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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
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Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Biometric Security Corp.
(Name of Registrant as Specified In Its Charter)
Biometric Security Corp.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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NOTICE OF EXTRAORDINARY GENERAL MEETING
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Notice is hereby given that the Extraordinary General Meeting (the
"Meeting") of the shareholders of Biometric Security Corp. (the "Corporation")
will be held on Monday, April 12, 1999 at Suite 1940 - 400 Burrard Street,
Vancouver, British Columbia, Canada, at the hour of 10:00 a.m. (local time in
Vancouver, B.C.) for the following purposes:
1. To pass a resolution adopted by a majority (greater than 50%) of the
shareholders entitled to vote at the meeting (an "Ordinary Resolution")
authorizing the consolidation of the issued share capital of the
Corporation on the basis of one new common share without par value for
every five existing common shares without par value;
2. To pass a resolution adopted by two thirds (2/3) or more of the
shareholders entitled to vote at the meeting (a "Special Resolution")
authorizing the Corporation to change its jurisdiction of incorporation
from the State of Wyoming to the Province of British Columbia by way of
filing an Instrument of Continuance and adopting Memorandum and Articles
prepared in accordance with the British Columbia Company Act and, upon the
continuation, the reduction of the Corporation's authorized share capital
to one hundred million (100,000,000) common shares without par value;
3. To pass an Ordinary Resolution authorizing the Corporation to change the
Corporation's name to "Safeguard Biometric Corp." upon the Corporation's
continuation into British Columbia; and
4. To approve the transaction of such other business as may properly come
before the Meeting.
Accompanying this Notice is an Information Circular and a form of Proxy.
Shareholders unable to attend the Meeting in person should read the notes
to the enclosed Proxy and complete and return the Proxy to the Corporation's
Registrar and Transfer Agent Pacific Corporate Trust Company, Suite 830, 625
Howe Street, Vancouver, B.C., Canada V6C 3B8, or at the Meeting within the time
required by, and to the location set out in, the notes to the Proxy.
The enclosed Proxy is solicited by management of the Corporation and you
may amend it, if you wish, by inserting in the space provided the name of the
person you wish to represent you as proxyholder at the Meeting.
DATED at Vancouver, British Columbia, this 1st day of March, 1999.
BY ORDER OF THE BOARD
"Patrick W. McCleery"
--------------------------------
PATRICK W. MCCLEERY
President
<PAGE> 3
INFORMATION CIRCULAR
FOR THE
EXTRAORDINARY GENERAL MEETING
OF
BIOMETRIC SECURITY CORP.
TO BE HELD ON
MONDAY, APRIL 12, 1999
<PAGE> 4
INFORMATION CIRCULAR
BIOMETRIC SECURITY CORP.
SUITE 1940 - 400 BURRARD STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6C 3A6
(all information as at March 1, 1999 unless otherwise noted)
PERSONS MAKING THE SOLICITATION
THIS INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BEING MADE BY THE MANAGEMENT OF BIOMETRIC SECURITY CORP. (THE
"CORPORATION") FOR USE AT THE EXTRAORDINARY GENERAL MEETING OF THE CORPORATION'S
SHAREHOLDERS (THE "MEETING") TO BE HELD ON APRIL 12, 1999 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 made primarily by mail, proxies may be
solicited personally or by telephone by directors, officers and employees of the
Corporation.
All costs of this solicitation will be borne by the Corporation.
APPOINTMENT AND REVOCATION OF PROXIES
The individuals named in the accompanying form of proxy are directors or
officers of the Corporation. A SHAREHOLDER WISHING TO APPOINT SOME OTHER PERSON
(WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT FOR THE SHAREHOLDER AND ON THE
SHAREHOLDER'S BEHALF AT THE MEETING HAS THE RIGHT TO DO SO, EITHER BY INSERTING
SUCH PERSON'S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY AND STRIKING
OUT THE TWO PRINTED NAMES, OR BY COMPLETING ANOTHER FORM OF PROXY. A Proxy will
not be valid unless the completed, dated and signed form of proxy is delivered
to Pacific Corporate Trust Company, of Suite 830 - 625 Howe Street, Vancouver,
British Columbia, Canada V6E 3B8 not less than 48 hours (excluding Saturdays,
Sundays and holidays) before the time for holding the Meeting, or is delivered
to the Chair of the Meeting prior to the commencement of the Meeting.
A shareholder who has given a Proxy may revoke it by an instrument in
writing executed by the shareholder or by the shareholder's attorney authorized
in writing or, if the shareholder is a corporation, by a duly authorized officer
or attorney of the corporation, and delivered to the registered office of the
Corporation, at Suite 1100, 1055 West Hastings Street, Vancouver, British
Columbia, Canada V6E 2E9, at any time up to and including the last business day
preceding the day of the Meeting or any adjournment of it or to the Chair of the
Meeting on the day of the Meeting or any adjournment of it.
A revocation of a Proxy does not affect any matter on which a vote has been
taken prior to the revocation.
EXERCISE OF DISCRETION
If the instructions in a Proxy are certain, the shares represented thereby
will be voted on any poll by the persons named in the Proxy and, where a choice
with respect to any matter to be acted upon has been specified in the Proxy, the
shares represented thereby will be voted or withheld from voting in accordance
with the specifications so made.
WHERE NO CHOICE HAS BEEN SPECIFIED BY THE SHAREHOLDER, SUCH SHARES WILL BE
VOTED IN ACCORDANCE WITH THE NOTES TO THE FORM OF PROXY.
The enclosed form of proxy, when properly completed and delivered and not
revoked, confers discretionary authority upon the persons appointed proxyholders
thereunder to vote with respect to any amendments or variations of matters
identified in the Notice of Meeting and with respect to other matters which may
properly come before the Meeting. At the time of the printing of this
Information Circular, the
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management of the Corporation knows of no such amendment, variation or other
matter which may be presented to the Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
As at March 1, 1999, the Corporation has issued and outstanding 32,501,078
fully paid and non-assessable common shares without par value, each share
carrying the right to one vote. THE CORPORATION HAS NO OTHER CLASSES OF VOTING
SECURITIES.
Any shareholder of record at the close of business on March 8, 1999 who
either personally attends the Meeting or who has completed and delivered a Proxy
in the manner, subject to the provisions described above, shall be entitled to
vote or to have such shareholder's shares voted at the Meeting.
To the best of the knowledge of the directors and senior officers of the
Corporation, there are no persons who, or corporations which, beneficially own,
directly or indirectly, or exercise control or direction over, shares carrying
more than 10% of the voting rights attached to all outstanding shares of the
Corporation.
EXECUTIVE COMPENSATION
Set out below are particulars of compensation paid to the following persons
(the "Named Executive Officers"):
(a) the Corporation's chief executive officer;
(b) each of the Corporation's four most highly compensated executive
officers who were serving as executive officers at the end of the most
recently completed financial year and whose total salary and bonus
exceeds Cdn.$100,000 per year; and
(c) any additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as an executive officer of the Corporation at the end of the
most recently completed financial year.
As at December 31, 1998, the end of the most recently completed fiscal year
of the Corporation, the Corporation had one Named Executive Officer, Patrick W.
McCleery, the Chairman of the Board, President and a director of the
Corporation.
SUMMARY OF COMPENSATION
The following table is a summary of compensation paid to the Named
Executive Officer for each of the Corporation's three most recently completed
fiscal years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
RESTRICTED
SHARES
SECURITIES OR
FISCAL OTHER ANNUAL UNDER RESTRICTED
NAME AND YEAR COMPENSATION OPTIONS SHARE LTIP ALL OTHER
POSITION OF PRINCIPAL ENDING SALARY BONUS (CD $) GRANTED UNITS PAYOUTS COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PATRICK W. MCCLEERY 1998 Nil Nil $124,726 420,000 Nil N/A Nil
Chairman of the Board and 1997 Nil Nil $127,122 Nil Nil N/A Nil
President 1996 Nil Nil $117,196 359,761 Nil N/A Nil
</TABLE>
LONG-TERM INCENTIVE PLANS -- AWARDS IN MOST RECENTLY COMPLETED FISCAL YEAR
The Corporation has no long-term incentive plans in place and therefore
there were no awards made under any long-term incentive plan to the Named
Executive Officer during the Corporation's most recently completed fiscal year.
A "Long-Term Incentive Plan" is a plan under which awards are made based on
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performance over a period longer than one fiscal year, other than a plan for
options, SARs (stock appreciation rights) or restricted share compensation.
OPTIONS/SARS GRANTED DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
During the most recently completed fiscal year, the following incentive
stock options were granted to the Named Executive Officer. No SARs (stock
appreciation rights) were granted during this period.
<TABLE>
<CAPTION>
MARKET VALUE
OF SECURITIES
UNDERLYING
SECURITIES % OF TOTAL OPTIONS ON
UNDER OPTIONS THE DATE OF
OPTIONS EXERCISE OR GRANTED TO GRANT (CDN$/
DATE OF GRANTED BASE PRICE EMPLOYEES IN SECURITY)
NAME GRANT (#) (CDN$/SECURITY) FISCAL YEAR (1) EXPIRATION DATE
<S> <C> <C> <C> <C> <C> <C>
PATRICK W. MCCLEERY 28/01/98 420,000 $0.23 23% $0.23 January 28, 2001
</TABLE>
(1) Calculated as the closing price of the Corporation's shares on the Vancouver
Stock Exchange on the date of the grant.
AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY
COMPLETED FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets out incentive stock options exercised by the Named
Executive Officer during the most recently completed fiscal year, as well as the
fiscal year end value of stock options held by the Named Executive Officer.
During this period, no outstanding SARs were held by the Named Executive
Officer.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SECURITIES AGGREGATE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR-END FISCAL YEAR-END ($)
EXERCISE REALIZED (CDN$) EXERCISABLE/UNEXERCISABLE EXERCISABLE/
NAME (#) (1) (#) UNEXERCISABLE (2)
<S> <C> <C> <C> <C>
PATRICK W. MCCLEERY Nil Nil 420,000/Nil Nil/Nil
</TABLE>
(1) Based on the difference between the option exercise price and the closing
market price of the Corporation's shares, on the date of exercise.
(2) In-the-Money Options are those where the market value of the underlying
securities as at the most recent fiscal year end exceeds the option exercise
price. The closing market price of the Corporation's shares as at December
31, 1998 (i.e., fiscal year end) was Cdn.$0.18.
TERMINATION OF EMPLOYMENT, CHANGE IN RESPONSIBILITIES AND EMPLOYMENT CONTRACTS
There are no compensatory plans or arrangements with respect to the Named
Executive Officer resulting from the resignation, retirement or other
termination of employment or from a change of control of the Corporation.
COMPENSATION OF DIRECTORS
Compensation for the Named Executive Officer has already been disclosed
above. No cash compensation was paid to any director of the Corporation for the
director's services as a director during the fiscal year ended December 31,
1998.
The Corporation has no standard arrangement pursuant to which directors are
compensated by the Corporation for their services in their capacity as directors
except for the granting from time to time of incentive stock options in
accordance with the policies of the Vancouver Stock Exchange. During the most
recently completed financial year, there were incentive stock options to
purchase a total of 665,000 common shares of the Corporation granted to
directors, other than Mr. McCleery, by the Corporation. These options are
exercisable up to the close of business on January 28, 2001.
All of the existing stock options are non-transferable and terminate on the
earlier of the expiry date or the 30th day following the day on which the
director, officer or employee, as the case may be, ceases to be either a
director, officer or employee of the Corporation. If a director is forced to
resign or is removed by special
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resolution, or if a senior officer or other employee is fired for cause, his
options expire on the day he is removed or fired, as the case may be.
The existing options will be adjusted in the event of a share consolidation
or subdivision or other similar change to the Corporation's share capital.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Management has no interest in matters to be acted upon at the Meeting
except as disclosed herein.
SPECIAL BUSINESS
CONSOLIDATION (REVERSE STOCK SPLIT) OF SHARE CAPITAL
GENERAL
Management proposes to present to the shareholders at the Meeting a
resolution to be approved by a majority (greater than 50%) of the shareholders
entitled to vote at the Meeting (an "Ordinary Resolution") to consolidate its
share capital as described below (the "Consolidation" or "Reverse Stock Split").
Management would like the consent of the shareholders to not proceed with the
Consolidation in the event that the Ordinary Resolution for the Consolidation is
passed by the shareholders at the Meeting and management subsequently concludes
that it would not be in the best interests of the Corporation to proceed with
the Consolidation. The Ordinary Resolution for the Consolidation, if approved by
the shareholders, will authorize the Corporation to consolidate the
Corporation's issued share capital on the basis of one new common share without
par value (the "New Common Share") for every existing five common shares without
par value (the "Common Shares"). As the Consolidation is only in respect of the
Corporation's issued share capital, the Consolidation will have no effect on the
Corporation's authorized share capital.
If the Ordinary Resolution for the Consolidation is approved by the
shareholders, the principal effect of the Consolidation will be to decrease the
number of issued and outstanding shares of the Corporation at the effective date
of the Consolidation.
As at the date of this Information Circular, the total number of the issued
and outstanding shares of the Corporation is 32,501,078. Since the Corporation
is currently negotiating a private placement of 11,666,666 units (each unit
being comprised of one common share and one share purchase warrant and each
share purchase warrant being exercisable for one additional common share within
two years) and there are currently 18,106,666 stock options and warrants
outstanding, the total issued and outstanding shares of the Corporation at the
date the Consolidation is effected may be different than the total as at the
date of this Information Circular. Upon the consolidation being effected, the
issued and outstanding share capital will decrease to a number one fifth (1/5)
its number at the effective date of the Consolidation. The shares of the
Corporation subject to outstanding options and warrants at the date of the
approval of the Consolidation will also be proportionately reduced.
As at the date of this Information Circular, the closing price of the
common shares of the Corporation trading on the Vancouver Stock Exchange was
Cdn.$0.23 per share. Upon the Consolidation being effected, it is expected the
market will adjust the market price of the shares. Theoretically, the share
price should increase by five times its price at the time of the Consolidation.
However, experience shows that, subsequent to a consolidation, the share price
usually settles at some price less than the consolidation multiple times the
then current market price.
For the form of Ordinary Resolution being proposed for the Consolidation,
see Appendix I attached to this Information Circular.
TAX CONSEQUENCES OF THE CONSOLIDATION (REVERSE STOCK SPLIT)
The following is a summary of the United States federal income tax
consequences of the Reverse Stock Split based on current law, including the
United States Internal Revenue Code of 1986, as amended (the "Code"), and is for
general information only. The tax treatment of a shareholder may vary depending
upon the particular facts and circumstances of such shareholder. Certain
shareholders, including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, non-resident aliens, foreign
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corporations and persons who do not hold common shares of the Corporation as a
capital asset, may be subject to special rules not discussed below.
THIS SUMMARY OF U.S. TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND
IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE
TO ANY HOLDER OR PROSPECTIVE HOLDER OF THE CORPORATION'S COMMON SHARES.
ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF THE CORPORATION'S COMMON SHARES
SHOULD CONSULT THEIR OWN TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, AND
FOREIGN TAX CONSEQUENCES OF THE CONTINUATION.
The receipt of New Common Shares (excluding fractional shares) in the
Reverse Stock Split should be a non-taxable transaction under the Code for
federal income tax purposes. Consequently, a shareholder receiving New Common
Shares should not realize either gain or loss, or any other type of income, with
respect to the New Common Shares received as a result of the Reverse Stock
Split. In addition, the aggregate tax basis of such shareholder's Common Shares
prior to the Reverse Stock Split will carry over in computing the tax basis of
the shareholder's New Common Shares. Each shareholder will be required to
allocate his basis in his Common Shares ratably among the aggregate of (i) total
number of New Common Shares owned following the Reverse Stock Split and (ii) any
fractional share.
CONTINUANCE INTO BRITISH COLUMBIA
INTRODUCTION
The Corporation was incorporated on January 16, 1979 under the British
Columbia Company Act, ("BCCA") under the name North American Power Petroleums
Inc. On September 18, 1985 the Corporation changed its name to International
North American Resources Inc. and subsequently changed its name to Sonoma
Resource Corp. on January 5, 1990. Effective as of November 10, 1998, the
Corporation was continued into the State of Wyoming, U.S.A. and changed its name
to Biometric Security Corp. and the Corporation's Memorandum was replaced with
Wyoming Articles of Continuance. Effective as of November 12, 1998, the
Corporation increased its authorized capital to an unlimited number of common
shares.
Management is proposing that the Corporation be transferred out of the
State of Wyoming into British Columbia (the "Continuation" or the "Transfer"),
the result of which will be that the Corporation will cease to be a Wyoming
Corporation governed by the provisions of the Wyoming Business Corporations Act
("WBCA") and will become a British Columbia company governed by the provisions
of the BCCA. The Continuation is subject to regulatory approval.
To effect the Transfer under Wyoming law, the Corporation's shareholders
must adopt by a resolution to be approved by two thirds (2/3) or more of the
shareholders entitled to vote at the Meeting (a "Special Resolution") the
proposal for the Transfer. In addition, the Corporation must post a U.S.$50,000
surety bond or deposit of such amount in an appropriate Wyoming depository for
six months, furnish the Wyoming Secretary of State with audited financial
statements certified by an independent certified public accountant with an
office located in the United States, publish a public notice in Wyoming as to
the proposed Transfer to British Columbia for the protection of creditors and
minority stockholders, and pay a special toll charge to the Wyoming Secretary of
State of an amount based on the net actual value of the Corporation's assets.
To effect the Continuation under the laws in British Columbia, the
Corporation will file an instrument of continuation (the "Instrument of
Continuation") with the British Columbia Registrar of Companies. The Instrument
of Continuation includes the Memorandum and Articles which will become the
Corporation's new charter documents, the equivalent of which under Wyoming law
are Articles and By-Laws, respectively. The Transfer will be effective on the
date of the issuance by the Wyoming Secretary of State of a certificate of
transfer transferring the Corporation to British Columbia and the issuance by
the British Columbia Registrar of Companies a Certificate of Continuance. It is
proposed that the effective date of the Continuation will be on or about April
13, 1999.
For the form of Special Resolution being proposed for the Continuation, see
Appendix I attached to this Information Circular.
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A copy of the Instrument of Continuation, which includes a copy of the
proposed new British Columbia Memorandum and Articles, may be reviewed at the
offices of the Corporation's solicitors, Catalyst Corporate Finance Lawyers,
1100 - 1055 West Hastings Street, Vancouver, British Columbia, V6E 2E9 at any
time during normal business hours. A copy may also be obtained from the
Corporation upon request.
The Continuation will not result in any change of the business of the
Corporation or its assets, liabilities, net worth or management, nor will the
Continuation impair the rights of any creditors of the Corporation. A particular
shareholder's holdings will not change. The Continuation is not, in itself, a
reorganization, amalgamation or merger.
The purpose of the Corporation's proposal to transfer its domicile of
incorporation from Wyoming, U.S.A. to British Columbia, Canada is to enable the
Corporation to have its affairs governed by the law of the jurisdiction in which
its principal trading market is located. This will provide the Corporation with
greater ease in securing financing for the Corporation in respect of, among
other things, the Corporation's acquisition of Biometric Identification, Inc.
("BII") which was approved by the Corporation's shareholders at the
Corporation's Annual General Meeting held on June 30, 1998 (the "AGM").
As previously disclosed, the Corporation has entered into an agreement (the
"BII Agreement") to acquire up to US$5,000,000 of convertible debentures to be
issued by BII, a private California corporation. If all of the convertible
debentures are purchased and all rights of conversion are exercised, the
Corporation will ultimately hold 45% of the issued shares of the common stock of
BII. For particulars of the BII Agreement and the Corporation's acquisition of
BII, please refer to the Corporation's Information Circular and Addendum to the
Information Circular in respect of the AGM, a copy of which is available upon
request at the Corporation's head office.
THE PROVISIONS OF THE BCCA AND THE WBCA
On the completion of the Continuation, the Corporation will be a British
Columbia corporation subject to the provisions of the BCCA. The following is a
discussion of the material provisions of the BCCA, as well as a discussion of
the material provisions of the Corporation's new British Columbia Articles. This
discussion includes, where relevant, a summary of certain differences between
the BCCA and the WBCA. However, the following summary is not intended to be
exhaustive and its focus is primarily upon shareholder rights and safeguards.
NOTHING THAT FOLLOWS SHOULD BE CONSTRUED AS LEGAL ADVICE TO ANY PARTICULAR
SHAREHOLDER OF THE CORPORATION AND SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN
LEGAL ADVISORS RESPECTING ALL OF THE IMPLICATIONS OF THE CONTINUATION.
THE CONSTATING DOCUMENTS
The constating documents are the constitution of a company which set out
the corporate governance procedures for the management of a company's affairs.
Under the WBCA, a Wyoming corporation is required to have constating documents
made up of Articles and By-Laws. Under the BCCA, a British Columbia corporation
is required to have constating documents made up of a Memorandum and Articles.
The Corporation's existing Articles set forth the Corporation's name and
authorized share capital and will be replaced by the Corporation's new
Memorandum. The new Articles adopted upon Continuation will prescribe the
corporate governance procedures such as how directors' and shareholders'
meetings are held, how the books and records must be maintained, how the
Corporation must conduct its corporate affairs, etc.
AMENDMENTS TO CONSTATING DOCUMENTS
Both the BCCA and the WBCA require shareholders to approve substantive
changes to the constating documents of a corporation. However, the requisite
majority of votes necessary to approve substantive changes to the constating
documents under the BCCA is 75% (3/4) of the votes cast whereas under the WBCA a
simple majority (greater than 50%) of shareholders entitled to vote on the
proposed resolution is required. In the case of certain fundamental changes,
such as the alteration of special rights and restrictions attached to issued
shares or a proposed amalgamation or continuation to another jurisdiction, a
resolution similarly approved by each class of shares is also required.
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SHARE CAPITAL
Upon the completion of the Continuation and the adoption of the proposed
new Memorandum and Articles, the authorized share capital of the Corporation
will consist of one hundred million (100,000,000) common shares without par
value. The Corporation will continue to have only one kind and class of shares
and there will be no changes to the current rights or restrictions attached to
these shares. All of the current issued and outstanding common shares of the
Corporation will be retained without any further action by the shareholders.
All of the common shares of the Corporation will rank equally as to voting
rights, participation in a distribution of the assets of the Corporation on a
liquidation, dissolution or winding-up of the Corporation and the entitlement to
dividends. The holders of the common shares will be entitled to receive notice
of all meetings of shareholders and to attend and vote the shares at the
meetings. Each common share continues to carry with it the right to one vote.
In the event of the liquidation, dissolution or winding-up of the
Corporation or other distribution of its assets, the holders of the common
shares will be entitled to receive, on a pro rata basis, all of the assets
remaining after the Corporation has paid out its liabilities. Distribution in
the form of dividends, if any, will be set by the board of directors.
Provision as to the modification, amendment or variation of the rights
attached to the common shares of the Corporation will be contained in the
Corporation's new Articles and the BCCA. Generally speaking, substantive changes
to the share capital require the approval of the shareholders by a resolution
adopted by at least 75% of the votes cast.
APPOINTMENT OF DIRECTORS
Under the BCCA and the proposed new Articles of the Corporation, the
directors of the Corporation will be elected by the shareholders at each annual
general meeting and typically hold office until the next annual general meeting
at which time they may be re-elected or replaced. The new Articles will permit
the directors to appoint directors to fill any vacancies that may occur on the
board. The Articles will also permit the directors to add additional directors
to the board between successive annual general meetings so long as the number
appointed does not exceed more than 30% of the number of directors appointed at
the last annual general meeting. Individuals appointed as directors to fill
vacancies on the board or added as additional directors hold office like any
other director until the next annual general meeting at which time they may be
re-elected or replaced. A director may be removed between annual meetings by way
of a resolution adopted by at least 75% of the votes cast at a meeting of the
shareholders called for that purpose.
MANAGEMENT
The board of directors are responsible for the overall management of the
Corporation. However, they are permitted to delegate much of their
responsibility to the officers and employees of the Corporation and to
committees formed by the board. Under the BCCA, the Corporation must have, at a
minimum, a President and a Secretary who must not be the same individual. As a
"reporting issuer" in British Columbia, the Corporation will continue to be
required to have an audit committee.
The directors and senior officers are required, under the BCCA, to act
honestly, in good faith and with a view to the best interests of the
Corporation. The directors have a fiduciary responsibility to the Corporation
and they are required to disclose conflicts of interests.
RIGHTS OF SHAREHOLDERS
In addition to the voting, dividend and liquidation rights attached to the
common shares as described under "Share Capital" above, the BCCA affords
shareholders certain rights such as the right to requisition a shareholders'
meeting, bring an oppression action or cause a derivative action to be brought
on behalf of a corporation, as well as certain rights to review the minute books
of a corporation.
The WBCA provides that a shareholder or a director may commence or defend a
legal action on behalf of a corporation (a derivative action) to enforce a
right, duty or obligation owed to a corporation by another
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party or to obtain damages for any breach of that right, duty or obligation. A
shareholder is entitled to commence a derivative action if:
(a) The shareholder was a shareholder of the corporation at the time of
the act or omission complained of, or became a shareholder through
transfer by operation of law from one who was a shareholder at the
time; and
(b) The shareholder fairly and adequately represents the interests of the
corporation in enforcing the rights of the corporation.
Court approval is also required to discontinue, settle or dismiss any
action brought under any of these provisions.
Under the BCCA, a shareholder or a director may, with court approval,
commence a legal action on behalf of a corporation (a derivative action). Such
an action may be brought by a shareholder or a director to enforce a right, duty
or obligation owed to the corporation by another party or to obtain damages for
any breach of that right, duty or obligation.
The BCCA also provides a shareholder of a corporation has the right to
apply to Court on the grounds that the corporation is acting or proposes to act
in a way that is prejudicial to the shareholder (an oppression action). On such
an application, the Court may make such order as it sees fit, including an order
to prohibit any act proposed by the corporation. The WBCA does not contain a
comparable provision.
Under the BCCA, a shareholder or director of a corporation may also defend
any action brought against the corporation, provided court approval is obtained.
Court approval is also required to discontinue, settle or dismiss any action
brought under any of these provisions.
DISSENT RIGHTS UNDER THE WBCA
The WBCA provides that shareholders are entitled to dissent in respect of
certain actions proposed to be taken by a Wyoming corporation.
The WBCA provides that a shareholder is entitled to dissent from any of the
following corporate actions:
(a) consummation of a plan of merger or consolidation to which the
corporation is a party if:
(i) shareholder approval is required for the merger or the
consolidation by the WBCA or the articles of incorporation and the
shareholder is entitled to vote on the merger or consolidation; or
(ii) the corporation is a subsidiary that is merged with its parent
under the WBCA;
(b) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(c) consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale
or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of
sale;
(d) an amendment of the articles of the corporation that materially and
adversely affects rights in respect of a dissenter's shares because
it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase, of the shares;
(iii) alters or abolishes a pre-emptive right of the holder of the
shares to acquire shares or other securities;
(iv) excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
or
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<PAGE> 12
(v) reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for
cash under the WBCA; and
(e) any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, by-laws, or a resolution of the
board of directors, provides that voting or non-voting shareholders
are entitled to dissent and obtain payment for their shares.
A shareholder who exercises a right of dissent is entitled to be paid the
fair value of his or her shares as determined by agreement of the parties or
failing which, by order of the court.
DISSENT RIGHTS UNDER THE BCCA
The BCCA provides that shareholders are entitled to dissent in respect of
certain actions proposed to be taken by a B.C. corporation, if the corporation
proposes to:
(a) amend its articles to add, change or remove any provisions restricting
or constraining the issue, transfer or ownership of shares;
(b) amend its articles to add, change or remove any restrictions on the
business the corporation may carry on;
(c) amalgamate with another corporation other than its holding corporation
or wholly-owned subsidiary;
(d) continue out of the jurisdiction of the BCCA;
(e) sell, lease or exchange all or substantially all of its property;
(f) offer financial assistance for the purpose of purchasing shares or
convertible debt obligations of the corporation or on the security of
a pledge of or charge on shares of the corporation given by that
person to the corporation, or in any other case, unless there are
reasonable grounds for believing that, or the directors are of the
opinion that, the giving of financial assistance is in the best
interests of the corporation;
(g) convert from a specially limited corporation (as defined in s. 243 of
the BCCA); and
(h) transfer or sell the whole or part of its business or property to
another corporation when it is being wound-up and for the transfer or
sale, the members of the corporation being wound-up receive shares,
debentures or other title interests from the other corporation.
A shareholder may exercise a right of dissent and is entitled to be paid
the fair value of the shareholder's shares as determined by agreement of the
parties or failing which, by order of the court.
DISCLOSURE OBLIGATIONS
Notwithstanding the Continuation, the Corporation will remain a "reporting
issuer" in British Columbia and as such it will continue to be obliged to
prepare and issue news releases in British Columbia, file material change
reports with the British Columbia Securities Commission ("BCSC"), prepare, file
and provide to shareholders unaudited quarterly and audited annual financial
statements, and otherwise comply with the British Columbia Securities Act. The
Corporation's insiders (existing and future) will continue to be subject to the
insider trading and reporting requirements of the British Columbia Securities
Act.
Following the Continuation, the Corporation, while it continues to qualify
as "foreign private issuer", as such term is defined under the Securities
Exchange Act of 1934 (U.S.) (the "Exchange Act"), will remain a "reporting
issuer" in the United States subject to the requirements of the Exchange Act.
Accordingly, it will file an annual report on Form 20-F with the U.S. Securities
and Exchange Commission within six months after the close of each fiscal year
and will report on Form 6-K as to certain events material to the Corporation, as
specified in the regulations under the Exchange Act, promptly after public
announcement of any such event is made. Following the Continuation, the
Corporation will no longer be subject to the Exchange Act requirements imposed
on "U.S. reporting issuers" such as quarterly reports on Form 10-Q, annual
reports on Form 10-K, and compliance with the proxy solicitation and insider
trading reporting rules.
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<PAGE> 13
TAX CONSEQUENCES OF THE CONTINUATION
UNITED STATES INCOME TAX CONSEQUENCES OF THE CONTINUATION
The following is a general summary of certain United States federal income
tax consequences, under current law, generally applicable to a U.S. Holder (as
defined below) of the Corporation's common shares with respect to the
Continuation. This summary does not address all potentially relevant United
States federal income tax matters and does not take into account or anticipate
any state, local or foreign tax considerations.
The following summary is based upon the sections of the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
This commentary is generally applicable to a holder of the Corporation's
common shares who is a U.S. citizen or U.S. resident individual, a U.S. domestic
corporation or partnership, or a U.S. trust or estate ("U.S. Holders"). This
summary does not address the tax consequences to persons subject to specific
provisions of United States federal income tax law. This summary is applicable
to shareholders of the Corporation who hold their shares in the Corporation as
capital property and who deal at arm's length with the Corporation.
THIS SUMMARY OF U.S. TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND
IT IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE
TO ANY HOLDER OR PROSPECTIVE HOLDER OF THE CORPORATION'S COMMON SHARES.
ACCORDINGLY, HOLDERS AND PROSPECTIVE HOLDERS OF THE CORPORATION'S COMMON SHARES
SHOULD CONSULT THEIR OWN TAX ADVISORS ABOUT THE FEDERAL, STATE, LOCAL, AND
FOREIGN TAX CONSEQUENCES OF THE CONTINUATION.
Discussion
A. Consequences to the Corporation
General
The Corporation's continuance to Canada and its discontinuance from the
United States would be treated, for tax purposes only, as a transfer by the
Corporation of all of its property to a fictional, newly incorporated
wholly-owned subsidiary ("BCco") in exchange for BCco shares. This exchange
would be deemed to be followed immediately by the distribution of BCco shares to
the shareholders of the Corporation and an exchange, by the shareholders, of
their shares of the Corporation for BCco shares. The final result would be that
BCco would have all the assets and liabilities of the Corporation and the same
shareholders as the Corporation but would, for U.S. tax purposes, be a Canadian
corporation rather than a U.S. corporation.
Deemed Transfer of Assets to BCco
Generally, the exchange of property by a corporation solely for stock or
securities in another corporation (BCco) would not require the recognition of
gain or loss to the exchanging corporation, pursuant to the Code. However, the
Code renders the exchange of assets of the Corporation for the shares of BCco
taxable in the U.S. because BCco is a foreign corporation. As a result, the
Corporation would be taxable on the disposition of its property to the extent
that the fair market value of such property exceeds the historic basis, for U.S.
tax purposes, in such property.
There are no exceptions from the U.S. emigration tax which apply to a U.S.
corporation emigrating from the United States. Consequently, the Corporation
would be taxable in the U.S. on its emigration to the extent that the fair
market value of its property exceeds its basis, for U.S. tax purposes, in the
property. The Corporation would pay tax on the amount of any gain at regular
U.S. corporate tax rates.
Dividend and Interest Withholding Tax
After the Corporation emigrates from the United States and becomes a
Canadian corporation it would be subject to a U.S. withholding tax on any
dividends paid by another U.S. corporation. The withholding tax of 15% is
reduced to 5% if the Corporation holds 10% or more of the voting shares of the
corporation paying the
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<PAGE> 14
dividend. In addition, a 10% U.S. withholding tax would apply to interest
received from the Corporation's investments in U.S. debentures.
U.S. State Tax
Additional research is required to determine whether any U.S. state taxes
(i.e., state income tax, state sales and use tax) would apply on the emigration
of the Corporation to Canada.
B. Consequences to Shareholders
U.S. Resident Shareholders
The deemed distribution of BCco stock in exchange for the shares of the
Corporation discussed above would be a taxable disposition of the shares of the
Corporation formerly held by the U.S. resident shareholders. The gain to the
U.S. resident shareholders from the deemed disposition of the shares of the
Corporation would be equal to the fair market value of BCco shares received over
the basis of the shares of the Corporation disposed. The fair market value of
BCco shares should equal the fair market value of the Corporation's property
transferred to BCco, net of liabilities. To the extent that this fair market
value amount exceeds the U.S. shareholders' basis in the shares of the
Corporation, a capital gain would result. The U.S. shareholders' basis in the
shares of the Corporation would have been increased by any gain recognized on
the earlier immigration of the Corporation to the United States from Canada. Any
capital gain on the shares of the Corporation would be taxable to the U.S.
resident individual shareholders at personal capital gains tax rates (20% tax
rate for shares held longer than 12 months). U.S. corporate shareholders would
be taxable in the U.S. at regular U.S. corporate tax rates.
Dividend Withholding Tax
After the Corporation emigrates from the United States, any dividends paid
to U.S. resident individual shareholders would be subject to 15% Canadian
withholding tax.
Canadian Resident Shareholders
Under the 1980 Canada-U.S. Income Tax Convention ("the Treaty") and the
Code, the Canadian resident shareholders would only be taxable in the U.S. on
the disposition of the shares of the Corporation if the Corporation was a "U.S.
real property interest" for U.S. tax purposes. In general, a U.S. real property
interest is a private corporation, 50% of whose value is derived from U.S. real
property. As 50% or more of the Corporation's value is not derived from U.S.
real property and the Corporation is a public corporation, the Canadian resident
shareholders would not be subject to U.S. tax on the emigration of the
Corporation to Canada.
CANADIAN INCOME TAX CONSEQUENCES OF CONTINUATION
This commentary will serve to summarize the Canadian income tax
consequences, for both shareholders and the Corporation, of the Continuation.
This summary is based on the current provisions of the Canadian Income Tax
Act (the "Act") the regulations to the Act and any proposed amendments to the
Act publicly announced before the date of this Information Circular. It is
assumed that any proposed amendments will be enacted in their present form and
that no other relevant amendments will come into force. However, there can be no
certainty in this regard.
The summary does not take into account or anticipate any other changes in
law, whether by judicial, governmental or legislative decision or action, nor
does it take into account the tax legislation of any province, state or other
local jurisdiction. Tax law and regulations, the judicial interpretation of them
and the administrative practices of tax authorities are constantly changing. No
assurances can be provided that any of the foregoing will not be changed in a
manner that will fundamentally alter the tax consequences to the Corporation or
to any particular shareholder.
The tax summary is generally applicable to shareholders of the Corporation
who are individuals (except where expressly noted otherwise), who hold their
shares in the Corporation as capital property and who deal at
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<PAGE> 15
arm's length with the Corporation. This summary generally does not address the
tax consequences of entities subject to specific provisions of Canadian income
tax law.
NO ADVANCE TAX RULING OR INTERPRETATION HAS BEEN SOUGHT FROM ANY TAX
AUTHORITY WITH RESPECT TO ANY OF THE TRANSACTIONS DISCUSSED HEREIN.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO CONSTITUTE
ADVICE TO ANY PARTICULAR SHAREHOLDER. EACH SHAREHOLDER SHOULD SEEK INDEPENDENT
ADVICE BASED UPON THE PARTICULAR CIRCUMSTANCES OF THAT SHAREHOLDER.
Summary
Several rules in Canadian tax legislation affecting corporations
immigrating to Canada are in the process of being changed. Several of these
changes will affect the Corporation and the effect of the proposed rules has
been incorporated in the discussion below as if they had the effect of law.
The Act requires a corporation to have a deemed year end immediately prior
to immigrating to Canada and a new year beginning immediately thereafter.
Therefore, the Corporation will have a deemed year end immediately before
immigrating and a new taxation period beginning immediately thereafter. The
Corporation will be able to choose any year end it desires as long as the year
does not exceed 53 weeks.
The Act requires that at the deemed year end noted above, the immigrating
company is deemed to dispose of all its property at fair market value on the day
of the immigration. The Corporation will be deemed to have disposed of all its
assets at the fair value at the day of immigration; however, management expects
that the Corporation will not be subject to significant gains as the cost amount
of its assets, namely the convertible debentures in BII, will have a fair value
close to its cost amount. If it is determined that a gain exists, the gain will
not be taxable in Canada except in certain circumstances. These circumstances
include the disposition of taxable Canadian property and assets used in a
business in Canada. Based on a review of the Corporation's balance sheet as at
September 30, 1998 it does not appear that the Corporation owns any assets that
would fall into these circumstances.
The Act states that a corporation is deemed to reacquire, at fair market
value, the assets deemed disposed as noted above. Therefore, the Corporation
will reacquire, at fair market value, all its assets owned at the date of
immigration. The cost amounts of these assets to the Corporation will equal the
fair market value at the date of immigration.
The Corporation is not currently a foreign affiliate of any resident of
Canada (i.e., no shareholder owns, either individually or as part of a related
group, 10% or more of the shares of the Corporation). Based on this, the rules
in the Act relating to foreign affiliates will not apply to the Corporation.
Paid-up Capital
On immigrating to Canada, the Act requires that the paid-up capital ("PUC")
of a corporation be reviewed in order to determine whether or not it will need
to be adjusted for income tax purposes. The adjustment is required when there is
a difference between the PUC otherwise calculated and the net of the assets and
liabilities of the company. The adjustment is calculated by taking the deemed
fair market value on the deemed disposition noted above less all the debts owing
by the corporation (the "Net Book Value") and subtracting from the Net Book
Value the PUC otherwise determined. When this amount is negative, indicating
that the Net Book Value is less than the PUC otherwise calculated, the Act
requires that the PUC otherwise calculated be reduced by the negative amount.
This will reduce the amount of capital that an immigrating company can return
tax-free to its shareholders.
If the calculated amount is positive, indicating that the Net Book Value
exceeds the PUC otherwise calculated, the Act allows a corporation to elect to
increase the PUC by the positive amount. Where a corporation chooses to increase
the PUC of the corporation, it must do so by notifying the Minister of its
intentions by electing within 90 days of immigrating. Where a corporation makes
this election, the shareholders of a corporation will be deemed to have received
a dividend equal to the positive amount. Depending on the particular taxpayer,
this deemed dividend may be taxable in Canada.
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<PAGE> 16
In the Corporation's case, a preliminary review of the balance sheet as at
September 30, 1998 would indicate that the Net Book Value minus the PUC
otherwise calculated would result in a negative adjustment of approximately
Cdn.$10 million. This would have the effect of reducing the PUC of the
Corporation from approximately Cdn.$12 million to Cdn.$2 million, thereby
reducing the amount of capital that can be returned to the shareholders on a
tax-free basis by approximately Cdn.$10 million. In order to determine the
actual adjustment required, it will be necessary to review financial information
at the date of immigration. A review by legal counsel of the PUC otherwise
calculated may also be required.
Continued Corporation
The Act states that where a corporation has incorporated in one
jurisdiction (the "Old Jurisdiction") and has been granted articles of
continuance in another jurisdiction (the "New Jurisdiction") the corporation
shall be deemed to have been incorporated in the New Jurisdiction and not have
been incorporated in the Old Jurisdiction. This rule allows foreign companies
that have been granted articles of continuance into Canada the ability to access
certain tax-free rollovers, wind-ups and amalgamations afforded to residents of
Canada. This provision will deem the Corporation to be incorporated in Canada
and not in Wyoming for the purposes of the Act. Consequently, the Corporation
will, for tax purposes, qualify as a Canadian corporation. However, the
Corporation may not need to rely on this provision as it was incorporated in
Canada prior to acquiring articles of continuance to Wyoming. The Corporation
may be in the position where its incorporation in Canada deems it to be a
resident in any event.
CHANGE OF AUTHORIZED CAPITAL
The WBCA permits Wyoming corporations to have an authorized share capital
consisting of an unlimited number of shares. The BCCA requires a corporation to
have a stated authorized share capital. Therefore, in the context of effecting
the Continuation, management is also asking the shareholders to approve the
change in its authorized capital to one hundred million (100,000,000) common
shares without par value. To effect this change, the Special Resolution being
proposed for the Continuation incorporates the proposal for the change in the
Corporation's authorized share capital.
Management would also like the consent of the shareholders to not proceed
with the change in the authorized share capital in the event that the Special
Resolution is passed by the shareholders at the Meeting and management
subsequently concludes that it would not be in the best interests of the
Corporation to proceed with such matters.
See Appendix I attached to this Information Circular for the Special
Resolution entitled "Approval of Continuation and Change of Authorized Capital".
CHANGE OF NAME
Pursuant to the policies of the Vancouver Stock Exchange (the "VSE") (the
exchange on which the Corporation's shares are listed for trading), a
corporation must change its name concurrently with a consolidation of its issued
share capital. Therefore, in the context of effecting the Consolidation, the
Corporation is required by the VSE to change its name. Administratively, the
most efficient and cost effective date for the Corporation to effect a change of
name is at the time of the proposed Continuation discussed above. Therefore,
management is asking shareholders to approve, by Ordinary Resolution, the change
of the name of the Corporation to "Safeguard Biometric Corp." which will be
effective upon the continuation of the Corporation into the Province of British
Columbia.
Management would also like the consent of the shareholders to not proceed
with the name change in the event that the Ordinary Resolution is passed by the
shareholders at the Meeting and management subsequently concludes that it would
not be in the best interests of the Corporation to proceed with such matters.
See Appendix I attached to this Information Circular for the Ordinary
Resolution entitled "Approval of Name Change".
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OTHER BUSINESS
Management is not aware of any matters to come before the Meeting other
than those 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 Proxy
to vote the shares represented thereby in accordance with their best judgment on
such matter.
ON BEHALF OF THE BOARD
"Patrick W. McCleery"
--------------------------------
PATRICK W. MCCLEERY
President
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<PAGE> 18
APPENDIX I -- SPECIAL AND ORDINARY RESOLUTIONS
TEXT OF SPECIAL AND ORDINARY RESOLUTIONS
APPROVAL OF CONSOLIDATION OF SHARE CAPITAL (REVERSE STOCK SPLIT)
The following Ordinary Resolution authorizes the Corporation to consolidate
its issued share capital (sometimes referred to as a reverse stock split) on the
basis of one new common share without par value for every existing five common
shares without par value (the "Consolidation").
Management would like the consent of the shareholders to not proceed with
the Consolidation in the event that the Ordinary Resolution respecting the
consolidation of the Corporation's share capital is passed by the shareholders
at the Meeting and management subsequently concludes that it would not be in the
best interests of the Corporation to proceed with the Consolidation. In this
regard, management will ask the shareholders to approve the following Ordinary
Resolution:
"WHEREAS Management proposes that the Corporation consolidate its issued
share capital on the basis of one new common share without par value for every
five existing common shares without par value (the "Consolidation");
AND WHEREAS management proposes to present an Ordinary Resolution to the
shareholders at the Meeting with respect to the Consolidation and may
subsequently decide that it is not in the best interests of the Corporation to
proceed with such matters;
RESOLVED, as Ordinary Resolutions, that:
1. all of the issued common shares without par value be consolidated on the
basis of one new common share without par value for every five existing
common shares without par value;
2. the directors of the Corporation be hereby authorized, in their discretion,
to abandon the Consolidation without further approval of the shareholders;
and
3. the directors and officers of the Corporation, or any one of them, be
hereby authorized and directed to perform all such acts, deeds and things
and execute, under the seal of the Corporation or otherwise, all such
documents, agreements and other writings as may be required to give effect
to the true intent of this resolution."
APPROVAL OF CONTINUATION AND CHANGE OF AUTHORIZED CAPITAL
The following Special Resolution authorizes the Corporation to complete the
transfer of the Corporation out of Wyoming and the continuation of the
Corporation into British Columbia (the "Continuation").
"WHEREAS the Corporation proposes to transfer out of the State of Wyoming
under the jurisdiction of the Wyoming Business Corporations Act ("WBCA") and
continue into British Columbia (the "Continuation") under the jurisdiction of
the British Columbia Company Act (the "BCCA");
AND WHEREAS the management proposes to present a Special Resolution to the
shareholders at the Meeting with respect to the Continuation and may
subsequently decide that it is not in the best interests of the Corporation to
proceed with such matters;
RESOLVED, as Special Resolutions, that:
1. the Corporation be hereby authorized to make application to the Wyoming
Secretary of State (the "Wyoming Secretary") for approval of the proposed
transfer of the Corporation out of Wyoming and to the B.C. Registrar of
Companies (the "B.C. Registrar") for approval of the proposed continuation
of the Corporation into British Columbia continuing the Corporation as if
it had been incorporated under the BCCA;
2. the Corporation approve and, upon the Continuation, adopt the Memorandum
(the "British Columbia Memorandum") in the form approved by the directors
of the Corporation, having the effect, among other things, of changing the
authorized capital of the Corporation to one hundred million (100,000,000)
common shares without par value, in substitution for the existing Articles
of Incorporation of the Corporation and its existing authorized capital,
the British Columbia Memorandum to come into effect
I-1
<PAGE> 19
when the B.C. Registrar issues a Certificate of Continuation continuing the
Corporation as if it had been incorporated under the BCCA and the Wyoming
Secretary issues a Certificate of Transfer to transfer the Corporation out
of the State of Wyoming;
3. the Corporation approve and, upon the Continuation, adopt the Articles (the
"British Columbia Articles") in the form approved by the directors of the
Corporation, the British Columbia Articles to come into effect when the
B.C. Registrar issues a Certificate of Continuation continuing the
Corporation as if it had been incorporated under BCCA and the Wyoming
Secretary issues a Certificate of Transfer to transfer the Corporation out
of the State of Wyoming;
4. the directors of the Corporation be hereby authorized, in their discretion,
to abandon or amend the application for continuation of the Corporation
under the BCCA and change in the authorized share capital without further
approval of the shareholders; and
5. the directors and officers of the Corporation, or any one of them, be
hereby authorized and directed to perform all such acts, deeds and things
and execute, under the seal of the Corporation or otherwise, all such
documents, agreements and other writings as may be required to give effect
to the true intent of this resolution."
APPROVAL OF NAME CHANGE
Pursuant to the proposed transfer of the Corporation out of Wyoming and the
continuation of the Corporation into British Columbia (the "Continuation"),
management proposes to change the name of the Corporation and, accordingly, the
following Ordinary Resolution will be presented to shareholders at the Meeting
for approval.
"WHEREAS the Corporation wishes to change its name to "Safeguard Biometric
Corp." upon continuation into the Province of British Columbia (the
"Continuation");
RESOLVED, as Ordinary Resolutions, that:
1. the Corporation change its name upon continuation of the Corporation into
British Columbia, to "Safeguard Biometric Corp." or such other name as may
be resolved by the board of directors of the Corporation in their absolute
discretion, and which may be acceptable to the regulatory authorities;
2. the Corporation approve and, upon the Continuation, adopt the Memorandum
(the "British Columbia Memorandum") in the form approved by the directors
of the Corporation having the effect, among other things, of changing the
name of the Corporation to "Safeguard Biometric Corp.", or such other name
as may be approved by the B.C. Registrar of Companies (the "B.C.
Registrar"), in substitution for the existing Articles of Incorporation of
the Corporation and its existing name, the change of name to come into
effect when the British Columbia Memorandum is submitted to the B.C.
Registrar and the B.C. Registrar issues a Certificate of Continuation
continuing the Corporation as if it had been incorporated under the British
Columbia Company Act and the Wyoming Secretary of State releases a
Certificate of Transfer to transfer the Corporation out of the State of
Wyoming;
3. the directors of the Corporation be hereby authorized, in their discretion,
to abandon the change of the Corporation's name without further approval of
the shareholders; and
4. the directors and officers of the Corporation, or any one of them, be
hereby authorized and directed to perform all such acts, deeds and things
and execute, under the seal of the Corporation or otherwise, all such
documents, agreements and other writings as may be required to give effect
to the true intent of this resolution."
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PROXY
THIS PROXY IS SOLICITED BY MANAGEMENT OF BIOMETRIC SECURITY CORP. (THE
"CORPORATION") FOR USE AT THE EXTRAORDINARY MEETING OF THE SHAREHOLDERS (THE
"MEETING") TO BE HELD ON MONDAY, APRIL 12, 1999 AT 10:00 A.M. (LOCAL TIME IN
VANCOUVER, B.C.) AND ANY ADJOURNMENT THEREOF.
The undersigned shareholder of the Corporation hereby appoints PATRICK W.
MCCLEERY, the Chairman of the Board, President and a director of the
Corporation, or failing this person, SAUNDRA ZIMMER, the Secretary of the
Corporation, or in the place of both of the foregoing,
- ------------------------------------ (PLEASE PRINT NAME), as proxyholder for and
on behalf of the undersigned, with power of substitution, to attend, act and
vote for and in the name of the undersigned at the Meeting and at every
adjournment thereof, with respect to all or
- ------------------ of the common shares of the Corporation registered in the
name of the undersigned. Unless otherwise expressly stated herein by the
undersigned, receipt of this proxy duly executed and dated, revokes any former
proxy given to attend and vote at the meeting and at any adjournment thereof.
UNLESS THE UNDERSIGNED DIRECTS OTHERWISE, THE NOMINEE IS HEREBY INSTRUCTED TO
VOTE THE COMMON SHARES OF THE CORPORATION HELD BY THE UNDERSIGNED AS FOLLOWS:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
----- ------- -------
<C> <S> <C> <C> <C>
1. To approve the consolidation (reverse stock split)
of the Corporation's issued share capital on the
basis of one new common share without par value
for every five existing common shares without par [ ] [ ] [ ]
value
2. To approve the continuation (transfer) of the
Corporation into the Province of British Columbia
and, upon the continuation, a reduction in the
Corporation's authorized capital to 100,000,000 [ ] [ ] [ ]
common shares without par value
<CAPTION>
FOR AGAINST ABSTAIN
----- ------- -------
<C> <C> <C> <C> <C>
3. To approve a change of the name of the
Corporation, upon the continuation [ ] [ ] [ ]
4. To approve the transaction of other business [ ] [ ] [ ]
</TABLE>
THE UNDERSIGNED SHAREHOLDER HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN TO
ATTEND AND VOTE AT THE MEETING.
SIGNATURE: -------------------------------- DATE: ------------------
(PROXY MUST BE SIGNED AND DATED)
If someone other than the named shareholder signs this Proxy on behalf of
the named shareholder, documentation acceptable to the Chairman of the
Meeting must be deposited with this Proxy granting signing authority to
the person signing the proxy.
To be used at the Meeting, this Proxy must be received at the offices of
PACIFIC CORPORATE TRUST COMPANY by mail or by fax no later than 48 hours
preceding the Meeting or with the Chairman of the Meeting on the day of
the Meeting prior to its commencement. The mailing address of PACIFIC
CORPORATE TRUST COMPANY, IS SUITE 830 - 625 HOWE STREET, VANCOUVER,
BRITISH COLUMBIA, V6C 3B8 and its fax number is (604) 689-8144.
<PAGE> 21
1. IF THE SHAREHOLDER'S SECURITIES ARE HELD BY AN INTERMEDIARY (E.G. A BROKER)
AND THE SHAREHOLDER WISHES TO ATTEND THE MEETING TO VOTE ON THE RESOLUTIONS,
please insert the shareholder's name in the blank space provided, do not
indicate a voting choice by any resolution, sign and date and return the
Proxy in accordance with the instructions provided by the intermediary.
Please contact the intermediary if there are any questions. At the Meeting a
vote will be taken on each of the resolutions as set out on this Proxy and
the shareholder's vote will be counted at that time.
2. IF THE SHAREHOLDER CANNOT ATTEND THE MEETING BUT WISHES TO vote on the
resolutions, the shareholder can APPOINT ANOTHER PERSON, who need not be a
shareholder of the Corporation, to vote according to the shareholder's
instructions. To appoint someone other than the nominees named by management,
please insert your appointed proxyholder's name in the space provided, sign
and date and return the Proxy. Where no choice on a resolution is specified
by the shareholder, this Proxy confers discretionary authority upon the
shareholder's appointed proxyholder to vote for or against or withhold vote
with respect to that resolution, provided that with respect to a resolution
relating to a director nominee or auditor, the proxyholder only has the
discretion to vote or not vote for such nominee.
3. IF THE SHAREHOLDER CANNOT ATTEND THE MEETING BUT WISHES TO vote on the
resolutions and to APPOINT ONE OF THE NOMINEES NAMED BY MANAGEMENT as
proxyholder, please leave the wording appointing a nominee as shown, sign and
date and return the Proxy. Where no choice is specified by a shareholder on a
resolution shown on the Proxy, a nominee of management acting as proxyholder
will vote the securities as if the shareholder had specified an affirmative
vote.
4. The securities represented by this Proxy will be voted or withheld from
voting in accordance with the instructions of the shareholder on any ballot
of a resolution that may be called for and, if the shareholder specifies a
choice with respect to any matter to be acted upon, the securities will be
voted accordingly. With respect to any amendments or variations in any of
the resolutions shown on the Proxy, or matters which may properly come
before the Meeting, the securities will be voted by the nominee appointed as
the proxyholder, in its sole discretion, sees fit.
5. If the shareholder votes by completing and returning the Proxy, the
shareholder may still attend the Meeting and vote in person should the
shareholder later decide to do so. To vote in person at the Meeting, the
shareholder must revoke the Proxy in writing as set forth in the Information
Circular.
6. This Proxy is not valid unless it is dated and signed by the shareholder or
by the shareholder's attorney duly authorized by the shareholder in writing,
or, in the case of a corporation, by its duly authorized officer or attorney
for the corporation. If the Proxy is executed by an attorney for an
individual shareholder or joint shareholders or by an officer or an attorney
of a corporate shareholder, the instrument so empowering the officer or the
attorney, as the case may be, or a notarial copy thereof, must accompany the
Proxy.
7. To be valid, this Proxy, duly dated and signed, must arrive at the office of
the Registrar and Transfer Agent of the Corporation, not less than 48 hours
(excluding Saturdays, Sundays and holidays) before the time for holding the
Meeting, or delivered to the Chairman of the Meeting prior to the
commencement of the Meeting.
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