website or www.sedar.com.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As at July 23, 2012, there was no indebtedness outstanding of
any current or former Director, executive officer or employee of the Company or
its subsidiaries which is owing to the Company or its subsidiaries, or which is
owing to another entity, which indebtedness is the subject of a guarantee,
support agreement, letter of credit or other similar arrangement or
understanding provided by the Company or its subsidiaries, whether entered into
in connection with a purchase of securities or otherwise.
No individual who is, or at any time during the most recently
completed financial year was, a Director or executive officer of the Company, no
proposed nominee for election as a Director and no associate of such persons:
| (i) |
is, or at any time since the beginning of the most
recently completed financial year has been, indebted to the Company or its
subsidiaries; or |
| |
|
| (ii) |
is indebted to another entity, which indebtedness is, or
at any time since the beginning of the most recently completed financial
year has been, the subject of a guarantee, support agreement, letter of
credit or other similar arrangement or understanding provided by the
Company or its subsidiaries, |
whether in relation to a securities purchase program or other
program.
CORPORATE CEASE TRADE ORDERS OR BANKRUPTCIES
To the knowledge of the Company, no proposed Director:
| |
(a) |
is, as at the date of this Information Circular, or has
been, within 10 years before the date of this Information Circular, a
director, chief executive officer (“CEO”) or chief financial
officer (“CFO”) of any company (including the Company)
that: |
| |
|
|
|
| |
|
(i) |
was the subject, while the proposed Director was acting
in the capacity as director, CEO or CFO of such company, of a cease trade
or similar order or an order that denied the relevant company access to
any exemption under securities legislation, that was in effect for a
period of more than 30 consecutive days; or |
| |
|
|
|
| |
|
(ii) |
was subject to a cease trade or similar order or an order
that denied the relevant company access to any exemption under securities
legislation, that was in effect for a period of more than 30 consecutive
days, that was issued after the proposed Director ceased to be a director,
CEO or CFO but which resulted from an event that occurred while the
proposed Director was acting in the capacity as director, CEO or CFO of
such company; or |
14
| |
(b) |
is, as at the date of this Information Circular, or has
been within 10 years before the date of this Information Circular, a
director or executive officer of any company (including the Company) that,
while that person was acting in that capacity, or within a year of that
person ceasing to act in that capacity, became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency or was subject
to or instituted any proceedings, arrangement or compromise with creditors
or had a receiver, receiver manager or trustee appointed to hold its
assets; or |
| |
|
|
| |
(c) |
has, within the 10 years before the date of this
Information Circular, become bankrupt, made a proposal under any
legislation relating to bankruptcy or insolvency, or become subject to or
instituted any proceedings, arrangement or compromise with creditors, or
had a receiver, receiver manager or trustee appointed to hold the assets
of the proposed Director; or |
| |
|
|
| |
(d) |
has been subject to any penalties or sanctions imposed by
a court relating to securities legislation or by a securities regulatory
authority or has entered into a settlement agreement with a securities
regulatory authority; or |
| |
|
|
| |
(e) |
has been subject to any penalties or sanctions imposed by
a court or regulatory body that would likely be considered important to a
reasonable securityholder in deciding whether to vote for a proposed
Director. |
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Corporate governance relates to the activities of the Company’s
Board of Directors, the members of which are elected by and are accountable to
the Shareholders, and takes into account the role of the individual members of
management who are appointed by the Board and who are charged with the
day-to-day management of the Company. The Board is committed to sound corporate
governance practices which are both in the interests of the Shareholders and
contribute to effective and efficient decision making.
National Policy 58-201, Corporate Governance Guidelines,
establishes corporate governance guidelines which apply to all public companies.
The Company has reviewed its own corporate governance practices in light of
these guidelines. In certain cases, the Company’s practices comply with the
guidelines; however, the Board considers that some of the guidelines are not
suitable for the Company at its current stage of development and level of
activity and therefore these guidelines have not been adopted. National
Instrument 58-101, Disclosure of Corporate Governance Practices, mandates
disclosure of corporate governance practices, which disclosure is set out
below.
Independence of Members of Board and Management Supervision
by Board
The Board currently consists of five Directors, a majority of
whom are independent based upon the tests for independence set forth in NI
52-110. Assuming each of the nominated Directors is elected by Shareholders at
the Meeting on September 6, 2012, the Board will include three (3) independent
Directors: Messrs Myckatyn, Fagin and Baker. Mr. Shrake and Ms. McLeod-Seltzer
are not considered independent as they are the President and Chief Executive
Officer, and Board Chairman, respectively, of the Company.
The Board facilitates the exercise of independent judgement in
carrying out its responsibilities, by the effective supervision of management by
the independent Directors on an informal basis, through active and regular
involvement in reviewing and supervising the operations of the Company and
through regular and full access to management. Further independent supervision
is performed through the Audit Committee which is composed entirely of
independent Directors who meet regularly with the Company’s auditors without
management being in attendance. The independent Directors hold meetings without
the presence of non-independent Directors on a quarterly basis and are also
encouraged to meet at any time they consider necessary without any members of
management, including the non-independent Directors, being present. The
Company’s auditors, legal counsel and certain employees may be invited to
attend. During the Company’s most recently completed financial year, the
independent Directors met a total of four (4) times.
Leadership is provided for the Board’s independent Directors
through access to management and the independent operation of the Audit
Committee, as discussed above, and through its Lead Director, Mr. Myckatyn. As
Lead Director, Mr. Myckatyn’s role and responsibilities are to:
15
| |
a. |
assist the Chairman to manage the Board and its
committees in a manner that ensures that these relationships are effective
and efficient and further the best interests of the Company; |
| |
|
|
| |
b. |
oversee the process of evaluation of the Board, its
committees and individual Directors; |
| |
|
|
| |
c. |
act as the principal sounding board and counsellor for
the Chairman; |
| |
|
|
| |
d. |
ensure that the Chairman is aware of concerns of the
independent Directors, Shareholders and other stakeholders; |
| |
|
|
| |
e. |
work with the Chairman to assist the Chairman in
fulfilling her responsibilities in managing the Board; |
| |
|
|
| |
f. |
work with the Chairman to co-ordinate the agenda for
Board meetings; |
| |
|
|
| |
g. |
chair and manage all meetings for the independent
Directors; |
| |
|
|
| |
h. |
attend committee meetings when it is appropriate to do
so; and |
| |
|
|
| |
i. |
meet, from time to time, with the Chairman and the
President and Chief Executive Officer to convey and discuss concerns of
the independent Directors. |
Participation of Directors in Other Reporting Issuers
The following table sets forth each Director of the Company
that is also a director of any other issuer that is a reporting issuer (or
equivalent) in any jurisdiction.
| Name of
Director |
Name of Other Public
Company |
| Catherine McLeod-Seltzer |
Bear Creek Mining Corporation, Kinross Gold
Corporation, Troon Ventures Ltd. and Major Drilling Group International,
Inc. |
| William Myckatyn |
First Point Minerals Corp., San
Marco Resources Inc. and OceanaGold Corporation |
| David K. Fagin |
Atna Resources Ltd. |
| Tim Baker |
Eldorado Gold Corp., Augusta
Resource Corporation, Antofagasta Plc. |
Participation of Directors in Board Meetings
The Board meets at least once every quarter to review, among
other things, the performance of the Company. The Board also holds a meeting
each year to review and assess the Company’s financial forecasts and business
plan for the ensuing year and its overall strategic objectives. Other meetings
of the Board are called to deal with special matters as circumstances require.
During the Company’s most recently completed financial year, four (4) Board
meetings were held. The attendance record of each Director for the Board
meetings held is as follows:
Name of
Director |
No. of Board Meetings
Attended in the Most Recently
Completed Financial
Year |
| Catherine McLeod-Seltzer |
4 |
| Thomas Shrake |
4 |
| Anthony J. Petrina
(1) |
4 |
| William Myckatyn |
3 |
| David K. Fagin |
4 |
| Tim Baker (2) |
1 |
(1) Mr. Petrina retired as a Director
of the Company effective March 2, 2012.
(2) Mr. Baker became a Director of the
Company effective March 5, 2012 and only one Board meeting was held since the
date of his appointment.
16
Board Mandate
The mandate of the Board is to manage or supervise the
management of the business and affairs of the Company and to act with a view to
the best interests of the Company. The Board sets long-term goals and objectives
for the Company, formulates the plans and strategies necessary to achieve those
objectives and goals, and supervises and offers guidance to the Company’s senior
management in their implementation. Although the Board has delegated to senior
management personnel the responsibility for managing the day-today affairs of
the Company, the Board is ultimately responsible for all matters relating to the
Company and its business. In fulfilling its mandate, the Board, among other
matters, is responsible for reviewing and approving the Company’s overall
business strategies and its annual business plan; reviewing and approving the
quarterly corporate and cash flow forecasts; reviewing and approving significant
capital investments; reviewing major strategic initiatives to ensure that the
Company’s proposed actions accord with Shareholder objectives; reviewing
succession planning; assessing management’s performance against approved
business plans and industry standards; reviewing and approving the reports and
other disclosure issued to Shareholders; ensuring the effective operation of the
Board; and safeguarding Shareholders’ equity interests through the optimum
utilization of the Company’s capital resources.
The Board expects management to efficiently implement its
strategic plans for the Company in a professional, competent and ethical manner,
to keep the Board fully apprised of its progress in doing so and to be fully
accountable to the Board in respect to all matters for which it has been
assigned responsibility. In addition to matters which must, by law or pursuant
to the constating documents of the Company, be approved by the Board, all
matters of strategic importance to the Company are referred to the Board for
prior review and approval. Any material expenditures or legal commitments,
including without limitation debt or equity financings, acquisitions and
divestitures by the Company, financial statements and major disclosure
documents, are subject to prior approval by the Board. The Board holds meetings
on a regular basis to review the Company’s strategy as well as to consider and
approve particular matters. One of the Board’s responsibilities is to review
and, if thought fit, to approve opportunities as presented by management and to
provide guidance to management. The Board expects management to operate the
business of the Company in a manner that enhances Shareholder value and is
consistent with the highest level of integrity. Management is expected to
execute the Company’s business plan and to meet performance goals and
objectives.
The Board oversees the management of the Company’s affairs
directly and through its committees. The Board also meets to plan for the future
growth of the Company; to identify risks of the Company’s business, thus
ensuring the implementation of appropriate systems to manage these risks; to
monitor senior management; and to ensure timely disclosure of material
transactions. The frequency of Board meetings as well as the nature of agenda
items, change, depending upon the state of the Company’s affairs and in light of
opportunities or risks that the Company faces. When necessary and appropriate,
issues may be approved and adopted by the Board by way of written resolutions in
accordance with applicable corporate law.
Position Descriptions
The Board has developed written position descriptions for the
Chairman, the President and CEO and for the Directors at large. On a quarterly
basis, the Board approves the operating and capital forecasts, and the Chairman
and President and CEO are required to ensure the Company operates within those
guidelines. Material departures must be approved by the Board. The Board is of
the view that the respective corporate governance roles of the Board and
management, as represented by the Chairman and President and CEO, are clear, and
that the limits to management’s responsibility and authority are well defined.
The Board has not developed written position descriptions for
the Chair of each Board committee. The Chairs of the Audit Committee, the
Nominating Committee, the Compensation Committee, and the Health, Safety and
Environmental Committee are responsible for calling the meetings of each
Committee, establishing meeting agenda with input from management, and
supervising the conduct of the meetings.
Orientation and Continuing Education
New Directors are provided with a Board Manual, as reviewed and
adopted by the Board, which contains comprehensive information and guidelines on
the duties of the Board, and members of management, terms of reference for
committees and policies adopted by the Board. New Directors are given a detailed
briefing by the Chairman of the Board and by the President and CEO on the
Company and its business, and the legal duties and obligations of Directors. The
President and CEO reports at each Board meeting on the Company’s activities and provides Directors with a monthly written report. All
Directors are encouraged to contact senior management for updates at any time.
17
The Board currently does not provide continuing education for
its Directors. By using a Board composed of experienced professionals with a
wide range of financial, legal, exploration and mining expertise, the Company
ensures that the Board operates effectively and efficiently.
Board members are encouraged to communicate with management,
legal counsel and, where applicable, auditors and technical consultants of the
Company; to keep themselves current with industry trends and developments and
changes in legislation with management’s assistance; and to attend related
industry seminars and visit the Company’s operations. Board members have full
access to the Company’s records.
Ethical Business Conduct
The Board has adopted a written Code of Conduct and Ethics and
a Whistleblower Policy by which it and all officers and employees of the Company
abide. The Whistleblower Policy outlines a confidential and anonymous process in
which to report any accounting concerns while the Code of Conduct helps define
and establish a standard of professional behaviour and responsibility,
acceptable to the Company, for all employees. A copy of the Code of Conduct and
Ethics and the Whistleblower Policy is available for review on the Company’s
website and on SEDAR at www.sedar.com. In addition, the Board, through
its meetings with management and other informal discussions with management,
monitors in compliance with the Code of Conduct and Ethics and encourages a
culture of ethical business conduct. The Company’s high calibre management team
promotes a culture of ethical business conduct throughout the Company’s
operations and is expected to monitor the activities of the Company’s employees,
consultants and agents in that regard. The Board encourages any concerns
regarding ethical conduct in respect of the Company’s operations to be raised,
on an anonymous basis, with the President and CEO, the Chairman, or another
Board member as appropriate.
It is a requirement of applicable corporate law that Directors
and senior officers who have an interest in a transaction or agreement with the
Company promptly disclose that interest at any meeting of the Board at which the
transaction or agreement will be discussed and, in the case of Directors,
abstain from discussions and voting in respect to same if the interest is
material. These requirements are also contained in the Company’s Articles, which
are made available to the Directors and senior officers of the Company.
Nomination of Directors
The Nominating Committee is composed of two Directors, Messrs
Baker (Chair) and Myckatyn, each of whom is independent based upon the tests for
independence set forth in NI 52-110. The Nominating Committee has the
responsibility for recommending to the Board the nominees to fill vacancies on
the Board or to be proposed by any member of the Board as candidates for
election as Directors at the annual general meeting. The Nominating Committee
also recommends to the Board a desirable balance of expertise among the Board
members, seeks out possible candidates to fill Board positions and aids in
attracting qualified candidates to the Board. In addition, the Nominating
Committee’s responsibilities include reviewing and monitoring the orientation of
new Board members; reviewing and approving officers’ directorships in other
companies and reviewing Directors’ relationships with outside entities with
regard to potential conflicts of interest.
Compensation Committee
The Compensation Committee is composed of Messrs Fagin (Chair)
and Myckatyn, each of whom is independent based upon the tests for independence
set forth in NI 52-110. The overall purpose of the Compensation Committee is to
make recommendations to the Board for human resources and compensation policies
and to implement and oversee same if the Board approves the recommendations for
the Company.
The Compensation Committee is responsible for reviewing all
overall compensation strategy, objectives and policies; annually reviewing and
assessing the performance of the executive officers; recommending to the Board
the compensation of the executive officers; reviewing executive appointments;
and reviewing the adequacy and form of Directors’ compensation.
To determine compensation payable, the Compensation Committee
reviews compensation paid for Directors and officers of companies of a similar
size and stage of development in the mineral exploration industry and determines
an appropriate compensation reflecting the need to provide incentive and
compensation for the time and effort expended by the Directors and senior
management, while taking into account the financial and other resources of the Company. The Board of Directors does not
benchmark its executive compensation program, but from time to time does review
compensation practices of companies of similar size and stage of development to
ensure the compensation paid is competitive within the Company's industry and
geographic location while taking into account the financial and other resources
of the Company. See also “Statement of Executive Compensation”
above.
18
No compensation consultant or advisor has, at any time since
the beginning of the Company’s most recently completed financial year, been
retained to assist in determining compensation for any of the Company’s
Directors or officers.
Other Committees
Committees of the Board are an integral part of the Company’s
governance structure. In addition to the Compensation and Nominating Committees
(described above), the Board’s committees presently consist of an Audit
Committee and a Health, Safety and Environmental Committee. The Board’s
committees have been established to devote the necessary expertise and resources
to particular areas, and to enhance the quality of discussion at Board meetings.
The Committees facilitate effective Board decision making by providing
recommendations to the Board on matters within their respective
responsibilities. The Board believes that the Committees assist in the effective
functioning of the Board and that the composition of the Committees should
ensure that the views of the independent Directors are effectively represented.
A discussion of the Company’s Nominating and Compensation
Committees is provided above under the subheadings “Nomination of Directors” and
“Compensation Committee”. Please refer to the section entitled “Audit Committee
Information” in the Company’s Form 20-F for the year ended April 30, 2012 for
the information required to be disclosed pursuant to NI 52-110 with respect to
the Company’s Audit Committee.
The Company’s Health, Safety and Environmental Committee is
composed of Messrs Myckatyn (Chair), Shrake and Baker, a majority of whom are
considered independent based upon the tests for independence set forth in NI
52-110. The Health, Safety and Environmental Committee has the responsibility
for reviewing the Company’s environmental policy and for ensuring that the
Company’s operations are conducted in a manner consistent with the environmental
policy and in a manner that does not unduly expose its employees to unnecessary
risk of accident or death.
The Board has determined that, at this stage of the Company’s
development, it is not necessary for the Board to have additional standing
committees. The Board may from time to time appoint a special committee of one
or more Directors which committee may engage an outside advisor at the Company’s
expense in order to assist the committee in fulfilling its responsibilities.
Assessments
The Board annually, and at such other times as it deems
appropriate, reviews the performance and effectiveness of the Board, the
Directors and its committees to determine whether changes in size, personnel or
responsibilities are warranted. To assist in its review, the Board conducts
informal surveys of its Directors respecting its own effectiveness. In addition,
the Board satisfies itself that the Board, its committees, and its individual
Directors are performing effectively through frequent discussions between
management and individual Board members. There are also discussions among the
independent Directors with resulting comments to the Board. If appropriate, the
Board then considers whether procedural or substantive changes are necessary to
increase the effectiveness of the Board and its committees.
Shareholder Feedback and Concerns
The Company is dedicated to the maintenance of good Shareholder
relations and attempts to deal with any expressed concerns of Shareholders in an
effective and timely manner. The Company employs a Vice-President of Investor
Relations to monitor and promptly address Shareholder concerns in an expeditious
and informal manner. If any material issues of concern arise, the Board of
Directors is informed and provides direction for action as needed. The Company
has a Disclosure Policy which is followed and is available for review on the
Company’s website.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Other than as set forth in this Information Circular, no
Director or executive officer of the Company, no proposed Director of the Company, no person or company which
beneficially owns, or controls or directs, directly or indirectly, more than 10%
of the shares of the Company, nor any associate or affiliate of any of such
persons, has any material interest, direct or indirect, in any transactions
since May 1, 2011 (being the commencement of the Company’s last completed
financial year), or proposed transactions, which has materially affected or
would materially affect the Company or any of its subsidiaries.
19
APPOINTMENT OF AUDITOR
Staley, Okada & Partners, Chartered Accountants were first
appointed as the Company’s auditors in 2002. During the Company’s fiscal year
ended April 30, 2007, Staley, Okada & Partners merged their practice with
PricewaterhouseCoopers LLP which continued as the Company’s auditors.
Unless such authority is withheld, the persons named in the
accompanying form of proxy intend to vote for the reappointment of
PricewaterhouseCoopers LLP as auditor to the Company to hold office for the
ensuing year at a remuneration to be fixed by the Directors.
SPECIAL MATTERS TO BE VOTED UPON AT THE MEETING
Re-approval of Evergreen Incentive Stock Option
Plan
The following is only a summary of certain provisions of the
Evergreen Plan and is qualified in its entirety by the provisions of the
Evergreen Plan. A Shareholder or other interested party may obtain a copy of the
Evergreen Plan by contacting the Corporate Secretary of the Company in writing
at Suite 1050, 625 Howe Street, Vancouver, British Columbia, V6C 2TC or by
telephone at 604-689-1976.
Description of the Evergreen Plan
On August 26, 2009, Shareholders reapproved the Company's
Evergreen Plan, which was initially adopted in 2006. The Evergreen Plan is
designed to attract and retain highly qualified employees, service providers,
consultants, directors and officers of the Company and its subsidiaries
(collectively, the "Eligible Participants"). The method of establishing
the maximum number of shares reserved for grant under option is equal to 10% of
the number of shares outstanding at the time of grant. All of the Company’s
outstanding options have been granted under the Evergreen Plan as all options
granted under the Company’s former 2002 incentive stock option and stock bonus
plan have expired, been exercised or cancelled.
Under the Evergreen Plan, the Board of Directors is authorized
to designate Eligible Participants to whom options should be granted. As well,
the directors have the power under the terms of the Evergreen Plan to appoint a
committee of not less than three (3) directors to administer the Evergreen Plan.
The exercise price for an option granted under the Evergreen Plan shall be
determined by the directors at the time of grant, provided such price shall not
be less than the "market price", being the volume weighted average trading price
for the five trading days immediately preceding the date of grant. The Company
presently does not have a share purchase plan and does not grant stock
appreciation rights.
The Board of Directors fixes the vesting terms which it deems
appropriate when options are granted. On a change of control (as defined in the
Evergreen Plan), all shares subject to outstanding options will become vested
and exercisable by the optionees. Options granted under the Evergreen Plan have
a maximum fixed term of ten (10) years, subject only to the expiration date of
the fixed term falling within, or immediately after, a blackout period which was
self-imposed by the Company, in which case the option will expire within a 10
business day period after the blackout is lifted. No option may be assigned
other than by will or pursuant to the laws of succession, and to a trust, RESP
or RRSP or similar legal entity established by the optionee.
The Evergreen Plan provides that under no circumstances shall
the Evergreen Plan, together with all of the Company's other previously
established or proposed stock options, stock option plans, employee stock
purchase plans or any other compensation or incentive mechanisms involving the
issuance or potential issuance of shares, result, at any time, in the number of
shares: (i) issued to insiders, within any one year period, exceeding 10% of the
number of shares then outstanding; (ii) issuable to insiders, at any time,
exceeding 10% of the number of shares then outstanding; (iii) issued to any one
insider and such insider's associates, within any one year period, exceeding 5%
of the number of shares then outstanding; and (d) issuable to any one
participant, at any time, exceeding 5% of the number of shares then outstanding.
20
In the event of the death of an optionee, options held by such
optionee may be exercised until the earlier of the expiry date of such options
or one year from the date of death, after which the options terminate. In the
event that an optionee ceases to be an Eligible Participant for any reason other
than for cause or by virtue of death, then options held by such optionee shall
remain exercisable for a period of 30 days after the date on which such optionee
ceases to be an Eligible Participant or the expiration date of such options,
whichever is earlier. Where, however, the employment or service contract with an
optionee is terminated for cause, no option held by such optionee shall be
exercisable following the date on which such optionee ceases to be an Eligible
Participant.
The Evergreen Plan requires Shareholder approval every three
years. As the Evergreen Plan was implemented by the Company in 2006 and
reapproved by the Shareholders in 2009, Shareholder approval of the Evergreen
Plan will be sought at the Meeting.
Since the adoption of the Evergreen Plan in 2006, a total of
16,345,000 options have been granted, of which 3,528,334 have been cancelled and
16,666 have been exercised. Accordingly, as of the date hereof, 12,800,000
options are currently under grant, representing approximately 7.59% of the
issued and outstanding common shares of the Company as of the date of this
Information Circular.
Amendments to the Evergreen Plan
The Evergreen Plan requires Shareholder approval for amendments
to the Evergreen Plan (other than those requiring only Board approval as set out
below) including the following:
| |
(a) |
any amendment to the fixed percentage of shares issuable
under the Evergreen Plan, including a change from the fixed maximum
percentage of 10% of the issued and outstanding shares to a fixed maximum
number; |
| |
(b) |
any change to the definition of "Eligible Participant"
which would have the potential of broadening or increasing insider
participation; |
| |
(c) |
the addition of any form of financial
assistance; |
| |
(d) |
the addition of a cashless exercise feature, payable in
cash or securities, which does not provide for a full deduction of the
number of underlying shares from the Evergreen Plan reserve; |
| |
(e) |
the addition of a deferred or restricted share unit or
any other provision which results in Eligible Participants receiving
shares while no cash consideration is received by the Company;
and |
| |
(f) |
any other amendments that may lead to significant or
unreasonable dilution in the Company's outstanding securities or may
provide additional benefits to Eligible Participants, especially insiders
of the Company, at the expense of the Company and its existing
Shareholders. |
The Evergreen Plan requires only Board approval for the
following types of amendments, as outlined in the Evergreen Plan:
| |
(a) |
amendments considered to be of a clerical
nature; |
| |
(b) |
a change to the vesting provisions of a security or to
the Evergreen Plan itself; |
| |
(c) |
a change to the termination provisions of a security or
to the Evergreen Plan itself which does not entail an extension beyond the
original expiry date; |
| |
(d) |
a change to reduce the exercise price of a security for
an Eligible Participant who is not an insider (as defined in the Evergreen
Plan); |
| |
(e) |
the addition of a cashless exercise feature, payable in
cash or securities, which provides for a full deduction of the number of
underlying securities form the Evergreen Plan's reserve; and |
| |
(f) |
amendments of a non-material nature which are approved by
the TSX. |
On August 26, 2009, the Shareholders approved certain
amendments to the Evergreen Plan in order to:
| |
1. |
adjust the securities that an optionee will receive on
exercise after the completion of a compulsory acquisition or other going
private transaction following a take-over bid; |
| |
|
|
| |
2. |
adjust the expiry date of options received by an optionee
in a new company in the event that the Company completes a plan of
arrangement or spin-out transaction; |
| |
|
|
| |
3. |
clarify existing adjustment provisions with respect to
outstanding options on completion of share reorganizations, special
distributions and other corporation reorganizations;
and |
21
| |
4. |
update certain legislative and statutory references and
correct certain typographical errors and cross referencing
errors; |
On July 23, 2012, the Board of Directors also made certain
non-material amendments to the Evergreen Plan (a) to clarify, and conform to the
TSX Company Manual, the wording regarding the insider participation limits in
the Evergreen Plan, and (b) to provide that the Company's optionholders who are
resident in the United States are required to provide for certain
representations and warranties to the Company, in order to ensure compliance by
the Company with the provisions of the U.S. Securities Act. Such amendments to
the Evergreen Plan were conditionally approved by the TSX on July 20, 2012.
Shareholder Approval of Evergreen Plan
There is a maximum of 16,860,170 common shares reserved for
issuance under the Evergreen Plan, representing 9.9% of the issued and
outstanding common shares of the Company as at the date of this Information
Circular.
As all options which are exercised pursuant to the Plan become
available again for future grant, the Evergreen Plan constitutes an "evergreen"
plan. The policies of the TSX require that the Evergreen Plan be submitted to
Shareholders for ratification every three (3) years. If the Evergreen Plan is
not approved at the Meeting, existing options that have been granted would
remain unaffected, but the Company would not be able to grant options going
forward. Options that get cancelled or expire unexercised are no longer
available for reallocation under the Evergreen Plan.
The Evergreen Plan was initially adopted by the Company on July
12, 2006, approved by Shareholders on August 29, 2006 and subsequently
reapproved by the Shareholders on August 26, 2009. At the Meeting, Shareholders
will be asked to consider, and if thought fit, approve with or without
variation, an ordinary resolution in substantially the following form:
"WHEREAS:
| |
A. |
on July 12, 2006, the Board of Directors of the Company
adopted an evergreen incentive stock option plan (the "Evergreen Plan")
which does not have a fixed maximum number of common shares
issuable; |
| |
|
|
| |
B. |
on August 29, 2006 the Shareholders of the Company
approved the Evergreen Plan, by a majority of votes cast and three years
later on August 26, 2009 the Shareholders reapproved the Evergreen Plan,
by a majority of votes cast; |
| |
|
|
| |
C. |
the rules of Toronto Stock Exchange provide that all
unallocated options, rights of other entitlements under a security-based
compensation arrangement of an issuer which does not have a fixed number
of maximum securities issuable be approved by Shareholders of the issuer
every three (3) years; |
BE IT RESOLVED, as an ordinary resolution, that:
| |
1. |
all unallocated options under the Evergreen Plan be and
are hereby approved; |
| |
|
|
| |
2. |
the Company have the ability to continue granting options
under the Evergreen Plan until September 6, 2015, that is until the date
that is three (3) years from the date where Shareholder approval is being
sought; and |
| |
|
|
| |
3. |
any director or officer of the Company be and is hereby
authorized to do such things to sign, execute and deliver all documents
that such director and officer may, in his or her discretion, determined
to be necessary in order to give full effect to the intent and purpose of
this resolution." |
The Board of Directors recommends that Shareholders vote in
favour of the above resolution approving the Evergreen Plan.
22
Adoption of New Shareholder Rights
Plan
At the annual and special general meeting of the Company held
on August 26, 2009, the Shareholders approved an amended and restated
shareholder rights plan (the "Existing Plan") which will expire at the
close of the Meeting.
The Board of Directors of the Company has determined that it is
advisable for the Company to enter into a new shareholder rights plan (the
"Rights Plan"), which will become effective immediately after the close
of the Meeting when the Existing Plan expires, provided the Rights Plan is
approved by the Shareholders by ordinary resolution at the Meeting. The Rights
Plan is substantially similar to the Existing Plan and the terms of the Rights
Plan are set out in an agreement (the "Rights Plan Agreement") between
the Company and Computershare Investor Services Inc.
At the Meeting, the Shareholders will be asked to consider and,
if thought advisable, to approve by means of an ordinary resolution, the Rights
Plan Agreement. Approval of the Rights Plan Agreement by the Shareholders is
required by the terms of the Rights Plan Agreement and by the TSX.
Recommendation of the Board
The Board has determined that the Rights Plan Agreement is and
continues to be in the best interests of the Company and the Shareholders.
Accordingly, the Board recommends that Shareholders vote in favour of the
resolution approving, confirming and ratifying the Rights Plan Agreement and
authorizing the issuance of Rights (as defined in the Rights Plan Agreement)
pursuant thereto.
A Shareholder or other interested party may obtain a copy of
the Shareholder Rights Plan Agreement by contacting the Corporate Secretary of
the Company at Suite 1050, 625 Howe Street, Vancouver, British Columbia V6C 2T6.
The following is only a summary of certain provisions of the
Rights Plan Agreement and is qualified in its entirety by the provisions of the
Rights Plan Agreement. Defined terms used in this section and not defined herein
have the meaning ascribed to them in the Rights Plan Agreement.
Background to the Rights Plan Agreement
The Rights Plan Agreement has been designed to protect
Shareholders from unfair, abusive or coercive take-over strategies including the
acquisition of control of the Company by a bidder in a transaction or series of
transactions that may not treat all Shareholders fairly nor afford all
Shareholders an equal opportunity to share in the premium paid upon an
acquisition of control. The Rights Plan Agreement would provide the Board with
sufficient time, in the event of a public take-over bid or tender offer for the
common shares of the Company, to pursue alternatives which could enhance
Shareholder value. These alternatives could involve the review of other
take-over bids or offers from other interested parties to provide Shareholders
desiring to sell the Company's common shares with the best opportunity to
realize the maximum sale price for their common shares. In addition, with
sufficient time, the Board would be able to explore and, if feasible, advance
alternatives to maximize share value through possible corporate reorganizations
or restructuring. The directors need time in order to have any real ability to
consider these alternatives.
Potential Advantages of the Rights Plan Agreement
The Board believes that under the current rules relating to
take-over bids and tender offers in Canada, there is not sufficient time for the
directors to explore and develop alternatives for the Shareholders such as
possible higher offers or corporate reorganizations or restructurings that could
maximize Shareholder value. Under current rules, a take-over bid must remain
open in Canada for a minimum of 35 days. Accordingly, the directors believe that
the Rights Plan Agreement continues to be an appropriate mechanism to ensure
that they will be able to discharge their responsibility to assist Shareholders
in responding to a take-over bid or tender offer.
In addition, the Board believes that the existence of the
Rights Plan Agreement would encourage persons seeking to acquire control of the
Company to do so by means of a public take-over bid or offer available to all
Shareholders. The Rights Plan Agreement would deter acquisitions by means that
deny some Shareholders the opportunity to share in the premium that an acquirer is likely
to pay upon an acquisition of control. By motivating would-be acquirers to make
a public take-over bid or offer or to negotiate with the Board, Shareholders
will have the best opportunity of being assured that they will participate on an
equal basis, regardless of the size of their holding, in any acquisition of
control of the Company.
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The Rights Plan Agreement is not intended to prevent a
take-over or deter fair offers for securities of the Company. The Board believes
that the Rights Plan Agreement will not adversely limit the opportunity for the
Shareholders to dispose of their common shares through a take-over bid or tender
offer which provides fair value to all Shareholders. The Board will continue to
be bound to consider fully and fairly any bona fide take-over bid or offer for
the common shares and to discharge that responsibility with a view to the best
interests of the Shareholders.
Potential Disadvantages of the Rights Plan Agreement
Because the Rights Plan Agreement may increase the price to be
paid by an acquirer to obtain control of the Company and may discourage certain
transactions, confirmation of the Rights Plan Agreement may reduce the
likelihood of a take-over bid being made for the outstanding common shares of
the Company. Accordingly, the Rights Plan Agreement may deter some take-over
bids that Shareholders may wish to receive.
Term
If the resolution approving the Rights Plan Agreement is
adopted at the Meeting, the Rights Plan will remain in effect until termination
of the Company's annual general meeting of Shareholders in 2015 unless the term
of the Rights Plan Agreement is terminated earlier. The Rights Plan may be
extended beyond 2015 by resolution of the Shareholders in accordance with the
provisions of the Rights Plan Agreement. If the Rights Plan Agreement is not
approved at the Meeting, the Existing Plan will terminate at the conclusion of
the Meeting, all Rights granted under the Existing Plan will be cancelled and
the Company will cease to have a shareholder rights plan in place.
Issue of Rights
One right has been issued by the Company pursuant to the
Existing Plan in respect of each common share of the Company. One right will be
issued or deemed to have been issued in respect of each common share outstanding
at 4:00 p.m. (Vancouver time) on September 6, 2012 (the "Record Time") if
the Rights Plan Agreement is approved at the Meeting. One right will also be
issued for each additional common share issued after the Record Time and prior
to the earlier of the Separation Time (as defined below) and the Expiration Time
(as defined in the Rights Plan Agreement).
Exercise of Rights
The Rights will separate from the common shares to which they
are attached and become exercisable at the time (the "Separation Time")
which is the close of business on the tenth Trading Day (as defined in the
Rights Plan Agreement) after the earlier of:
| (i) |
the first date of public announcement by the Company or
another person indicating that any person has become an Acquiring Person
(as defined below); |
| |
|
| (ii) |
the date of the commencement of or first public
announcement of the intent of any person (other than the Company or any
subsidiary) to commence a take-over bid (other than a Permitted Bid or a
Competing Permitted Bid (as defined below), as the case may be); |
| |
|
| (iii) |
the date on which a Permitted Bid or Competing Permitted
Bid ceases to qualify as such; and |
| |
|
| (iv) |
such earlier or later time as may be determined by the
Board. |
Each right will entitle the holder, subject to adjustment as
set forth in the Rights Plan Agreement, from and after the Separation Time and
prior to the Expiration Time, to purchase one common share at a price of $100.00
(the "Exercise Price").
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The issuance of the Rights is not dilutive until the Rights
separate from the underlying common shares and become exercisable, or until the
exercise of the Rights. The issuance of the Rights will not change the manner in
which Shareholders currently trade their common shares.
Certificates and Transferability
Prior to the close of business on the earlier of the Separation
Time and the Expiration Time, the Rights will be evidenced by a legend imprinted
on certificates for common shares issued after the Record Time. Rights are also
attached to common shares outstanding at the Record Time, although share
certificates issued prior to the Record Time will not bear such a legend.
Shareholders are not required to return their certificates in order to have the
benefit of the Rights. Prior to the Separation Time, Rights will trade together
with the common shares and will not be exercisable or transferable separately
from the common shares. From and after the Separation Time and prior to the
Expiration Time, the Rights will become exercisable, will be evidenced by Rights
certificates and will be transferable separately from the common shares.
Permitted Bid Requirements
The requirements of a "Permitted Bid" include the following:
| a) |
the take-over bid is made by means of a take-over bid
circular; |
| |
|
| b) |
the take-over bid is for all outstanding Voting Shares
(as defined below) and to all holders of Voting Shares as registered on
the books of the Company, other than the Offeror (as defined in the Rights
Plan Agreement); |
| |
|
| c) |
the take-over bid contains, and the take-up and payment
for securities tendered or deposited is subject to, an irrevocable and
unqualified provision that no Voting Shares will be taken up or paid for
pursuant to the take-over bid prior to the close of business on the date
which is not less than 60 days following the date of the take-over bid and
only if at such date more than 50% of the Voting Shares held by
Independent Shareholders (as defined in the Rights Plan Agreement) shall
have been deposited or tendered pursuant to the take-over bid and not
withdrawn; |
| |
|
| d) |
the take-over bid contains an irrevocable and unqualified
provision that, unless the take-over bid is withdrawn, Voting Shares may
be deposited pursuant to such take-over bid at any time during the period
of time between the date of the take-over bid and the date on which Voting
Shares may be taken up and paid for, and that any Voting Shares deposited
pursuant to the take-over bid may be withdrawn until taken up and paid
for; and |
| |
|
| e) |
the take-over bid contains an irrevocable and unqualified
provision that if, on the date on which Voting Shares may be taken up and
paid for, more than 50% of the Voting Shares held by Independent
Shareholders shall have been deposited pursuant to the take-over bid and
not withdrawn, the Offeror will make a public announcement of that fact
and the take-over bid will remain open for deposits and tenders of Voting
Shares for not less than ten business days from the date of such public
announcement. |
The Rights Plan allows for a competing Permitted Bid (a
"Competing Permitted Bid") to be made while a Permitted Bid is in
existence. A Competing Permitted Bid must satisfy all of the requirements of a
Permitted Bid except that it must expire prior to the expiry of that Permitted
Bid, subject to the requirement that it be outstanding for a minimum period of
35 days in accordance with applicable securities legislation.
Waiver and Redemption
If a potential Offeror does not desire to make a Permitted Bid,
it can negotiate with, and obtain the prior approval of, the Board to make a
take-over bid by way of a take-over bid circular sent to all holders of Voting
Shares on terms which the Board considers fair to all Shareholders. In such
circumstances, the Board may waive the application of the Rights Plan thereby
allowing such bid to proceed without dilution to the Offeror. Any waiver of the
application of the Rights Plan in respect of a particular take-over bid shall
also constitute a waiver of any other take-over bid which is made by means of a
take-over bid circular to all holders of Voting Shares while the initial
take-over bid is outstanding.
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Flip-In Event
Any transaction or event in which a person (an "Acquiring
Person"), including associates and affiliates and others acting in concert,
acquires (other than pursuant to an exemption available under the Rights Plan or
a Permitted Bid) beneficial ownership of 20% or more of the Voting Shares of the
Company is referred to as a "Flip-in Event". "Voting Shares"
include the common shares, together with any other shares of the Company
entitled to vote generally with election of all directors. Any Rights held by an
Acquiring Person at the Separation Time will become void and the Rights (other
than those held by the Acquiring Person) will permit the holder to purchase
common shares at a 50% discount to their market price. A person, or a group
acting in concert, who is the beneficial owner of 20% or more of the common
shares as of the Record Time is exempt from the dilutive effect of the Rights
Plan.
The Board may waive the application of the Rights Plan in
respect of a particular Flip-in Event that has occurred through inadvertence,
provided that the Acquiring Person that inadvertently triggered such Flip-in
Event has reduced its beneficial holdings to less than 20% of the outstanding
Voting Shares at the time the Board grants the waiver and it is then no longer
an Acquiring Person. With the prior consent of the holders of Voting Shares, the
Board may, prior to the occurrence of a Flip-in Event that would occur by reason
of an acquisition of Voting Shares otherwise than pursuant to a take-over made
by means of a take-over bid circular to holders of Voting Shares, waive the
application of the Rights Plan to such Flip-in Event.
The Board may, at any time prior to the occurrence of a Flip-in
Event, elect to redeem all but not less than all of the then outstanding Rights
at a redemption price of $0.00001 per Right. Rights are deemed to be redeemed
following completion of a Permitted Bid, a Competing Permitted Bid or a
take-over bid in respect of which the Board has waived the application of the
Rights Plan.
Board of Directors
The adoption of the Rights Plan will not in any way, lessen or
affect the duty of the Board to act honestly and in good faith with a view to
the best interests of the Company. The Board, when a take -over bid or similar
offer is made, will continue to have the duty and power to take such actions and
make such recommendations to the Shareholders as are considered appropriate. It
is not the intention of the Board to secure the continuance of existing
directors or officers to avoid an acquisition of control or the Company in a
transaction that is fair and in the best interests of the Company and the
Shareholders, or to avoid the fiduciary duties of the Board or of any director.
The proxy mechanisms of the Business Corporations Act (British Columbia)
are not affected by the Rights Plan Agreement, and a Shareholder may use their
statutory rights to promote a change in the management or direction of the
Company, including the right of Shareholders holding not less than 5% of the
outstanding common shares to requisition the Board to call a meeting of
Shareholders.
Amendment
The Board may, by resolution at or prior to the Meeting,
supplement or amend the Rights Plan Agreement without the approval of holders of
Rights or common shares. As well, the Right Plan Agreement may be supplemented
or amended to cure any ambiguity or to correct or supplement any provisions
contained therein which may be inconsistent with the intent of the Rights Plan
Agreement. The Company may also make amendments to the Rights Plan Agreement at
any time to correct clerical or typographical errors or amendments which are
required to maintain the validity of the Rights Plan Agreement due to changes in
any applicable legislation, rules or regulations.
Existing Charter Provisions
The Notice of Articles and Articles of the Company do not
contain any provisions intended by the Company to have, or, to the knowledge of
the Board having, an anti-takeover effect. However, the power of the Board to
issue additional common shares (although subject to restrictions imposed by
applicable law and regulatory requirements) could be used to dilute the
beneficial share ownership of persons seeking to obtain control of the Company.
26
Voting Requirements
The Rights Plan Agreement provides that it must be ratified by
the Shareholders at the Meeting. The TSX also requires that such ratification be
obtained. The Rights Plan Agreement must be ratified by a majority of the votes
cast at the Meeting by holders of common shares, excluding any votes cast by an
Acquiring Person or person who has made a take-over bid (other than a Permitted
Bid or a Competing Permitted Bid or acquisition exempt from the application of
the Rights Plan Agreement), or associates or affiliates of, or joint actors
with, such persons. Management of the Company is not aware of any Shareholder
who will be ineligible to vote on the confirmation of the Rights Plan Agreement
at the Meeting.
Text of Ordinary Resolution to Approve Rights Plan Agreement
At the Meeting, the Shareholders will be asked to approve the
following resolution:
"BE IT RESOLVED AS AN ORDINARY RESOLUTION THAT:
| |
1. |
the Shareholder Rights Plan Agreement dated as of
September 6, 2012, between the Company and Computershare Investor Services
Inc. be and is hereby ratified, confirmed and approved, and the Company is
authorized to issue rights pursuant thereto; |
| |
|
|
| |
2. |
the actions of the directors and officers of the Company
in executing and delivering the Shareholder Rights Plan Agreement be and
the same are hereby ratified, confirmed and approved; and |
| |
|
|
| |
3. |
any one director or officer of the Company be and is
hereby authorized to executed and deliver on behalf of the Company any and
all such documents and instruments and to do all such other act as and
things as in their opinion may be necessary or desirable in connection
with the Shareholder Rights Plan Agreement." |
MANAGEMENT CONTRACTS
No management functions of the Company or any of its
subsidiaries are performed to any substantial degree by a person other than the
Directors or executive officers of the Company or its subsidiaries.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than as set forth in this Information Circular, no person
who has been a Director or executive officer of the Company at any time since
the beginning of the last financial year, nor any proposed nominee for election
as a Director of the Company, nor any associate or affiliate of any of the
foregoing, has any material interest, direct or indirect, by way of beneficial
ownership of securities or otherwise, in any matter to be acted upon other than
the election of Directors or the appointment of auditors.
ADDITIONAL INFORMATION
Additional information relating to the Company is available on
SEDAR at www.sedar.com. Financial information is provided in the
Company’s comparative financial statements and MD&A for its most recently
completed financial year. Shareholders may contact the Company at 604-689-1976
to request copies of the Company’s financial statements and MD&A (which
documents are also available on SEDAR).
ANY OTHER MATTERS
Management of the Company is not aware of any other matter to
come before the Meeting other than as set forth in the Notice of Meeting. If any
other matter properly comes before the Meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares represented
thereby in accordance with their best judgment on such matter.
27
BOARD APPROVAL AND STATEMENT OF DIRECTORS
This Information Circular contains information as at July 23,
2012, except where another date is specified. The contents of this Information
Circular have been approved and its mailing authorized by the Board of Directors
of the Company by a resolution passed on July 23, 2012.
AVAILABILITY OF DISCLOSURE DOCUMENTS
The Company will provide to any person or company, upon request
to its Corporate Secretary in writing to the head office of the Company, a copy
of:
| |
a. |
the latest Form 20-F, together with a copy of any
document, or pertinent pages of any documents, incorporated therein by
reference; and |
| |
|
|
| |
b. |
its comparative financial statements for the year ended
April 30, 2012, together with the report of its auditors thereon,
contained in its annual report and any interim financial statements filed
subsequent thereto. |
The Company may charge a reasonable fee for providing a copy of
the foregoing documents to a person who is not a securityholder of the Company.
28
