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 [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[x] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Section 240.14a-11(c)
or Section 240.14a-12
Sonus Corp.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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SONUS CORP.
111 S.W. FIFTH AVENUE, SUITE 2390
PORTLAND, OREGON 97204
--------------------
NOTICE OF ANNUAL AND SPECIAL
GENERAL MEETING OF SHAREHOLDERS
DECEMBER 15, 1998
--------------------
NOTICE IS HEREBY GIVEN that the Annual and Special General Meeting of
the holders of common shares ("Common Shares") and the holders of Series A
Convertible Preferred Shares (the "Preferred Shares") of Sonus Corp. (the
"Corporation") will be held at Atwater's, 30th Floor, 111 S.W. Fifth Avenue,
Portland, Oregon, on Tuesday, December 15, 1998, at 10 a.m. Pacific Time, for
the following purposes:
1. To approve the continuance of the Corporation to the jurisdiction
of the Yukon Territories;
2. To fix the number of directors at six;
3. To elect directors;
4. To appoint auditors for the ensuing year and to authorize the Board
of Directors to fix the remuneration to be paid to the auditors;
5. To approve an amendment to the Corporation's Second Amended and
Restated Stock Award Plan to increase the number of Common Shares
issuable thereunder by 500,000 shares;
6. To receive and consider the annual report containing financial
statements for the fiscal year ended July 31, 1998, together with
the report of the auditors thereon; and
7. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of record of Common Shares or Preferred Shares at the close
of business on October 28, 1998, are entitled to receive notice of the meeting.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
November 12, 1998
Brian S. Thompson
Secretary
We ask that you promptly sign, date and return the enclosed proxy in the
enclosed return envelope, whether or not you plan to attend the meeting in
person. If you do attend the meeting, you may withdraw your proxy and vote in
person. All instruments appointing proxies to be used at the meeting must be
deposited at the offices of CIBC Mellon Trust Company, Suite 600, 333-7th Avenue
SW, Calgary, Alberta, Canada, T2P 2Z1 (P.O. Box 2517, Calgary, Alberta, Canada,
T2P 4P4), prior to 10 a.m. (Calgary time) on December 14, 1998, or delivered to
the chairman of the meeting prior to the commencement of the meeting. A person
appointed as a proxy need not be a shareholder of the Corporation.
<PAGE>
SONUS CORP.
--------------------
ANNUAL AND SPECIAL GENERAL MEETING
OF SHAREHOLDERS TO BE HELD ON DECEMBER 15, 1998
MANAGEMENT INFORMATION CIRCULAR
AND PROXY STATEMENT
--------------------
SOLICITATION OF PROXIES
THIS MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT (THE
"CIRCULAR") IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT
OF SONUS CORP. (THE "CORPORATION") OF PROXIES TO BE USED AT THE ANNUAL AND
SPECIAL GENERAL MEETING OF THE SHAREHOLDERS OF THE CORPORATION TO BE HELD AT
ATWATER'S, 30TH FLOOR, 111 S.W. FIFTH AVENUE, PORTLAND, OREGON, ON TUESDAY,
DECEMBER 15, 1998, AT 10 A.M. PACIFIC TIME, AND ANY ADJOURNMENTS THEREOF, FOR
THE PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING.
The solicitation of proxies will be made primarily by mail, but proxies
may also be solicited personally and by telegram or telephone by directors and
officers of the Corporation without additional compensation for such services.
Brokers and other persons holding shares in their names, or in the names of
nominees, will be reimbursed for their reasonable expenses in forwarding
soliciting materials to their principals and in obtaining authorization for the
execution of proxies. All costs of solicitation of proxies by the Corporation
will be borne by the Corporation. This Circular and accompanying form of proxy
will be mailed to shareholders beginning approximately November 12, 1998.
All dollar amounts included in this Circular are expressed in United
States dollars. Amounts originally expressed in Canadian dollars have been
converted using the applicable spot exchange rate (as quoted by the Federal
Reserve Bank of New York for the New York Interbank Market) as of November 3,
1998, or, where appropriate, the applicable date of the specific transaction or
payment described. THE EXCHANGE RATE FOR CONVERTING CANADIAN DOLLARS INTO U.S.
DOLLARS AT NOVEMBER 3, 1998, WAS 1.5240.
APPOINTMENT AND REVOCATION OF PROXIES
The persons designated in the enclosed form of proxy are directors of
the Corporation. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON OTHER THAN THE
PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY TO REPRESENT HIM OR HER AT
THE MEETING. THE PERSON NEED NOT BE A SHAREHOLDER. This right may be exercised
either by inserting in the blank space provided the name of the other person a
shareholder wishes to appoint or by completing another proper form of proxy.
Shareholders who wish to be represented at the meeting by proxy must deposit
their form of proxy prior to 10 a.m. (Calgary time) on December 14, 1998, at the
offices of CIBC Mellon Trust Company, Suite 600, 333-7th Avenue SW, Calgary,
Alberta, Canada, T2P 2Z1
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(P.O. Box 2517, Calgary, Alberta, Canada, T2P 4P4), or deliver it to the
chairman of the meeting prior to the commencement of the meeting.
A shareholder who has given a proxy has the right to revoke it at any
time by an instrument in writing executed by the shareholder or his attorney
authorized in writing or, if the shareholder is a corporation, by an officer or
attorney thereof duly authorized, and deposited at the offices of CIBC Mellon
Trust Company, Suite 600, 333-7th Avenue SW, Calgary, Alberta, Canada, T2P 2Z1
(P.O. Box 2517, Calgary, Alberta, Canada, T2P 4P4), addressed to the Secretary
of the Corporation, at any time up to and including the last business day
preceding the day of the meeting, or any adjournment thereof, at which the proxy
is to be used, or with the chairman of the meeting on the day of the meeting, or
any adjournment thereof.
OUTSTANDING VOTING SECURITIES
The Corporation has two classes of securities outstanding with voting
rights, Common Shares, without nominal or par value (the "Common Shares"), and
Series A Convertible Preferred Shares, without nominal or par value (the
"Preferred Shares" and, together with the Common Shares, the "Shares"). All
references to Common Shares and per share prices in the Circular have been
adjusted for the one-for-five reverse stock split in February 1998. On October
28, 1998, the Corporation had outstanding 6,119,707 Common Shares and 13,333,333
Preferred Shares. Each Common Share carries the right to one vote, while each
Preferred Share is entitled to one-fifth of a vote. The holders of the Common
Shares and the holders of the Preferred Shares will vote together as a single
class at the meeting.
The Corporation has also reserved for issuance: (i) 2,000,000 Common
Shares upon the exercise of share purchase warrants presently outstanding; (ii)
180,000 Common Shares upon the conversion of convertible subordinated notes due
August 1, 1999; (iii) 2,666,666 Common Shares upon the conversion of the
Preferred Shares; and (iv) 1,600,000 Common Shares upon the exercise of stock
options presently outstanding held by employees, directors, and officers of, and
consultants to, the Corporation.
Only shareholders of record at the close of business on October 28,
1998, will be entitled to vote at the meeting, except to the extent that a
shareholder has transferred ownership of any of his or her Common Shares or
Preferred Shares after the record date and the transferee of those shares has
produced properly endorsed share certificates or has otherwise established that
he or she owns the shares and, in either case, has requested, not later than
December 5, 1998, that the transferee's name be included in the list of
shareholders entitled to vote at the meeting, in which case such transferee
shall be entitled to vote such shares at the meeting.
The average of the high and low sale prices of the Common Shares on the
American Stock Exchange ("AMEX") on November 3, 1998, was $4.875.
VOTING OF PROXIES
When a proxy in the accompanying form is properly executed and returned,
the Common Shares or Preferred Shares represented thereby will be voted at the
meeting in accordance with
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the instructions specified in the spaces provided in the proxy. IF NO
INSTRUCTIONS ARE SPECIFIED, THE SHARES WILL BE VOTED IN FAVOR OF THE MATTERS
LISTED IN THE ACCOMPANYING NOTICE OF MEETING.
A quorum of shareholders will be established at the meeting if not less
than 33-1/3% of the combined total of Common Shares and Preferred Shares issued
and entitled to vote at the meeting are present in person or represented by
proxy.
A DIRECTION TO ABSTAIN WITH RESPECT TO PROPOSALS 1, 2 AND 5 SET FORTH IN
THE ACCOMPANYING NOTICE OF MEETING WILL BE DEEMED TO HAVE THE SAME EFFECT AS A
VOTE AGAINST THE PROPOSAL. Brokers holding Shares of record for customers may
not be entitled to vote unless they receive voting instructions from their
customers. "Broker non-votes," which refer to Shares as to which a broker or
other nominee has indicated on a duly executed and returned proxy or otherwise
advised the Company that it lacks voting authority as to any matter, will have
no effect on the required vote on the matter.
The enclosed form of proxy confers discretionary authority upon the
persons named therein with respect to any amendments to matters identified in
the accompanying Notice of Meeting and other matters that may properly come
before the meeting. Management is not aware of any amendments to matters
identified in the Notice of Meeting or of any other matters that are to be
presented for action at the meeting.
SHARE OWNERSHIP BY PRINCIPAL SHAREHOLDERS AND MANAGEMENT
BENEFICIAL OWNERSHIP TABLE
The following table gives information regarding the beneficial ownership
of Common Shares as of October 28, 1998, by each of the Corporation's directors
and nominees for director, by certain of the Corporation's executive officers,
and by the Corporation's present directors and executive officers as a group. In
addition, it gives information, including addresses, regarding each person or
group known to the Corporation to own beneficially more than 5% of the
outstanding Common Shares or Preferred Shares. Information as to beneficial
stock ownership is based on data furnished by the persons concerning whom such
information is given. Unless otherwise indicated, all shares listed as
beneficially owned are held with sole voting and investment power. The numbers
in the table include Common Shares as to which a person has the right to acquire
beneficial ownership through the exercise or conversion of options, purchase
warrants or convertible securities within 60 days after October 28, 1998.
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<PAGE>
<TABLE>
==============================================================================================================
Class of Amount and Nature
Name and Address Shares of "Beneficial % of Common % of Preferred
of Beneficial Owner Ownership"(1)(2) Shares(1)(2) Shares
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<S> <C> <C> <C> <C>
Joel Ackerman (3) --- --- --- ---
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BankAmerica Corporation(4) Common 829,100(4) 13.5% ---
555 California Street, Ste. 2600
San Francisco, California 94104
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Haywood D. Cochrane, Jr. --- --- --- ---
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Brandon M. Dawson Common 910,000 14.7% ---
111 S.W. Fifth Ave., Ste. 2390
Portland, Oregon 97204
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William DeJong Common 56,440 * ---
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Gregory J. Frazer, Ph.D. Common 392,391(5) 6.3% ---
18531 Roscoe Blvd., Ste. 201
Northridge, California 91324
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Douglas F. Good Common 266,912 4.3% ---
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Hugh T. Hornibrook Common 65,000 * ---
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Edwin J. Kawasaki Common 60,000 * ---
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Warburg, Pincus & Co. (3) Common 4,666,666(3) 43.3% ---
466 Lexington Avenue Preferred 13,333,333(3) --- 100%
New York, New York 10017
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All present directors and Common 1,867,043(5) 28.7% ---
executive officers as a group (9
persons)
==============================================================================================================
</TABLE>
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* Less than 1% of the outstanding Common Shares.
(1) "Beneficial ownership" is calculated in accordance with Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934, pursuant to which Common
Shares as to which a person has the right to acquire beneficial
ownership through the exercise or conversion of options, purchase
warrants or convertible securities within 60 days after October 28,
1998, have been included in shares deemed to be outstanding for purposes
of computing percentage ownership by such person.
(2) "Beneficial ownership" includes Common Shares that the person has the
right to acquire through the exercise or conversion of options, purchase
warrants or convertible securities within 60 days after October 28,
1998, as follows: Brandon M. Dawson, 60,000 shares; William DeJong,
40,000 shares; Gregory J. Frazer, Ph.D., 80,000 shares; Douglas F. Good,
25,000 shares; Hugh T. Hornibrook, 65,000 shares; Edwin J. Kawasaki,
40,000 shares; Warburg, Pincus & Co., 4,666,666 shares; and all
directors and executive officers as a group, 395,000 shares.
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<PAGE>
(3) Warburg, Pincus & Co. is the general partner of Warburg, Pincus
Ventures, L.P. ("Warburg"), the record owner of 13,333,333 Preferred
Shares, together with warrants to purchase 2,000,000 Common Shares. Joel
Ackerman, a general partner of Warburg, Pincus & Co., disclaims
beneficial ownership of the Shares beneficially owned by Warburg except
to the extent of an indirect pecuniary interest in an indeterminate
number of such Shares. Each Preferred Share is entitled to one-fifth of
a vote. The Preferred Shares vote together with the Common Shares as a
single class. The Preferred Shares held by Warburg represent
approximately 30% of the combined voting power of outstanding
securities. Of the 4,666,666 Common Shares shown as beneficially owned
by Warburg, 2,666,666 shares represent the Common Shares issuable upon
conversion of the 13,333,333 Preferred Shares outstanding.
(4) Included in reliance on information contained in Schedule 13G dated July
9, 1998, filed by BankAmerica Corporation ("BAC") and certain related
entities engaged in providing investment management and investment
advisory services as follows: BAC's wholly owned subsidiary Robertson
Stephens Investment Management Co., the Robertson Stephens Orphan Fund,
L.P. (the "Fund"), and the Fund's general partner, Robertson, Stephens &
Company Investment Management, L.P. Each of the reporting entities
reported shared voting and investment power as to all the indicated
shares except the Fund, which reported shared voting and investment
power as to 610,000 shares, or 10.0% of the outstanding Common Shares.
(5) Includes 49,298 Common Shares and options to acquire 20,000 Common
Shares exercisable within 60 days after October 28, 1998, held by
Carissa Bennett, Gregory J. Frazer's wife.
ACQUISITION OF SECURITIES BY WARBURG, PINCUS VENTURES, L.P.
On December 24, 1997, the Corporation consummated the sale of 13,333,333
Preferred Shares, together with warrants to purchase 2,000,000 Common Shares for
$12.00 per share (the "Warrants"), contemplated by a Securities Purchase
Agreement dated November 21, 1997, between the Corporation and Warburg. The
Preferred Shares and Warrants were issued in exchange for $18,000,000 in cash
from the liquid investment funds held by Warburg.
The Preferred Shares, which are entitled to one-fifth of a vote per
share (or such other number of votes equal to the number of Common Shares into
which a Preferred Share shall be convertible from time to time) in the election
of directors and any other matters presented to the shareholders of the
Corporation for action or consideration, represent approximately 30% of the
outstanding voting securities of the Corporation. Including the Common Shares
issuable upon exercise of the Warrants, Warburg "beneficially owns"
approximately 43% of the voting securities of the Corporation.
The Preferred Shares may be converted at any time, in whole or in part,
into Common Shares. The conversion rate is one Common Share for every five
Preferred Shares surrendered for conversion, subject to adjustment for stock
dividends, stock splits, reverse stock splits, recapitalizations, and other
anti-dilution adjustments.
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As long as Warburg beneficially owns a number of outstanding Shares
constituting at least 10% of the outstanding Common Shares (including for this
purpose the Common Shares issuable upon conversion of the Preferred Shares but
not the Common Shares issuable upon exercise of the Warrants), the Corporation
is required, upon Warburg's request, to nominate and use its reasonable best
efforts to cause to be elected and to remain as directors two persons,
reasonably satisfactory to the Corporation, designated by Warburg. On December
24, 1997, in partial satisfaction of this requirement, the Board elected Joel
Ackerman, a managing director of E. M. Warburg, Pincus & Co., LLC, as a director
of the Corporation, filling the vacancy created by the resignation of Gene K.
Balzer, Ph.D. A second nominee designated by Warburg, Haywood D. Cochrane, Jr.,
is proposed for election as a director at the meeting. See "3. Election of
Directors."
The number of directors as to which Warburg has the right to designate
nominees will increase to three if and for so long as the number of positions on
the Board exceeds eight. Such number will decrease by one if Warburg
beneficially owns a number of outstanding Shares constituting less than 10% of
the outstanding Common Shares and will further decrease to none if Warburg
beneficially owns less than 666,667 outstanding Common Shares (including for
purposes of the foregoing the Common Shares issuable upon conversion of the
Preferred Shares but not the Common Shares issuable upon exercise of the
Warrants). As long as Warburg beneficially owns at least 666,667 outstanding
Common Shares, the number of positions on the Board may not exceed 11. The right
to designate one nominee for director may be transferred by Warburg to a single
purchaser of at least 6,666,667 Preferred Shares or that number of Common Shares
issuable upon conversion thereof.
Prior to consummation of the transaction with Warburg, control of the
Corporation was effectively in the hands of the Corporation's directors,
particularly Douglas F. Good, Chairman of the Board, and Brandon M. Dawson,
President and Chief Executive Officer, who together owned 20% of the outstanding
Common Shares. Messrs. Good and Dawson now hold a total of 12.4% of the
outstanding voting securities of the Corporation.
As a result of Warburg's significant percentage share ownership, as well
as its right to designate nominees for director as discussed above, Warburg will
be able to exercise substantial influence and control over the Corporation's
affairs. For as long as Warburg beneficially owns at least 3,333,333 outstanding
Preferred Shares (or the number of Common Shares issuable upon conversion
thereof), the Corporation may not, without Warburg's consent, (i) sell, lease,
exchange or transfer all or substantially all of its assets to any third party,
(ii) amalgamate the Corporation with another corporation such that the then
existing shareholders of the Corporation hold less than 51% of the combined
voting power of the amalgamated corporation, (iii) materially change the nature
of the Corporation's business, (iv) effect a liquidation, amalgamation or sale
of the Corporation or sell substantially all of its or its subsidiaries' assets,
or (v) with certain exceptions, redeem or pay a dividend or distribution on its
Common Shares.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires that reports of beneficial ownership of Common Shares and changes in
such ownership be filed with the Securities and Exchange Commission ("SEC") by
"reporting persons," including directors, executive officers, and certain
holders of more than 10% of the outstanding Common Shares. To the Corporation's
knowledge, all Section 16(a) reporting requirements applicable to known
reporting persons were complied with for transactions and stock holdings during
the fiscal year ended July 31, 1998, except that Edwin J. Kawasaki, Vice
President-Finance and Chief Financial Officer of the Corporation, filed one late
report relating to the grant of an option for 6,000 Common Shares.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the years indicated the compensation
awarded or paid to, or earned by, the Corporation's chief executive officer and
the Corporation's other executive officers whose salary level and bonus for the
fiscal year ended July 31, 1998, exceeded $100,000.
<TABLE>
Long-Term
Compensation-Awards
Annual Compensation -------------------
-------------------- Number of Shares
Name and Principal Position Year(1) Salary Bonus Underlying Options
- - --------------------------- ------- ------ ----- -------------------
<S> <C> <C> <C> <C>
Brandon M. Dawson 1998 $167,917 --- 530,000
President and Chief 1997 130,000 --- ---
Executive Officer 1996 86,667 --- 130,000
Gregory J. Frazer, Ph.D. 1998 110,000 $63,461 ---
Vice President-Business 1997 91,669 --- 80,000
Development
Edwin J. Kawasaki 1998 102,500 --- 196,000
Vice President-Finance and 1997 80,000 42,500(2) 34,000
Chief Financial Officer
</TABLE>
- - --------------------
(1) Mr. Frazer joined the Corporation in October 1996, and Mr. Kawasaki in
August 1996.
(2) Paid in December 1997 for services rendered during the 1997 fiscal year.
In addition, two other executive officers of the Corporation were paid
an aggregate of $187,416 in cash compensation during the 1998 fiscal year.
OPTION GRANTS
During the fiscal year ended July 31, 1998, the Corporation granted
stock options to employees and directors under its Second Amended and Restated
Stock Award Plan (the "Stock
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<PAGE>
Award Plan"). Options are granted at the discretion of the Board of Directors.
The options are not transferable or assignable.
The following table sets forth certain information concerning grants of
options to purchase Common Shares to individuals who were directors or executive
officers of the Corporation during the fiscal year ended July 31, 1998:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
- - -------------------------------------------------------------------------------------------------
Percentage of
Total Options
Number of Shares Granted to
Underlying Employees in Exercise Price Expiration
Name Options Granted Fiscal Year ($/share) Date
---- --------------- ----------- --------- ----
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joel Ackerman -- -- -- --
- - -------------------------------------------------------------------------------------------------
Gene K. Balzer, Ph.D. -- -- -- --
- - -------------------------------------------------------------------------------------------------
Brandon M. Dawson 353,600(1) 31% $ 6.75 02/01/08
78,400(1) 7% 10.00 02/01/08
98,000(1) 9% 12.00 02/01/08
- - -------------------------------------------------------------------------------------------------
William DeJong 25,000(2) 2% 7.25 06/26/08
- - -------------------------------------------------------------------------------------------------
Randall E. Drullinger 44,000(1) 4% 6.75 02/01/08
16,000(1) 1% 10.00 02/01/08
20,000(1) 2% 12.00 02/01/08
- - -------------------------------------------------------------------------------------------------
Kathy A. Foltner 32,000(1) 3% 8.16 03/04/08
8,000(1) 1% 10.00 03/04/08
10,000(1) 1% 12.00 03/04/08
- - -------------------------------------------------------------------------------------------------
Gregory J. Frazer, Ph.D. -- -- -- --
- - -------------------------------------------------------------------------------------------------
Douglas F. Good 25,000(2) 2% 7.25 06/26/08
- - -------------------------------------------------------------------------------------------------
Hugh T. Hornibrook 65,000(2) 6% 7.25 06/26/08
- - -------------------------------------------------------------------------------------------------
Edwin J. Kawasaki 121,600(1) 11% 6.75 02/01/08
30,400(1) 3% 10.00 02/01/08
38,000(1) 3% 12.00 02/01/08
6,000(3) 1% 7.05 10/16/02
- - -------------------------------------------------------------------------------------------------
</TABLE>
(1) Vests in four equal annual installments beginning one year following the
date of grant. The options will become exercisable in full in the event
that, within one year (two years in the case of Mr. Dawson) following a
change in control of the Corporation, the executive's employment is
terminated by the Corporation without cause, or the executive
experiences a material demotion in status or position or a material
change in his or her duties that is inconsistent with his or her
position at the Corporation, his or her base salary is reduced, or his
or her participation in the Corporation's compensation plans is not
continued on a level comparable with other key executives (each of the
foregoing events constitutes "good reason"). A change in control of the
Corporation will be deemed to occur if (i) a person acquires beneficial
ownership of 50% or more of the combined voting power of the
Corporation, with certain exceptions, (ii) the incumbent directors (or
nominees approved by a majority of the incumbent directors, including
subsequently approved directors) cease to constitute at least a majority
of the directors of the Corporation, or (iii) a reorganization,
amalgamation or sale of all or substantially all the assets of the
Corporation, with certain exceptions, is consummated. A portion of Mr.
Dawson's options will also become exercisable based on the time elapsed
following
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<PAGE>
the date of grant in the event that his employment is terminated by the
Company without cause or by Mr. Dawson for "good reason."
(2) Exercisable in full.
(3) Exercisable as to one-half of the Common Shares immediately following
grant and the balance beginning August 12, 1998.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information regarding option
exercises during the fiscal year ended July 31, 1998, and the fiscal year-end
value of unexercised options held by individuals who were directors or executive
officers of the Corporation during the 1998 fiscal year:
<TABLE>
- - ----------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
- - ----------------------------------------------------------------------------------------------------
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options at
on Value Options at July 31, 1998 July 31, 1998(1)
- - ----------------------------------------------------------------------------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joel Ackerman --- --- --- --- --- ---
- - ----------------------------------------------------------------------------------------------------
Gene K. Balzer, Ph.D. --- --- --- --- --- ---
- - ----------------------------------------------------------------------------------------------------
Brandon M. Dawson --- --- 60,000 530,000 $468,300 $839,800
- - ----------------------------------------------------------------------------------------------------
William DeJong --- --- 40,000 --- 131,550 ---
- - ----------------------------------------------------------------------------------------------------
Randall E. Drullinger --- --- 40,000 80,000 --- 104,500
- - ----------------------------------------------------------------------------------------------------
Kathy A. Foltner --- --- 12,500 62,500 24,438 72,688
- - ----------------------------------------------------------------------------------------------------
Gregory J. Frazer, Ph.D. --- --- 40,000 40,000 105,000 105,000
- - ----------------------------------------------------------------------------------------------------
Douglas F. Good --- --- 25,000 --- 46,875 ---
- - ----------------------------------------------------------------------------------------------------
Hugh T. Hornibrook --- --- 65,000 --- 121,875 ---
- - ----------------------------------------------------------------------------------------------------
Edwin J. Kawasaki --- --- 20,000 210,000 70,500 359,300
- - ----------------------------------------------------------------------------------------------------
</TABLE>
- - ----------------
(1) The value shown was calculated based on the excess of the closing sale
price of the Common Shares reported on AMEX on July 31, 1998, over the
per share exercise price of the unexercised in-the-money options.
EMPLOYMENT AND CONSULTING AGREEMENTS
In late 1997, the Company entered into employment agreements with
Brandon M. Dawson, its President and Chief Executive Officer, Edwin J. Kawasaki,
its Vice President-Finance and Chief Financial Officer, and Randall E.
Drullinger, its Vice President-Marketing. The term of each agreement expires on
December 24, 2001, subject to automatic one-year extensions annually unless
either party gives six months' prior written notice of non-extension. The
agreements establish an annual base salary of $195,000 for Mr. Dawson, $115,000
for Mr. Kawasaki, and $104,000 for Mr. Drullinger, subject to such increases
(but not decreases) as are determined from time to time by the Board or a
compensation committee designated by the Board. The agreements provide for
annual incentive bonuses in an amount to be determined by the Board up to a
specified percentage of each executive's base salary as follows: Mr. Dawson,
100%; Mr. Kawasaki, 50%; and Mr. Drullinger, 50%. In addition, upon execution of
his
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agreement, Mr. Kawasaki received a bonus for services performed in the 1997
fiscal year in the amount of $42,500. Under the agreements, the executives are
entitled to participate in all of the Company's compensation plans covering key
executive and managerial employees, including, without limitation, medical,
disability and life insurance benefits and vacation pay, as well as
reimbursement for the lease of an automobile up to $12,000 per year for Mr.
Dawson and $6,000 per year for each of Messrs. Kawasaki and Drullinger. The
Company has also provided Mr. Dawson with an equity split-dollar life insurance
policy with a face amount of $2,000,000, provided that the premiums paid by the
Company per year will not exceed $20,000, to be recovered from the death
benefits, surrender value or loan proceeds payable on the policy.
The agreements with Messrs. Dawson, Kawasaki, and Drullinger include an
agreement on the part of each executive not to compete with the Company for a
period of two years (three years with respect to Mr. Dawson) after the
executive's employment with the Company is terminated. If the executive's
employment is terminated by reason of death, the Company will pay to the
executive's personal representative his base salary through the date of death,
together with any accrued benefits (including death benefits) to which the
executive is entitled under the terms of the Company's compensation plans. In
the event of the executive's termination due to disability, the executive will
be entitled to receive his base salary reduced by any benefits paid under the
Company's group long-term disability insurance plan for the remaining term of
the agreement and the portion of his annual bonus relating to the period before
his disability. If the executive's employment is terminated by the Company for
cause or the executive terminates his employment voluntarily without good
reason, the Company will pay the executive his base salary through the effective
date of termination, together with any accrued benefits to which the executive
is entitled under the terms of the Company's compensation plans. Cause includes
a material act of fraud, dishonesty or moral turpitude, gross negligence or
intentional misconduct. Good reason includes a material demotion in the
executive's status or position, a material change in his duties that is
inconsistent with his position, a reduction in his base salary, or a failure to
continue his participation in the Company's compensation plans on terms
comparable to other key executives. If the executive's employment is terminated
by the Company without cause or by the executive with good reason, the Company
will pay the executive's base salary through the termination date, plus an
amount of severance pay equal to, with respect to Messrs. Kawasaki and
Drullinger, one times the executive's base salary payable in 12 monthly
installments and, with respect to Mr. Dawson, two times the sum of his base
salary and his average annual bonus for the prior two fiscal years payable in 24
monthly installments. In addition, upon such termination without cause or with
good reason, the Company will afford continued participation in the Company's
compensation plans (or, if not permitted under the general provisions of any
such plan, will provide a substantially equivalent benefit) for two additional
years in the case of Mr. Dawson and for one year in the case of Messrs. Kawasaki
and Drullinger.
Effective January 1, 1997, the Company entered into a five-year
consulting agreement with Hugh T. Hornibrook, a director of the Company, under
which the Company pays Mr. Hornibrook a retainer of $66 per month and $82 per
hour for consulting services on an as-needed basis.
From January 1, 1997, until September 30, 1998, the Company retained
NeuroDynamic Systems, Inc., at the rate of $6,000 per month, to provide
consulting services in connection with
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the Company's Canadian operations and the development of a training program for
audiologists. Gene K. Balzer, Ph.D., a director of the Company until December
1997, is president and sole shareholder of NeuroDynamic Systems, Inc.
On October 31, 1996, the Company entered into a three-year employment
agreement with Kathy A. Foltner, its Vice President-Operations, that provided
for a salary of $85,000 per year and certain employee benefits. Effective March
27, 1998, Ms. Foltner's annual salary was increased to $104,000. The agreement
contains covenants not to compete with and not to solicit employees, clients, or
customers of the Company during her period of employment and for 36 full
calendar months following termination of her employment.
On October 1, 1996, the Company entered into a five-year employment
agreement with Gregory J. Frazer, Ph.D., its Vice President-Business
Development, that provides for a base salary of $110,000 per year and for a
bonus based on the aggregate net income of the hearing clinics acquired by the
Company that were previously owned, in part, by Mr. Frazer. The employment
agreement provides Mr. Frazer with certain fringe benefits such as medical and
dental insurance, vacation, professional liability insurance, an automobile
allowance, and reimbursement of certain expenses. Mr. Frazer has also entered
into an agreement with the Company which contains covenants not to compete with
and not to solicit employees, clients or customers of the Company on behalf of a
competitor during his period of employment and for three years following
termination of his employment.
COMPENSATION OF DIRECTORS
The non-employee directors of the Corporation receive a fee of $1,000
for each board or committee meeting attended and are reimbursed for
out-of-pocket and travel expenses incurred in attending board and committee
meetings. The Corporation has no other standard arrangement pursuant to which
directors are compensated by the Corporation for their services in their
capacity as directors. The Corporation may from time to time, as it has in the
past, grant stock options to directors in accordance with the policies of AMEX,
the Securities and Exchange Commission, and the securities laws and regulations
of the jurisdictions where the directors reside. Options granted during the 1998
fiscal year are included in the table under "Option Grants" above.
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
On October 1, 1996, the Corporation acquired 11 hearing care clinics in
Southern California through the acquisition of all of the outstanding shares of
three companies owned by Gregory J. Frazer, Ph.D., who was subsequently
appointed Vice President-Business Development and a director of the Corporation,
his wife, Carissa Bennett, and Jami Tanihana (the "HCA Shareholders"). The
consideration paid by the Corporation consisted of $314,724 in cash and 474,907
Common Shares of which Mr. Frazer and Ms. Bennett received a total of 294,071
shares. Mr. Frazer and Ms. Bennett also received a total of $196,294 in payment
for covenants not to compete.
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The HCA Shareholders have the right, until September 30, 2001, to
require the Corporation to redeem an aggregate of 3,000 of their Common Shares
as of the last day of each calendar quarter at a price of $8.35 per share. The
redemption rights are noncumulative and expire if not exercised as of the end of
any calendar quarter as to such quarter. Pursuant to such redemption rights, the
Corporation has redeemed a total of 5,280 Common Shares from Ms. Tanihana, 1,320
Common Shares from Ms. Bennett and 360 Common Shares from Mr. Frazer for
consideration of $44,089, $11,022, and $3,006, respectively.
During 1997, the Corporation acquired six additional hearing clinics in
Southern California in which Mr. Frazer was part-owner. Of the aggregate cash
purchase price of $1,217,231 for the six clinics, Mr. Frazer and Ms. Bennett
received a total of $560,377. Mr. Frazer and Ms. Bennett also received the sum
of $147,654 in payment for covenants not to compete in connection with the
acquisitions. During 1998, the Corporation acquired three additional clinics in
California in which Mr. Frazer and Ms. Bennett were part-owners. Mr. Frazer and
Ms. Bennett received $242,179 of the total purchase price of $542,268. They also
received $80,520 in payment for covenants not to compete.
On October 31, 1996, the Corporation acquired the Midwest Division of
Hearing Health Services, Inc. (the "Midwest Division"), in exchange for
convertible subordinated notes made payable to certain affiliates of the seller
in the aggregate amount of $2,600,000, convertible into 400,000 Common Shares,
and the assumption of a promissory note with a balance of $360,000 payable to
Kathy A. Foltner, Vice President-Operations of the Company. The promissory note
is payable in equal annual installments of $120,000 beginning on July 1, 1997,
and bears interest at 6% per annum. The balance of the promissory note at July
31, 1998, was $120,000 and the highest outstanding balance during the 1998
fiscal year was $240,000. In addition to the promissory note, the Corporation
also agreed to assume an obligation of the Midwest Division to pay Ms. Foltner
$50,000 in each of 1997, 1998, and 1999, if specified production goals were met.
The Corporation paid Ms. Foltner $50,000 during the fiscal year ended July 31,
1998, and $12,500 for the period from August 1, 1998, to October 31, 1998.
Under the terms of an escrow agreement dated January 14, 1994, among the
Corporation, Michael G. Thomson, Craig R. Thomson, Murray T.A. Campbell, Bruce
A. Ramsay and William DeJong (the "Founding Shareholders"), and a trustee,
600,000 Common Shares were issued to the Founding Shareholders in exchange for
an aggregate of $100,000 in cash and deposited in escrow with the trustee. As of
October 21, 1997, all of the shares had been released from escrow.
Douglas F. Good, Marilyn Marshall, and Trudy McCaffery (the "Fraserview
Shareholders"), the Corporation, and a trustee entered into an escrow agreement
dated October 7, 1994, with respect to 850,000 Common Shares (the "Performance
Shares") that were issued to the Fraserview Shareholders in connection with the
Corporation's acquisition of Fraserview Hearing & Speech Clinic Ltd. Pursuant to
a purchase and sale agreement (the "Share Purchase Agreement") dated as of April
15, 1996, between the Fraserview Shareholders and Brandon M. Dawson, Roger W.
Larose, Randall E. Drullinger and Hugh T. Hornibrook (the "Purchasers"), the
Fraserview Shareholders sold all of the Performance Shares to the Purchasers for
an aggregate consideration of $601,637 (converted from Canadian dollars at April
15, 1996).
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Pursuant to an assignment and novation agreement dated as of August 28, 1996,
Roger W. Larose assigned all of his right, title and interest in the Share
Purchase Agreement to Brandon M. Dawson. In addition, pursuant to an assignment
and novation agreement dated as of February 27, 1997, Mr. Hornibrook assigned
all of his right, title, and interest in the Share Purchase Agreement to Edwin
J. Kawasaki. As a result of the Share Purchase Agreement and assignments,
Messrs. Dawson, Drullinger and Kawasaki hold 780,000, 50,000 and 20,000
Performance Shares, respectively. The Performance Shares were released from
escrow effective February 11, 1998.
William DeJong, a director of the Corporation, is a partner in the
Calgary, Alberta law firm of Ballem MacInnes. During the fiscal year ended July
31, 1998, total fees, disbursements and government sales tax paid to Ballem
MacInnes by the Corporation for legal services were approximately $196,000.
Under a settlement agreement between the Corporation and Roger W.
Larose, formerly the Corporation's chief operating officer, the Corporation
agreed to pay the exercise price of 40,000 options to purchase Common Shares
held by Mr. Larose. On April 1, 1996, Mr. Larose exercised options for 20,000
Common Shares at $1.40 per share and Douglas F. Good, as an advance to and on
behalf of the Corporation, paid the exercise price of $28,048 to the
Corporation. On September 30, 1996, Mr. Larose exercised options for an
additional 20,000 Common Shares at $1.40 per share and Mr. Good, as an advance
to and on behalf of the Corporation, paid the exercise price of $27,900 to the
Corporation.
Brandon M. Dawson subsequently executed promissory notes in favor of Mr.
Good equal to the amounts advanced by Mr. Good in connection with the options
exercised by Mr. Larose, and Mr. Dawson was substituted for Mr. Good as the
obligee with respect to such advances. Interest on the advances accrued at the
rate of 9% per annum. The advances were repaid to Mr. Good by the Corporation on
December 26, 1997, along with interest in the amount of $7,147, thereby
satisfying Mr. Dawson's obligations to Mr. Good.
On October 5, 1997, the Corporation loaned Mr. Dawson $85,000 in
connection with the purchase of his residence. The loan was repaid on April 10,
1998, along with interest at 10% per annum in the amount of $4,308.
On December 26, 1997, the Corporation loaned Mr. Dawson $30,639 in order
to allow Mr. Dawson to repay an advance from Mr. Good in connection with the
exercise by Mr. Dawson of options to purchase 20,000 Common Shares on April 1,
1996. On March 19, 1998, the Corporation loaned Mr. Dawson an additional $34,298
in order to pay taxes incurred as a result of Mr. Dawson's April 1996 option
exercise. The loans bear interest at 7.75% per annum and are due on November 1,
1999.
On May 8, 1997, Mr. Dawson exercised options for 50,000 Common Shares at
$1.35 per share in order to allow options for Common Shares to be granted to
other employees. In connection with such exercise, the Corporation loaned Mr.
Dawson $67,500 to pay the aggregate exercise price of the options. The loan,
which bears interest at 10% per annum, is due on November 1, 1999. On April 24,
1998, the Corporation loaned Mr. Dawson an additional
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$91,000 in order to pay taxes incurred as a result of Mr. Dawson's May 1997
option exercise. The additional loan bears interest at 7.75% per annum and is
due on November 1, 1999.
1998 ANNUAL REPORT
The Corporation's annual report to shareholders for the fiscal year
ended July 31, 1998, including financial statements and other information with
respect to the Corporation, has been mailed to shareholders with this Circular.
Additional copies of the annual report may be obtained by writing to the
Corporation.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Corporation are KPMG Peat Marwick LLP, 1211 S.W.
Fifth Avenue, Suite 2000, Portland, Oregon 97204. The co-registrars and
co-transfer agents for the Common Shares are CIBC Mellon Trust Company, Suite
600, 333-7th Avenue SW, Calgary, Alberta, Canada T2P 2Z1, and ChaseMellon
Shareholder Services L.L.C., 520 Pike Street, Suite 1220, Seattle, Washington
98101.
PARTICULARS OF MATTERS TO BE ACTED UPON
To the knowledge of the Board of Directors, the only matters to be acted
upon at the annual meeting are those set forth in the accompanying Notice of
Meeting relating to the continuance of the Corporation to the jurisdiction of
the Yukon Territories, fixing the number of directors to be elected, the
election of directors, the appointment of auditors, approval of an amendment to
the Corporation's Stock Award Plan, and the receipt of the financial statements
for fiscal 1998.
1. APPROVAL OF CONTINUANCE TO THE YUKON TERRITORIES
The Board of Directors believes that it is in the best interests of the
Corporation and its shareholders to change the jurisdiction of incorporation of
the Corporation from Alberta to the Yukon Territories (the "Continuance
Proposal"). Accordingly, the shareholders of the Corporation are being asked to
vote on a special resolution, unanimously approved by the Board of Directors, to
approve and authorize the Corporation to continue to the jurisdiction of the
Yukon Territories under the Business Corporations Act (Yukon Territories) (the
"Yukon Act") as if the Corporation had been incorporated under the laws of the
Yukon Territories. SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS SECTION OF THE
CIRCULAR, INCLUDING THE RELATED SCHEDULES REFERENCED BELOW AND ATTACHED HERETO,
BEFORE VOTING ON THE CONTINUANCE PROPOSAL.
Management is proposing that the Corporation continue under the Yukon
Act principally because the Yukon Act does not contain a requirement that a
majority of the directors of the Corporation be resident Canadians. Under the
Business Corporations Act (Alberta) (the "Alberta Act"), under which the
Corporation is currently governed, at least half of the directors of the
Corporation must be resident Canadians and directors may not transact business
at a meeting of directors unless at least half of the directors present are
resident Canadians. Management of the
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Corporation has determined that continuing under the Yukon Act will allow the
Corporation to seek the most qualified persons to act as directors, irrespective
of their place of residence. As the Corporation is rapidly expanding its
business and operations in the United States, this flexibility is of particular
importance. In all other material respects, the Yukon Act and the Alberta Act
are comparable.
The Continuance Proposal will not result in any change in the name,
business, management, fiscal year, assets or liabilities, or headquarters of the
Corporation. The capital structure of the Corporation following implementation
of the Continuance Proposal also will be unchanged. SHAREHOLDERS WILL NOT BE
REQUIRED TO SEND IN THEIR STOCK CERTIFICATES FOR COMMON SHARES OR PREFERRED
SHARES, WHICH WILL CONTINUE TO REPRESENT ISSUED AND OUTSTANDING SHARES OF THE
CORPORATION. The Common Shares will continue to be traded on AMEX without
interruption, under the same symbol (SSN).
Management of the Corporation believes that continuation under the Yukon
Act will not materially adversely affect the rights of the shareholders of the
Corporation or the conduct of the business and affairs of the Corporation. There
are no adverse U.S. or Canadian income tax consequences to the Corporation or
its shareholders as a result of implementation of the Continuance Proposal.
The Continuance Proposal is not being proposed in order to prevent an
unsolicited takeover attempt, and the Board of Directors is not aware of any
present attempt by any person to acquire control of the Corporation, obtain
representation on the Board of Directors (other than Warburg, as described under
"Acquisition of Securities by Warburg, Pincus Ventures, L.P." above), or take
any action that would materially affect the governance of the Corporation.
The continuance of the Corporation under the Yukon Act will involve the
filing of Articles of Continuance, in the form prescribed by the Yukon Act, with
the Registrar of Corporations (Yukon Territories), which will replace the
Corporation's current Articles. The Yukon Act also requires the establishment of
a registered office and a records office in the Yukon Territories. The Articles
of Continuance are in all material respects identical to the Articles of the
Corporation as they currently exist, with the necessary modifications to conform
to the Yukon Act.
For the continuance to occur, the special resolution authorizing the
Corporation to continue under the Yukon Act must be passed, pursuant to Section
182 of the Alberta Act, by at least two-thirds of the votes cast in respect
thereof by holders of the Corporation's shares at the meeting. Additionally, the
continuance under the Yukon Act must be authorized by the Registrar of
Corporations (Alberta). The Registrar of Corporations (Alberta) has advised the
Corporation, by letter dated September 11, 1998, that it has no objection to the
Corporation's continuing to the Yukon Territories. Even if the special
resolution is passed and all regulatory approvals are given, the directors of
the Corporation may, in their sole discretion, revoke the special resolution if,
for example, the number of shares with respect to which Notices of Dissent are
given is, in the opinion of the directors, unduly detrimental to the Corporation
or its shareholders.
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Subject to the Continuance Proposal being approved and implementation of
the continuance of the Corporation under the Yukon Act, new bylaws of the
Corporation have been approved by the directors of the Corporation and are being
submitted for ratification by the shareholders of the Corporation at the
meeting. Bylaw No. 1C of the Corporation, attached hereto as Schedule A, is
similar to the existing Bylaw No. 1A (as amended by Bylaw No. 1B) in all
material respects and is required to replace the existing bylaws upon
implementation of the Continuance Proposal in order to conform with the language
of the Yukon Act.
TEXT OF THE SPECIAL RESOLUTION
The complete text of the special resolution to be submitted for approval
by the shareholders at the meeting is as follows:
"BE IT RESOLVED as a Special Resolution of the Corporation that:
1. The continuance of the Corporation under the Business Corporations Act
(Yukon Territories) (the "Yukon Act") as if the Corporation had been
incorporated thereunder is hereby approved;
2. The Corporation is hereby authorized to apply to the Registrar of
Corporations (Alberta) for approval to continue to the Yukon Territories
under the Yukon Act;
3. The Corporation is hereby authorized to apply to the Registrar of
Corporations (Yukon Territories) for a Certificate of Continuance
continuing the Corporation under the Yukon Act as if it had been
incorporated thereunder and to file with such Registrar Articles of
Continuance and such other documents as may be required in the form or
forms prescribed by the Yukon Act, and continue, and effective on the
issuance of a Certificate of Continuance by such Registrar and without
affecting the validity and existence of the Corporation by or under its
Articles and the validity of any act performed thereunder, the Articles
of the Corporation shall be amended to conform to the laws of the Yukon
Territories by substituting the Articles of Continuance therefor;
4. Subject to the filing and acceptance of the aforementioned Articles of
Continuance, Bylaw No. 1C in the form attached hereto as Schedule A and
approved by the directors of the Corporation is hereby ratified and
confirmed;
5. Any one officer or director of the Corporation is hereby authorized, for
and on behalf of the Corporation, whether under its corporate seal or
otherwise, to execute and file:
(a) subject to the issuance of the requisite authorizations to
continue, the Articles of Continuance; and
(b) all such documents and to perform and do all such acts and things
as such person in his sole discretion considers necessary or
advisable to carry out the terms of these resolutions, including,
without limitation, all documents required by the
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Business Corporations Act (Alberta) and the Yukon Act, as
applicable, to accompany the Articles of Continuance; and
6. The directors of the Corporation are hereby authorized in their sole
discretion to abandon the continuance of the Corporation under the Yukon
Act without further approval of the shareholders of the Corporation."
Approval by the shareholders of the special resolution will constitute
approval of Bylaw No. 1C.
DISSENTING SHAREHOLDERS' RIGHTS
Under Section 184 of the Alberta Act, shareholders of the Corporation
have the right to dissent from the Continuance Proposal in accordance with the
provisions of such section. Any shareholder of the Corporation who dissents in
respect of the Continuance Proposal in compliance with Section 184 of the
Alberta Act (a "Dissenting Shareholder") will be entitled to be paid by the
Corporation the fair value of the shares of the Corporation held by such
shareholder, such fair value to be determined at the close of business on the
last business day before the day on which the resolution from which the
Dissenting Shareholder dissents is adopted. In order to exercise his or her
right to dissent, a Dissenting Shareholder must send to the Corporation a
written objection to the Continuance Proposal at or before the meeting, which
will be held on December 15, 1998, at 10 a.m., Pacific Time. Failure to vote
against the special resolution does not act as a waiver of the right of dissent
and appraisal, and a vote against the special resolution does not constitute
notice of dissent. A summary of the provisions of Section 184 of the Alberta Act
and the full text of the provisions are attached hereto as Schedule B.
The Continuance Proposal will not take effect unless the special
resolution is approved by at least 66-2/3% of the votes cast by the shareholders
on the motion at the meeting and confirmed by the issuance by the Registrar of
Corporations (Alberta) under the Alberta Act of a Certificate of Discontinuance
of the Corporation. Warburg and management, which together control approximately
47% of the voting shares of the Corporation, have indicated their intention to
vote in favor of the Continuance Proposal. THE PERSONS DESIGNATED IN THE
ENCLOSED FORM OF PROXY, UNLESS OTHERWISE INSTRUCTED, INTEND TO VOTE FOR THE
SPECIAL RESOLUTION APPROVING THE CONTINUANCE PROPOSAL.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE CONTINUANCE
PROPOSAL.
2. FIXING NUMBER OF DIRECTORS
Under the Articles of Incorporation, as amended (the "Articles"), of the
Corporation, the Board of Directors may consist of a minimum of three and a
maximum of 11 directors. The Board of Directors may, between annual general
meetings, appoint one or more additional directors to serve until the next
annual general meeting, provided that the number of additional
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directors may not exceed one-third of the number of directors elected at the
most recent annual general meeting and the total number of directors may not
exceed 11.
At present, the Board of Directors consists of six directors. As
discussed below, the Board of Directors has nominated six persons for election
as directors at the meeting. Accordingly, the shareholders will be asked to
consider and, if thought fit, to pass the following resolution:
"BE IT RESOLVED THAT the number of directors of the Corporation
be and the same is hereby fixed at six directors until such time as the
directors determine by resolution to appoint one or more additional
directors in accordance with the Corporation's Articles."
The foregoing resolution will be adopted if approved by a majority of
the votes cast on this motion by the shareholders at the meeting. THE PERSONS
DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS OTHERWISE INSTRUCTED, INTEND TO
VOTE FOR THE RESOLUTION FIXING THE NUMBER OF DIRECTORS.
3. ELECTION OF DIRECTORS
The Board of Directors has nominated six persons for election as
directors to serve until the next annual general meeting and until their
successors are elected and qualified. Five of the nominees for election as
directors are members of the present Board. Joel Ackerman was appointed to the
Board in December 1997 at the request of Warburg, the holder of all the
outstanding Preferred Shares, and Haywood D. Cochrane, Jr., has been nominated
for election at the meeting at the request of Warburg, conditional upon approval
of the Continuance Proposal. See "1. Approval of Continuance to the Yukon
Territories." In the event that the Continuance Proposal is not approved by the
required two-thirds vote, following the meeting, Mr. Cochrane will not take
office as a director and the Board will appoint Douglas F. Good, a private
investor, to fill the resulting vacancy. Mr. Good, age 56, has been a director
of the Corporation since 1994 and has served as Chairman of the Board since
August 1996. From December 1995 until July 1996, he served as the Corporation's
chief financial officer. He was President of the Corporation from October 1994
to December 1995. Prior to October 1994, Mr. Good was chief financial officer of
International Retail Systems Inc., a software and point of sale systems company
based in Dallas, Texas.
A nominee will be elected if the nominee receives a plurality of the
votes cast by the Common Shares entitled to vote in the election, provided that
a quorum is present at the meeting. UNLESS AUTHORITY TO VOTE FOR A DIRECTOR OR
DIRECTORS IS WITHHELD, THE ACCOMPANYING PROXY WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES NAMED BELOW. If for some unforeseen reason a nominee becomes
unavailable to serve as a director, the Board of Directors may designate a
substitute nominee. In that case, the persons named as proxies will vote for the
substitute nominee designated by the Board unless otherwise instructed.
The following table sets forth information with respect to each person
nominated for election as a director of the Corporation, including their names,
municipality of residence, ages
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as of October 28, 1998, business experience during the past five years, and year
of appointment as a director. There are no family relationships among the
Corporation's directors, nominees for director, or officers.
<TABLE>
Name and Director
Municipality of Residence Age Principal Occupation(1) Since
- - ------------------------- --- ----------------------- -----
<S> <C> <C> <C>
Joel Ackerman 34 Managing Director of E. M. Warburg, 1997
New York, New York Pincus & Co., L.L.C., an international
venture banking firm.
Haywood D. Cochrane, Jr. 50 President and Chief Executive Officer ---
Nashville, Tennessee and a director of Meridian Corporate
Healthcare, Inc., a specialized medical
management company.
Brandon M. Dawson 30 President and Chief Executive Officer 1995
Gresham, Oregon of the Corporation.
William DeJong 40 Partner in the law firm of 1994
Calgary, Alberta Ballem MacInnes.
Gregory J. Frazer, Ph.D 46 Vice President-Business Development 1996
Northridge, California of the Corporation.
Hugh T. Hornibrook 49 Acquisition consultant. 1996
Vancouver, British Columbia
</TABLE>
(1) During the past five years, the principal occupation and employment of
each director has been in the capacity set forth above except as
follows:
(a) From 1990 to 1993, Mr. Ackerman served as an associate at Mercer
Consulting, a strategic management consulting company.
(b) Mr. Cochrane has held his present position since February 1997. He
was Executive Vice President, Chief Financial Officer and Treasurer of
Laboratory Corporation of America Holdings, Inc. ("LabCorp"), from April
1995 to November 1996 and a consultant to LabCorp from November 1996
until February 1997. Mr. Cochrane served from June 1994 to April 1995 as
a member of senior management of National Health Laboratories, Inc.
("NHL"), following NHL's acquisition of Allied Clinical Laboratories,
Inc. ("Allied"). Mr. Cochrane was President and Chief Executive Officer
of Allied from its formation in 1989 until its acquisition by NHL in
June 1994. NHL was acquired by LabCorp in April 1995. Mr. Cochrane is a
director of JDN Realty Corporation and Unilab Corporation.
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(c) Mr. Dawson has served as President and Chief Executive Officer of
the Corporation since December 1995. From May 1992 to December 1995, he
was director of U.S. sales for Starkey Laboratories, Inc., a
multi-national manufacturer, distributor and marketer of custom
"in-the-ear" hearing instruments and related hearing and diagnostic
equipment.
(d) Mr. DeJong joined the law firm of Ballem MacInnes in 1987.
(e) Mr. Frazer has served as Vice President-Business Development of the
Corporation since October 1996, when the Corporation acquired 11
audiology based hearing clinics which were among 22 clinics in Southern
California of which Mr. Frazer was part owner and operator. The
Corporation has since acquired nine of the remaining 11 clinics. Mr.
Frazer has spent his entire career as a hearing care professional since
receiving his doctoral degree from Wayne State School of Medicine in
1981.
(f) Mr. Hornibrook served as Vice President-Corporate Development of the
Corporation from April 1996 until January 1997. From July 1994 to April
1996, and since January 1997, he has been an independent business
consultant. Prior to July 1994, Mr. Hornibrook served as director of
corporate development for The Loewen Group Inc., a consolidator and
operator of funeral homes and cemeteries throughout North America.
DIRECTORS' MEETINGS AND BOARD COMMITTEES
During the fiscal year ended July 31, 1998, the Board of Directors held
three meetings. Each director attended more than 75% of the aggregate of the
total number of meetings of the Board of Directors and of any committee of the
Board on which the director served held during fiscal 1998.
The Audit Committee reviews services provided by the Corporation's
independent auditors, makes recommendations concerning their engagement or
discharge, and reviews with management and the independent auditors the annual
financial statements of the Corporation, the results of the audit, the adequacy
of internal accounting controls, and the quality of financial reporting. The
Audit Committee met once during fiscal 1998. The members of the Audit Committee
are Messrs. Ackerman, DeJong, and Hornibrook.
The Corporation presently does not have a standing compensation
committee or nominating committee. The Board of Directors will consider
suggestions submitted by shareholders regarding potential nominees for director.
Any recommendations as to nominees for election at the 1999 annual general
meeting of shareholders should be submitted in writing by July 15, 1999, to the
Secretary of the Corporation at its principal executive offices and should
include the name, address and qualifications of each proposed nominee.
OTHER EXECUTIVE OFFICERS
Randall E. Drullinger, age 35, has served as Vice President-Marketing of
the Corporation since April 1996. From August 1990 to April 1996, he was
director of financial management services at Starkey Laboratories, Inc.
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Scott E. Klein, age 41, has been appointed Executive Vice President and
Chief Operating Officer of the Corporation effective November 1, 1998. Mr. Klein
was Senior Vice President of Operations (Eastern Zone) of Hollywood
Entertainment Corporation from April 1997 to October 1998. He previously held
various senior management positions, including Senior Vice President of the
Retail Division, at NordicTrack, Inc., from August 1993 until April 1997.
Kathy A. Foltner, age 45, was appointed Vice President-Operations of the
Corporation in November 1996, when the Corporation acquired substantially all of
the assets of the Midwest Division of Hearing Health Services, Inc. Ms. Foltner
served as vice president of Hearing Health Services, Inc., since January 1995
and as director of its Michigan operations from July 1994 to December 1994.
Prior to July 1994, Ms. Foltner was the owner and president of Audio-Vestibular
Testing Center, Inc.
Edwin J. Kawasaki, age 40, has served as Vice President-Finance and
Chief Financial Officer of the Corporation since August 1996. Mr. Kawasaki was a
principal of Stafford Capital Corp., an investment buy-out firm, from September
1995 to July 1996, and was a senior vice president at Peregrine Holdings Ltd.,
an investment banking boutique firm, from January 1994 to September 1995. From
1987 to 1993, he was the controller of Lewis and Clark College. Prior to 1987,
Mr. Kawasaki was a supervising senior accountant with KPMG Peat Marwick LLP.
4. APPOINTMENT OF AUDITORS
Effective December 20, 1996, upon the recommendation of the Board of
Directors and approval by the shareholders, the Corporation retained KPMG Peat
Marwick LLP as its independent auditors, replacing Shikaze Ralston. The
Corporation made the change in independent auditors due to its significant and
growing operations in the United States and its need to draw upon the services
and expertise of a large international accounting and auditing firm. The report
of Shikaze Ralston on the consolidated financial statements of the Corporation
for the year ended July 31, 1996, included in its 1997 annual report on Form
10-K did not contain an adverse opinion or disclaimer of opinion and was not
qualified as to uncertainty, audit scope, or accounting principles. In addition,
there were no disagreements with Shikaze Ralston on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Shikaze
Ralston, would have caused them to make reference to the subject matter of the
disagreements in connection with their report. Before engaging KPMG Peat Marwick
LLP as its new independent auditors, the Corporation did not consult with them
regarding any matters related to the application of accounting principles, the
type of audit opinion that might be rendered on the Corporation's financial
statements or any other such matters.
UNLESS OTHERWISE INSTRUCTED, THE PERSONS NAMED IN THE ENCLOSED FORM OF
PROXY INTEND TO VOTE FOR THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS AUDITORS OF
THE CORPORATION TO HOLD OFFICE UNTIL THE NEXT ANNUAL GENERAL MEETING OF
SHAREHOLDERS OR UNTIL THEIR SUCCESSORS ARE APPOINTED AND TO AUTHORIZE THE BOARD
OF DIRECTORS TO FIX THE AUDITORS' REMUNERATION. The Corporation expects
representatives of KPMG Peat Marwick LLP to be present at the
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meeting and to be available to respond to appropriate questions. The auditors
will have the opportunity to make a statement at the meeting if they desire to
do so.
5. APPROVAL OF AMENDMENT TO STOCK AWARD PLAN
GENERAL
Effective December 10, 1996, the Board of Directors adopted a Stock
Award Plan providing for the grant of options to employees of the Corporation.
The Board subsequently amended and restated the Stock Award Plan effective
February 5, 1997, and adopted a second amendment and restatement effective
October 15, 1997, which was approved by the shareholders of the Corporation on
December 5, 1997. An amendment to increase the number of Common Shares issuable
under the Stock Award Plan by 1,200,000 shares to 1,800,000 shares was approved
by the shareholders at a special meeting held on February 9, 1998.
The Stock Award Plan provides for the grant of stock options and other
stock-based awards to the Corporation's officers and employees, non-employee
directors, and outside consultants or advisers. The purpose of the Stock Award
Plan is to promote and advance the interests of the Corporation and its
shareholders by assisting the Corporation in attracting, retaining and rewarding
key employees, directors and outside advisers and linking their interests with
those of the Corporation's shareholders.
PROPOSED AMENDMENT TO THE STOCK AWARD PLAN
Effective October 26, 1998, the Board of Directors adopted, subject to
shareholder approval, an amendment to the Stock Award Plan to increase the
number of Common Shares which may be made the subject of awards under the Stock
Award Plan by 500,000 shares to a total of 2,300,000 shares. Common Shares
subject to awards granted under the Stock Award Plan which expire or are
otherwise canceled or terminated or are settled in cash in lieu of Common Shares
will again become available for grants of new awards.
As of October 26, 1998, five executive officers, 19 other employees,
three non-employee directors and no outside consultants held stock options
granted under the Stock Award Plan and represented the pool of persons
considered eligible to participate in the plan at that date. Also at that date,
options for 2,400 Common Shares granted under the Stock Award Plan had been
exercised, options to purchase a total of 1,315,000 Common Shares were
outstanding, and 482,600 Common Shares were available for future grants of
awards under the Stock Award Plan. See the "New Plan Benefits" table below for
information regarding an option grant subsequent to October 26, 1998. At October
26, 1998, options had been granted under the Stock Award Plan as follows:
Brandon M. Dawson, President and Chief Executive Officer, 530,000 shares;
Gregory J. Frazer, Ph.D., Vice President-Development, 0 shares; Edwin J.
Kawasaki, Vice President-Finance and Chief Financial Officer, 230,000 shares;
all current executive officers as a group (including Messrs. Dawson and
Kawasaki), 915,000 shares; all current non-employee directors as a group,
115,000 shares; Howard D. Cochrane, Jr., 0 shares; and all non-executive
employees as a group, 285,000 shares. Additional information regarding options
granted to
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directors and executive officers at the Corporation is set forth above in the
table headed "Option Grants in Last Fiscal Year."
The following table presents information with respect to additional
stock options granted under the Stock Award Plan subsequent to October 26, 1998.
The type, number, and value of other Awards that may be granted in the future
under the Stock Award Plan is not known.
NEW PLAN BENEFITS-STOCK AWARD PLAN
<TABLE>
Name and Position Number of Options
- - ----------------- -----------------
<S> <C>
Brandon M. Dawson.................................................... 0
President and Chief Executive Officer
Gregory J. Frazer, Ph.D.............................................. 0
Vice President-Business Development
Edwin J. Kawasaki.................................................... 0
Vice President-Finance and Chief Financial Officer
Scott E. Klein....................................................... 300,000
Executive Vice President and Chief Operating Officer(1)
All current executive officers as a group(1)......................... 300,000
Non-employee directors as a group.................................... 0
Non-executive employees as a group................................... 0
</TABLE>
- - --------------------
(1) The options were granted effective November 1, 1998, pursuant to the
terms of Mr. Klein's employment agreement with the Corporation at a per
share exercise price of $5.88. The options are immediately exercisable
as to 50,000 Common Shares, will become exercisable as to an additional
16,667 Common Shares on the first day of each calendar quarter beginning
April 1, 1999, will become immediately exercisable in full in the event
that Mr. Klein's employment is terminated by the Corporation without
cause (as defined) or by Mr. Klein with good reason (as defined) within
one year following a change in control of the Corporation (as defined),
and will expire 10 years following the date of grant.
DESCRIPTION OF AWARDS UNDER THE STOCK AWARD PLAN
The types of awards (collectively referred to as "Awards") that may be
granted by the Board under the Stock Award Plan include:
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Options. Options to purchase Common Shares may be incentive stock
options ("ISOs") meeting the requirements of Section 422 of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), or nonqualified options which are
not eligible for such tax-favored treatment. The expiration date of each option
is as determined by the Board (but not more than 10 years after the date of
grant for ISOs), subject to approval by any regulatory authority having
jurisdiction over Awards granted under the Stock Award Plan. The exercise price
per share must be equal to or greater than 100% of the fair market value of a
Common Share on the date the option is granted for ISOs and at a discount of not
more than 25% from such fair market value for nonqualified options.
Stock Appreciation Rights. A recipient of stock appreciation rights will
receive upon exercise an amount equal to the excess (or specified portion
thereof) of the fair market value of a Common Share on the date of exercise over
the base price, multiplied by the number of shares as to which the rights are
exercised. The base price will be designated by the Board in the award agreement
and may be equal to, higher or lower than the fair market value of the Common
Shares on the date of grant. Payment may be in cash, in Common Shares, or in any
other form or combination of methods approved by the Board.
Restricted Units. Restricted units are awards of units equivalent in
value to a Common Share, which may be subject to forfeiture if the recipient
terminates employment or service as a director or consultant during a specified
period. At the expiration of such period, the restricted units vest and payment
is made in an amount equal to the value of the number of shares covered by the
restricted units. Payment may be in cash, in Common Shares, or in any other form
or combination of methods approved by the Board.
Performance Awards. Performance Awards are granted in units equivalent
in value to a Common Share. A performance Award is subject to forfeiture if or
to the extent the recipient fails to meet certain performance goals during a
designated performance cycle. Performance Awards earned by attaining performance
goals are paid at the end of a performance cycle in cash, in Common Shares, or
in any other form or combination of methods approved by the Board.
Other Stock-Based Awards. The Board may grant other Awards that involve
payments or grants of Common Shares or are measured by or in relation to Common
Shares. The Stock Award Plan provides flexibility to design new types of
stock-based or stock-related Awards to attract and retain employees, officers,
directors, and outside advisers in a competitive environment.
Nontransferability. Awards are not transferable or assignable except by
will or the laws of descent and distribution.
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ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a change in capitalization, the Board will make such
proportionate adjustments in the aggregate number of Common Shares for which
Awards may be granted under the Stock Award Plan, the maximum number of Common
Shares which may be awarded to any participant, and the number of Common Shares
covered by, and the exercise or base price of, any outstanding Awards, as the
Board in its sole discretion deems appropriate.
DURATION, TERMINATION AND AMENDMENT OF THE STOCK AWARD PLAN
The Stock Award Plan will remain in effect until Awards have been
granted covering all available Common Shares under the Stock Award Plan or the
plan is otherwise terminated by the Board. The Board may terminate the Stock
Award Plan at any time, but any such termination will not affect any outstanding
Awards. The Board may also amend the Stock Award Plan from time to time, subject
to approval, to the extent required, by any regulatory authority having
jurisdiction over the Stock Award Plan, but may not, without shareholder
approval, materially increase the aggregate number of Common Shares that may be
issued under the Stock Award Plan other than in connection with adjustments for
a change in capitalization.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The following discussion summarizes the principal anticipated U.S.
federal income tax consequences of grants of Awards under the Stock Award Plan
to participants and to the Corporation. All recipients of Awards under the Stock
Award Plan to date are U.S. residents.
TAX CONSEQUENCES TO PARTICIPANTS
Incentive Stock Options. ISOs under the Stock Award Plan are intended to
meet the requirements of Section 422 of the Code. A participant does not realize
taxable income upon the grant of an ISO or upon the issuance of shares when the
option is exercised. The amount realized on the sale or taxable exchange of such
shares in excess of the exercise price will be a capital gain, and any loss will
be a capital loss, except that if such disposition occurs within one year after
exercise of the option or two years after grant of the option, the participant
will recognize compensation taxable at ordinary income tax rates measured by the
amount by which the lesser of (i) the fair market value on the date of exercise
or (ii) the amount realized on the sale of the shares, exceeds the exercise
price. For purposes of determining alternative minimum taxable income, an ISO is
treated as a nonqualified option.
Nonqualified Options. No taxable income is recognized upon the grant of
a nonqualified option. In connection with the exercise of a nonqualified option,
a participant will generally realize ordinary income measured by the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise. The participant's cost basis in the acquired shares is the
fair market value of the shares on the exercise date. Any gain upon sale of the
shares is capital gain.
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Stock Appreciation Rights. The grant of a stock appreciation right to a
participant will not cause the recognition of income by the participant. Upon
exercise of a stock appreciation right, the participant will recognize ordinary
income equal to the amount of cash payable to the participant plus the fair
market value of any Common Shares or other property delivered to the
participant.
Restricted Units and Performance Awards. Generally, a participant will
not recognize any income upon issuance of an Award of restricted units or
performance units that is subject to forfeiture during a restriction period or
performance cycle. Generally, a participant will recognize compensation income
upon the vesting of restricted units or performance units in an amount equal to
the amount of cash payable to the participant plus the fair market value of
Common Shares or other property delivered to the participant.
TAX CONSEQUENCES TO THE CORPORATION
To the extent participants qualify for capital gains treatment with
respect to the sale of shares acquired pursuant to exercise of an ISO, the
Corporation will not be entitled to any tax deduction in connection with ISOs.
In all other cases, the Corporation will be entitled to receive a U.S. federal
income tax deduction at the same time and in the same amount as the amount which
is taxable to participants as ordinary income with respect to Awards.
RECOMMENDATION AND VOTE
At the meeting, the shareholders will be asked to consider and, if
thought fit, to approve the following resolution:
"BE IT RESOLVED THAT the amendment of the Second Amended and
Restated Stock Award Plan of the Corporation to increase the number of
Common Shares issuable thereunder from 1,800,000 to 2,300,000 Common
Shares is hereby approved."
THIS RESOLUTION WILL NOT TAKE EFFECT UNLESS IT IS APPROVED BY THE
AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST A MAJORITY OF THE SHARES PRESENT, IN
PERSON OR BY PROXY, AND ENTITLED TO VOTE ON THE PROPOSAL AT THE MEETING. THE
PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY, UNLESS INSTRUCTED OTHERWISE,
INTEND TO VOTE FOR THIS RESOLUTION APPROVING AMENDMENT OF THE STOCK AWARD PLAN.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF APPROVAL OF AN
AMENDMENT TO THE STOCK AWARD PLAN TO INCREASE THE NUMBER OF COMMON SHARES
ISSUABLE THEREUNDER TO 2,300,000 COMMON SHARES.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals submitted for inclusion in the 1999 proxy
materials and consideration at the 1999 annual general meeting of shareholders
must be received by the
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Corporation by July 15, 1999. Any such proposal should comply with the SEC's
rules governing shareholder proposals submitted for inclusion in proxy
materials.
The persons named as proxies for the 1999 annual general meeting of
shareholders will have discretionary authority to vote on any matter presented
by a shareholder for action at such meeting unless the Corporation receives
notice of the matter by September 28, 1999, in which case such persons will not
have discretionary voting authority except as provided in the SEC's rules
governing shareholder proposals.
* * * * *
The contents and the sending of this Circular have been approved by the
Board of Directors of the Corporation.
Portland, Oregon BY ORDER OF THE BOARD OF DIRECTORS
November 12, 1998
Brian S. Thompson
Secretary
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SCHEDULE A
BY-LAW NO. 1C
A BY-LAW RELATING GENERALLY TO THE CONDUCT OF THE BUSINESS AND
AFFAIRS OF SONUS CORP. (HEREINAFTER CALLED THE "CORPORATION").
PART I
INTERPRETATION
1.01 In this By-law and all other By-laws of the Corporation, unless
the context otherwise specifies or requires:
"ACT" means the Business Corporations Act (Yukon), as from time to time amended,
and every statute in substitution thereof;
"ARTICLES" means, as the case may require, the original or restated articles of
incorporation, articles of amendment, articles of amalgamation, articles of
continuance, articles of reorganization, articles of arrangement, articles of
dissolution and articles of revival of the Corporation, and includes an
amendment to any of them;
"BOARD" means the board of Directors, as such board may be constituted from time
to time;
"BY-LAW" means this by-law and all other by-laws of the Corporation from time to
time in force and effect;
"DIRECTORS" means the directors of the Corporation;
"MEETING OF SHAREHOLDERS" includes an annual or other general meeting of
Shareholders and a meeting of any class or classes of Shareholders;
"SHAREHOLDER" means a shareholder of the Corporation;
"CHIEF EXECUTIVE OFFICER" means the President or, if the Corporation does not
have a President or if the office of President is vacant, the officer of the
Corporation holding the paramount office.
PART 2
DIRECTORS
2.01 Borrowing Powers of Directors: Without limiting the powers of the
Directors as set forth in the Act, but subject to the Articles, the Directors
may from time to time on behalf of the Corporation, without authorization of the
Shareholders:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other
evidences of indebtedness or guarantee of the Corporation, whether
secured or unsecured;
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(c) to the extent permitted by the Act, give a guarantee on behalf of the
Corporation to secure performance of an obligation of any person; and
(d) mortgage, hypothecate, pledge or otherwise create an interest in or
charge on all or any currently owned or subsequently acquired property
of the Corporation to secure payment of a debt or performance of any
other obligation of the Corporation.
2.02 Delegation: Subject to the Articles, the Directors may from time
to time, by resolution, delegate to a committee of Directors, a single Director
or an officer or officers of the Corporation, all or any of the powers conferred
on the Directors by the preceding section of this By-law or by the Act.
2.03 Power to Adopt Seal and Authorize Use: The Directors may, by
resolution, adopt a seal for the Corporation, and authorize persons to affix the
seal and to attest by their signatures that the seal was duly affixed.
2.04 Directors' Power to Issue Shares: Subject to the Articles, the
Directors may, by resolution, issue shares of the Corporation at such time, to
such persons and, subject to the Act, for such consideration as the Directors
may from time to time determine.
2.05 Directors' Power to Make, Amend or Repeal By-Laws: Subject to the
Articles and the Act, the Directors may, by resolution, make, amend or repeal
any By-laws that regulate the business or affairs of the Corporation.
2.06 Directors' Power to Appoint Officers: Subject to the Articles:
(a) the Directors may designate the offices of the Corporation, appoint as
officers individuals of full capacity who may, but need not, be
Directors of the Corporation, specify their duties and, except where
delegation is prohibited by the Act, delegate to them powers to manage
the business and affairs of the Corporation;
(b) a Director may be appointed to any office of the Corporation; and
(c) two (2) or more offices of the Corporation may be held by the same
person.
2.07 Directors' Power to Fix Remuneration of Directors and Officers:
Subject to the Articles, the Directors may fix the remuneration of the Directors
and of the officers of the Corporation.
2.08 Financial Disclosure: Subject to the Articles, the Directors
shall not be required to place before the annual meeting of Shareholders any
information respecting the financial position of the Corporation or the results
of its operations except that information required by the Act.
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2.09 Remuneration and Expenses: The Directors shall be paid such
remuneration for their services as the Board may from time to time determine.
The Directors shall also be entitled to be reimbursed for travelling and other
expenses properly incurred by them in attending meetings of the Board or any
committee thereof. Nothing contained herein shall preclude any Director from
serving the Corporation in any other capacity and receiving remuneration
therefor.
2.10 Directors' Meetings:
(a) Convening Meetings: Any Director may convene a meeting of Directors.
(b) Notice of Meeting of Directors: At least forty-eight (48) hours' notice
(inclusive of the day on which the notice is communicated, or deemed to
be communicated, and the day of the meeting) shall be given of a meeting
of the Directors, and the notice shall specify the place, the day and
the hour of the meeting. Except where required by the Act, the notice
need not specify the purpose of the meeting or the business to be
transacted thereat.
(c) Notice of Adjourned Meeting of Directors: If a meeting of the Directors
is adjourned by one or more adjournments, it is not necessary to give
notice of the adjourned meeting, other than by announcement at the time
of the adjournment, if:
(i) all of the Directors are present at the time of the
announcement; or
(ii) those Directors who were not present at the time of the
announcement attend the adjourned meeting and participate
in the meeting;
but in all other cases, notice of the adjourned meeting shall be given
as if it were a new meeting, provided that if the adjournment is for a
period of time which makes it impossible or impracticable to give
forty-eight (48) hours' notice, the notice shall be deemed to have been
properly given if transmitted on the next business day following the
adjournment.
(d) Manner of Transmitting Notices: Notice of a meeting of the Directors, or
any other communication required to be made, may be given or made to a
Director either:
(i) in writing:
(1) by first class mail, postage prepaid, addressed to
the Director at the Director's latest address as
shown in the records of the Corporation;
(2) by delivery to the Director's latest address as
shown in the records of the Corporation and
leaving the notice in the custody of an adult
person found there, placing it in a mail
receptacle at that address or affixing it to a
door or placing in some other place at that
address where the notice or communication is
likely to be found;
(3) by personally serving it upon the Director; or
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(4) by any electronic device capable of transmitting a
printed message directed to the Director at a
place where the Director has access to a device
capable of receiving the message; or
(ii) verbally, whether by means of a telephone or otherwise.
All notices or other communication given or made in writing in
accordance with the foregoing shall be deemed to have been communicated:
(i) if given or made by mail, at the time it would be
delivered in the ordinary course of mail unless there are
reasonable grounds for believing that the Director did
not receive the notice or communication at that time, or
at all;
(ii) if delivered or personally served, on the day that it was
delivered or served; and
(iii) if by electronic device, one (1) hour following
transmission.
(e) Waiver of Notice: Notice of any meeting of Directors or of any committee
of Directors or the time for the giving of any such notice or any
irregularity in any meeting or in the notice thereof may be waived by
any Director in writing or by telecopy, telegram, cable or telex
addressed to the Corporation or in any other manner, and any such waiver
may be validly given either before or after the meeting to which such
waiver relates. Attendance of a Director at any meeting of Directors or
of any committee of Directors is a waiver of notice of such meeting,
except when a Director attends a meeting for the express purpose of
objecting to the transaction of any business on the grounds that the
meeting is not lawfully called.
(f) Omission of Notice: The accidental omission to give notice of any
meeting of Directors, or of any committee of Directors, or the
non-receipt of any notice by any person shall not invalidate any
resolution passed or any proceeding taken at such meeting.
(g) Place of Meetings of Directors: Subject to the Articles, meetings of the
Directors may be held at any place in the Yukon, or at any place outside
of the Yukon if all Directors entitled to attend and vote at the meeting
either participate in the meeting or consent, verbally or otherwise, to
the meeting being held at that place.
(h) Chairman of Meetings of Directors or Committee of Directors: Unless and
until the Directors have elected a Chairman of the Board, the Chief
Executive Officer shall act as chairman of all meetings of the Directors
but if the Chairman of the Board or the Chief Executive Officer, as the
case may be, is absent or refuses to act as chairman, the Directors in
attendance shall by a vote of the majority of them elect some other
Director present at the meeting to act as chairman of the meeting.
(i) Secretary of Meetings of Directors: The chairman of a meeting of
Directors may appoint a Director to act as secretary of a meeting of
Directors, and in the absence of such
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appointment, the chairman of the meeting shall also act as secretary of
the meeting.
(j) Quorum of Directors: Subject to the Articles, a majority of Directors
shall constitute a quorum at any meeting of Directors.
(k) Participation by Telephone: A Director may participate in a meeting of
Directors by means of telephone or other communication facilities that
permit all persons participating in the meeting to hear each other.
(l) Resolution by Majority: Subject to the Articles, every resolution
submitted to a meeting of Directors shall be decided by a vote of a
majority of the Directors participating in the meeting, and the
declaration of the chairman of the meeting on the result of the vote
shall be final. In case of an equality of votes, the chairman of the
meeting shall not have a casting vote.
2.11 Meetings of Committees of Directors: The provisions of Section
2.10 of this By-law shall apply equally to meetings of committees of Directors,
but when applying those provisions to a meeting of a committee of Directors, the
phrase "meeting of Directors" shall mean "meeting of a committee of Directors"
and the word "Director" shall mean "member of a committee of Directors".
2.12 Written Resolution in Lieu of Meeting: Subject to the Articles, a
resolution in writing signed by all the Directors entitled to vote on that
resolution at a meeting of Directors or committee of Directors is as valid as if
it had been passed at a meeting of Directors or a committee of Directors. A
resolution in writing may be signed in any number of counterparts which together
shall be construed as a single instrument. A resolution in writing shall take
effect on the date when it is expressed to be effective notwithstanding that the
effective date is before or after the date on which it was signed by the
Directors or any of them. A resolution in writing transmitted by telegraph,
telex or other device capable of transmitting a printed message and purporting
to be sent by a Director shall be valid as a counterpart of a resolution in
writing of the Directors or committee of Directors.
PART 3
SHAREHOLDERS' MEETINGS
3.01 Chairman of Meeting of Shareholders: The Chairman of the Board,
or failing him the President of the Corporation, shall act as chairman at all
Meetings of Shareholders. If the Chairman of the Board and the President are
both absent or refuse to act as chairman of the meeting, the Shareholders in
attendance shall elect some other person in attendance at the meeting, who need
not be a Shareholder, to act as chairman of the meeting.
3.02 Place of Shareholders' Meetings: Subject to the Articles and the
provisions of the Act permitting a Meeting of Shareholders to be held outside of
the Yukon, a Meeting of Shareholders shall be held at the place in the Yukon
determined by the Directors.
3.03 Participation in Meeting by Telephone: A Shareholder or any other
person entitled to attend a Meeting of Shareholders may participate in the
meeting by means of telephone or other communication facilities that permit all
persons participating in the meeting to hear each other, and a person
participating in such a meeting by those means is deemed for the purposes of the
Act to be present at the meeting.
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3.04 Notice of Adjourned Meeting: If a Meeting of Shareholders is
adjourned by one or more adjournments for an aggregate of less than thirty (30)
days, it is not necessary to give notice of the adjourned meeting, other than by
announcement at the time of the adjournment.
3.05 Quorum of Shareholders: A quorum of Shareholders is present at a
Meeting of Shareholders if not less than 33-1/3% of the issued shares entitled
to vote at the Meeting are represented in person or by proxy.
3.06 Loss of Quorum During Meeting: If a quorum is present at the
opening of a Meeting of Shareholders, the Shareholders present may proceed with
the business of the meeting notwithstanding that a quorum is not present
throughout the meeting.
3.07 Voting Jointly Held Shares: If two (2) or more persons hold
shares of the Corporation jointly, one of those holders present at a Meeting of
Shareholders may, in the absence of the others, vote the shares, but if two (2)
or more of those persons who are present, in person or by proxy, vote, they
shall vote as one on the shares jointly held by them.
3.08 Voting: Voting at a Meeting of Shareholders shall be by show of
hands except when a vote by ballot is demanded by a Shareholder or a proxyholder
entitled to vote at the meeting. If a vote by ballot is demanded at a meeting in
which a Shareholder, or other person entitled to attend and vote at the meeting,
is participating by telephone or other communication facilities, such
Shareholder or other person may verbally appoint some person present at the
meeting to cast a ballot on his behalf and a ballot so cast shall be valid as if
it were personally cast by the Shareholder or other person so participating.
3.09 Written Resolution in Lieu of Meeting: Subject to the Articles, a
resolution in writing signed by all the Shareholders entitled to vote on that
resolution at a Meeting of Shareholders is as valid as if it had been passed at
a Meeting of Shareholders. A resolution in writing may be signed in any number
of counterparts which together shall be construed as a single instrument. A
resolution in writing shall take effect on the date when it is expressed to be
effective notwithstanding that the effective date is before or after the date on
which it was signed by the Shareholders or any of them. A resolution in writing
transmitted by telegraph, telex or other device capable of transmitting a
printed message and purporting to be sent by a Shareholder shall be valid as a
counterpart of a resolution in writing of the Shareholders.
PART 4
LIEN ON SHARES
4.01 If the Articles provide that the Corporation has a lien on shares
registered in the name of a Shareholder or his legal representative for a debt
of that Shareholder to the Corporation, such lien may be enforced, subject to
the Act and to any other provision of the Articles, by the
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sale of shares thereby affected or by any other action, suit, remedy or
proceedings authorized or permitted by law or by equity and, pending such
enforcement, the Corporation may refuse to register a transfer of the whole or
any part of such shares.
PART 5
VOTING RIGHTS IN OTHER BODIES CORPORATE
5.01 The signing officers of the Corporation may execute and deliver
instruments of proxy and arrange for the issuance of voting certificates or
other evidence of the right to exercise the voting rights attaching to any
securities held by the Corporation. Such instruments, certificates or other
evidence shall be in favour of such person or persons as may be determined by
the person signing or arranging for them. In addition, the Board may direct the
manner in which, and the person or persons by whom, any particular voting rights
or class of voting rights may or shall be exercised.
PART 6
SHARES AND SHARE CERTIFICATES
6.01 Allotment: Subject to the Articles, the Board may from time to
time allot, or grant options to purchase, and issue the whole or any part of the
authorized and unissued shares of the Corporation at such times and to such
persons and for such consideration as the Board shall determine, provided that
no share shall be issued until the consideration for the share is fully paid as
provided for in the Act.
6.02 Commissions: The Board may from time to time authorize the
Corporation to pay a reasonable commission to any person in consideration of his
purchasing or agreeing to purchase shares of the Corporation from the
Corporation or from any other person, or procuring or agreeing to procure
purchasers for shares of the Corporation.
6.03 Non-Recognition of Trusts: Subject to the provisions of the Act,
the Corporation may treat the person in whose name a share is registered in the
securities register as the absolute owner of the share as if that person had
full legal capacity and authority to exercise all rights of ownership,
irrespective of any indication to the contrary through knowledge or notice or
description in the Corporation's records or on the share certificate.
6.04 Share Certificates: Every holder of one or more shares of the
Corporation shall be entitled, at his option, to a share certificate, or to a
non-transferable written acknowledgement of his right to obtain a share
certificate, stating the name of the person to whom the certificate or
acknowledgement was issued, and the number and class or series of shares held by
him as shown on the securities register. Share certificates and acknowledgements
of a Shareholder's right to a share certificate, shall, subject to the Act, be
in such form as the Board shall from time to time approve. Any share certificate
shall be signed by any number of signing officers as the Board may determine and
need not be under the corporate seal, provided that, unless the Board otherwise
determines, certificates representing shares in respect of which a transfer
agent and/or registrar has been appointed shall not be valid unless
countersigned by or on behalf of such transfer agent and/or registrar. The
signature of a sole signing officer or two signing officers, as the case may
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be, may be printed or mechanically reproduced in facsimile upon share
certificates and every such facsimile signature shall for all purposes be deemed
to be the signature of the officer whose signature it reproduces and shall be
binding upon the Corporation. A share certificate executed as aforesaid shall be
valid notwithstanding that one or both of the officers whose facsimile signature
appears thereon no longer holds office at the date of issue of the certificate.
6.05 Replacement of Share Certificate: The Board or any officer or
agent designated by the Board may in its or his discretion direct the issue of a
new share certificate in lieu of and upon cancellation of a share certificate
that has been mutilated or in substitution for a share certificate claimed to
have been lost, destroyed or wrongfully taken, on payment of such fee not
exceeding such amount as may be allowed by the Act, and on such terms as to
indemnity, reimbursement of expenses and evidence of loss and of title as the
Board may from time to time prescribe, whether generally or in any particular
case.
6.06 Joint Shareholders: If two or more persons are registered as
joint holders of any share, the Corporation shall not be bound to issue more
than one certificate in respect thereof, and delivery of such certificate to one
of such persons shall be sufficient delivery to all of them. Any one of such
persons may give effectual receipts for the certificate issued in respect
thereof or for any dividend, bonus, return of capital or other money payable or
warrant issuable in respect of such share.
6.07 Fractional Share: The Corporation may issue a certificate for a
fractional share or may issue in its place, as may be determined by the Board,
scrip certificates in a form that entitles the holder to receive a certificate
for a full share by exchanging scrip certificates aggregating a full share. The
Directors may attach conditions to any scrip certificates, including that the
scrip certificates become void if they are not exchanged for a share certificate
representing a full share by a specified date, and that any shares for which
those scrip certificates are exchangeable may, notwithstanding any pre-emptive
right, be issued by the Corporation to any person and the proceeds of those
shares distributed rateably to the holders of the scrip certificates.
6.08 Transfer and Transmission of Shares: Shares of the Corporation
may be transferred in the form of a transfer of endorsement endorsed on the
certificates issued for the shares of the Corporation or in any form of transfer
which may be approved by the Board.
6.09 Registration of Transfer: Subject to the provisions of the Act,
no transfer of shares shall be registered in a securities register except upon
presentation of the certificate representing such shares with a transfer
endorsed thereon or delivered therewith duly executed by the registered holder
or by his attorney or successor duly appointed, together with such reasonable
assurance or evidence of signature, identification and authority to transfer as
the Board may from time to time prescribe, upon payment of all applicable taxes
and any fees prescribed by the Board.
6.10 Rights of Representatives: The Corporation may treat a person as
a registered Shareholder entitled to exercise all rights of the Shareholder he
represents if that person produces to the Board such evidence as may be
reasonably required that he is the executor, administrator, heir or legal
representative of the heirs of the estate of a deceased Shareholder, or a
guardian, committee or trustee representing a registered Shareholder.
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6.11 No Duty to Third Person: The Corporation is not required to
enquire into the existence of, or see to the performance or observance of, any
duty owed to a third person by a registered holder of any of its shares, or by
anyone whom it treats, subject to the Act, as the owner or registered holder of
its shares.
6.12 Transfer Agents and Registrars: The Board may from time to time
appoint an agent to maintain the central securities register or registers, and
an agent or agents to maintain a branch securities register or registers. Such a
person may be designated as transfer agent or registrar according to his
functions and one person may be appointed both registrar and transfer agent. The
Board may at any time terminate any such appointment.
PART 7
INFORMATION AVAILABLE TO SHAREHOLDERS
7.01 Available Information: Except as provided by the Act, no
Shareholder shall be entitled to obtain information respecting any details or
conduct of the Corporation's business which in the opinion of the Directors
would not be in the interest of the Corporation to communicate to the public.
7.02 Inspection of Information: The Directors may from time to time,
subject to those rights conferred by the Act, determine whether, to what extent,
at what time and place and under what conditions or regulations the documents,
books, registers and accounting records of the Corporation or any of them shall
be open to the inspection of Shareholders, and no Shareholder shall have any
right to inspect any document, book, register or accounting record of the
Corporation except as conferred by statute or authorized by the Board or by a
resolution of the Shareholders.
PART 8
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE CORPORATION
8.01 In all circumstances permitted by the Act, the Corporation shall
indemnify a Director or officer of the Corporation, a former Director or officer
of the Corporation, or a person who acts or acted at the Corporation's request
as a director or officer of a body corporate of which the Corporation is or was
a shareholder or a creditor, and his heirs and legal representatives, from and
against:
(a) all costs, charges and expenses, including an amount to settle an action
or satisfy a judgement reasonably incurred by him in respect of any
civil, criminal or administrative action or proceeding to which he is
made a party by reason of being or having been a Director or officer of
the Corporation or such body corporate; and
(b) all other costs, charges and expenses reasonably incurred in connection
with the defence of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been
a Director or officer of the Corporation or such body corporate.
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SCHEDULE B
THE STATUTORY PROVISIONS CONFERRING THE RIGHT OF DISSENT AND APPRAISAL ARE
TECHNICAL AND COMPLEX. ANY HOLDER OF SHARES WHO WISHES TO EXERCISE THE RIGHT OF
DISSENT AND APPRAISAL (A "DISSENTING SHAREHOLDER") SHOULD SEEK ITS OWN LEGAL
ADVICE, AS FAILURE TO COMPLY STRICTLY WITH THE PROVISIONS OF THE BUSINESS
CORPORATION ACT (ALBERTA) (THE "ACT") MAY PREJUDICE THE RIGHT OF DISSENT.
A Dissenting Shareholder may only claim under Section 184 of the Act with
respect to all of the shares of a class held by the Dissenting Shareholder or on
behalf of any one beneficial owner and registered in the name of the Dissenting
Shareholder. The filing of a notice of dissent does not deprive a shareholder of
the right to vote on the special resolution and a vote against the special
resolution does not constitute notice of dissent.
In order to exercise his or her right of dissent, a Dissenting Shareholder must
send to the Corporation a written objection to the special resolution at or
before the Annual and Special General Meeting of Shareholders to be held
December 15, 1998 (the "Meeting"). After the adoption of the special resolution
at the Meeting, an application may be made to the Court of Queen's Bench of
Alberta (the "Court") by originating notice made either by the Corporation or by
the Dissenting Shareholder, provided the Dissenting Shareholder sent an
objection to the Corporation at or before the Meeting, to fix the fair value of
the shares of the Dissenting Shareholder. If such an application is made, the
Corporation shall, unless the Court otherwise orders, send to each Dissenting
Shareholder a written offer to pay the amount considered by the directors to be
the fair value of the shares. Unless the Court otherwise orders, such offer
shall be sent to each Dissenting Shareholder at least ten days before the date
on which the application is returnable, if the Corporation is the applicant, or
within ten days after the Corporation is served with a copy of the originating
notice, if the Dissenting Shareholder is the applicant. Every such offer shall
be made on the same terms and contain or be accompanied by a statement showing
how the value was determined.
A Dissenting Shareholder may make an agreement with the Corporation for the
purchase of the Dissenting Shareholder's shares by the Corporation, in the
amount of the Corporation's offer or otherwise, at any time before the Court
pronounces an order fixing the fair value of the shares.
In connection with any application to the Court, the Court may give direction
for: the joining as parties of all Dissenting Shareholders whose shares have not
been purchased by the Corporation and for the representation of Dissenting
Shareholders who, in the opinion of the Court, are in need of representation;
the trial of issues and interlocutory matters, including pleadings and
examinations for discovery; the payment to the shareholders of all or part of
the sum offered by the Corporation for the shares; the deposit of share
certificates with the Court or with the Corporation or its transfer agent; the
appointment or payment of independent appraisers, and the procedures to be
followed by them; the service of documents; and the burden of proof of the
parties. A Dissenting Shareholder is not required to give security for costs in
respect of such application and except in special circumstances shall not be
required to pay costs of the application or appraisal. On such application the
Court shall make an order fixing the fair value of the shares of all Dissenting
Shareholders who are parties to the application, give judgment in that amount
against the Corporation and in favour of each of
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those Dissenting Shareholders, and fix the time in which the Corporation must
pay that amount to the Dissenting Shareholders.
Upon the earlier of: (i) the Corporation implementing the special resolution;
(ii) the making of an agreement between the Corporation and the Dissenting
Shareholder as to the payment to be made by the Corporation for the Dissenting
Shareholder's shares, whether by the acceptance of the Corporation's offer or
otherwise; and (iii) the pronouncement of an order by the Court, the Dissenting
Shareholder ceases to have any rights as a shareholder other than the right to
be paid the fair value of the Dissenting Shareholder's shares in the amount
agreed between the Corporation and the Dissenting Shareholder or in the amount
of the judgment, as the case may be. Until one of such events occurs, the
Dissenting Shareholder may withdraw the dissent or the Corporation may rescind
the resolution and in either event proceedings under Section 184 of the Act
shall be discontinued.
The Court may in its discretion allow a reasonable rate of interest on the
amount payable to each Dissenting Shareholder, from the date on which the
Dissenting Shareholder ceases to have any rights as a shareholder, as described
above, until the date of payment.
The Corporation shall not make a payment to a Dissenting Shareholder under
Section 184 of the Act if there are reasonable grounds for believing that the
Corporation is or would after the payment be unable to pay its liabilities as
they become due or the realizable value of the Corporation's assets would
thereby be less than the aggregate of its liabilities. In such case the
Corporation shall, within ten days after the pronouncement of an order by the
Court or the making of an agreement between the Dissenting Shareholder and the
Corporation as to the payment to be made for the Dissenting Shareholder's
shares, notify each Dissenting Shareholder that it is unable lawfully to pay
Dissenting Shareholders for their shares. Notwithstanding that a judgment has
been given in favour of the Dissenting Shareholder, if the Corporation is unable
to lawfully pay the Dissenting Shareholder, the Dissenting Shareholder, by
written notice delivered to the Corporation within thirty days after receiving
the notice that the Corporation may not lawfully pay the Dissenting Shareholder,
may withdraw the notice of objection, in which case the Corporation is deemed to
consent to withdrawal and the Dissenting Shareholder is reinstated with full
rights as a shareholder, failing which the Dissenting Shareholder retains a
status as a claimant against the Corporation, to be paid as soon as the
Corporation is lawfully able to do so or, in a liquidation, to rank subordinate
to the rights of creditors of the Corporation but in priority to its
shareholders.
BUSINESS CORPORATIONS ACT (ALBERTA)
SHAREHOLDER'S RIGHT TO DISSENT
184
(1) Subject to sections 185 and 234, a holder of shares of any class of a
corporation may dissent if the corporation resolves to
(a) amend its articles under section 167 or 168 to add, change or
remove any provisions restricting or constraining the issue or
transfer of shares of that class,
(b) amend its articles under section 167 to add, change or remove any
restrictions on the business or businesses that the corporation
may carry on,
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(c) amalgamate with another corporation, otherwise than under section
178 or 180.1,
(d) be continued under the laws of another jurisdiction under section
182, or
(e) sell, lease or exchange all or substantially all its property
under section 183.
(2) A holder of shares of any class or series of shares entitled to vote
under section 170, other than section 170(1)(a), may dissent if the
corporation resolves to amend its articles in a manner described in that
section.
(3) In addition to any other right he may have, but subject to subsection
(20), a shareholder entitled to dissent under this section and who
complies with this section is entitled to be paid by the corporation the
fair value of the shares held by him in respect of which he dissents,
determined as of the close of business on the last business day before
the day on which the resolution from which he dissents was adopted.
(4) A dissenting shareholder may only claim under this section with respect
to all the shares of a class held by him or on behalf of any one
beneficial owner and registered in the name of the dissenting
shareholder.
(5) A dissenting shareholder shall send the corporation a written objection
to a resolution referred to in subsection (1) or (2)
(a) at or before any meeting of shareholders at which the resolution
is to be voted on, or
(b) if the corporation did not send notice to the shareholder of the
purpose of the meeting or of his right to dissent, within a
reasonable time after he learns that the resolution was adopted
and of his right to dissent.
(6) An application may be made to the Court by originating notice after the
adoption of a resolution referred to in subsection (1) or (2),
(a) by the corporation, or
(b) by a shareholder if he has sent an objection to the corporation
under subsection (5),
to fix the fair value in accordance with subsection (3) of the shares of
a shareholder who dissents under this section.
(7) If an application is made under subsection (6), the corporation shall,
unless the Court otherwise orders, send to each dissenting shareholder a
written offer to pay him an amount considered by the directors to be the
fair value of the shares.
(8) Unless the Court otherwise orders, an offer referred to in subsection
(7) shall be sent to each dissenting shareholder
(a) at least 10 days before the date on which the application is
returnable, if the corporation is the applicant, or
(b) within 10 days after the corporation is served with a copy of the
originating notice, if a shareholder is the applicant.
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(9) Every offer made under subsection (7) shall
(a) be made on the same terms, and
(b) contain or be accompanied by a statement showing how the fair
value was determined.
(10) A dissenting shareholder may make an agreement with the corporation for
the purchase of his shares by the corporation, in the amount of the
corporation's offer under subsection (7) or otherwise, at any time
before the Court pronounces an order fixing the fair value of the
shares.
(11) A dissenting shareholder
(a) is not required to give security for costs in respect of an
application under subsection (6), and
(b) except in special circumstances shall not be required to pay the
costs of the application or appraisal.
(12) In connection with an application under subsection (6), the Court may
give directions for
(a) joining as parties all dissenting shareholders whose shares have
not been purchased by the corporation and for the representation
of dissenting shareholders who, in the opinion of the Court, are
in need of representation,
(b) the trial of issues and interlocutory matters, including
pleadings and examinations for discovery,
(c) the payment to the shareholder of all or part of the sum offered
by the corporation for the shares,
(d) the deposit of the share certificates with the Court or with the
corporation or its transfer agent,
(e) the appointment and payment of independent appraisers, and the
procedures to be followed by them,
(f) the service of documents, and
(g) the burden of proof on the parties.
(13) On an application under subsection (6), the Court shall make an order
(a) fixing the fair value of the shares in accordance with subsection
(3) of all dissenting shareholders who are parties to the
application,
(b) giving judgment in that amount against the corporation and in
favour of each of those dissenting shareholders, and
(c) fixing the time within which the corporation must pay that amount
to a shareholder.
(14) On
(a) the action approved by the resolution from which the shareholder
dissents becoming effective,
(b) the making of an agreement under subsection (10) between the
corporation and the dissenting shareholder as to the payment to
be made by the corporation for his shares, whether by the
acceptance of the corporation's offer under subsection (7) or
otherwise, or
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(c) the pronouncement of an order under subsection (13),whichever
first occurs, the shareholder ceases to have any rights as a
shareholder other than the right to be paid the fair value of his
shares in the amount agreed to between the corporation and the
shareholder or in the amount of the judgment, as the case may be.
(15) Subsection (14)(a) does not apply to a shareholder referred to in
subsection (5)(b).
(16) Until one of the events mentioned in subsection (14) occurs,
(a) the shareholder may withdraw his dissent, or
(b) the corporation may rescind the resolution, and in either event
proceedings under this section shall be discontinued.
(17) The Court may in its discretion allow a reasonable rate of interest on
the amount payable to each dissenting shareholder, from the date on
which the shareholder ceases to have any rights as a shareholder by
reason of subsection (14) until the date of payment.
(18) If subsection (20) applies, the corporation shall, within 10 days after
(a) the pronouncement of an order under subsection (13), or
(b) the making of an agreement between the shareholder and the
corporation as to the payment to be made for his shares, notify
each dissenting shareholder that it is unable lawfully to pay
dissenting shareholders for their shares.
(19) Notwithstanding that a judgment has been given in favour of a dissenting
shareholder under subsection (13)(b), if subsection (20) applies, the
dissenting shareholder, by written notice delivered to the corporation
within 30 days after receiving the notice under subsection (18), may
withdraw his notice of objection, in which case the corporation is
deemed to consent to the withdrawal and the shareholder is reinstated to
his full rights as a shareholder, failing which he retains a status as a
claimant against the corporation, to be paid as soon as the corporation
is lawfully able to do so or, in a liquidation, to be ranked subordinate
to the rights of creditors of the corporation but in priority to its
shareholders.
(20) A corporation shall not make a payment to a dissenting shareholder under
this section if there are reasonable grounds for believing that
(a) the corporation is or would after the payment be unable to pay
its liabilities as they become due, or
(b) the realizable value of the corporation's assets would thereby be
less than the aggregate of its liabilities.
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SONUS CORP.
--------------
PROXY
--------------
FOR USE AT THE ANNUAL AND SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 15, 1998
The undersigned shareholder of SONUS CORP. (the "Corporation") hereby appoints
Douglas F. Good, Chairman of the Board of the Corporation, or failing him,
Brandon M. Dawson, President and a director of the Corporation, or failing him,
Gregory J. Frazer, Ph.D., a director of the Corporation, or instead of any of
the foregoing, ------------------------- as proxy for the undersigned to attend
and act for and on behalf of the undersigned at the Annual and Special General
Meeting of the Shareholders of the Corporation (the "Meeting") to be held on the
15th day of December, 1998, and at any adjournment or adjournments thereof, to
the same extent and with the same power as if the undersigned were personally
present at the said meeting or such adjournment or adjournments thereof and,
without limiting the generality of the power hereby conferred, the designee
named above is specifically directed to vote (or withhold or abstain from
voting) the Common Shares and Preferred Shares of the Corporation registered in
the name of the undersigned as indicated below.
1. RESOLUTION APPROVING THE CONTINUANCE OF THE CORPORATION TO THE YUKON
TERRITORIES.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. RESOLUTION FIXING THE NUMBER OF DIRECTORS AT SIX.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. ELECTION OF DIRECTORS.
FOR [ ] WITHHOLD VOTE [ ]
all nominees listed (except as to all nominees
as marked to the contrary below) listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Joel Ackerman, Haywood D. Cochrane, Jr., Brandon M. Dawson, William
DeJong, Gregory J. Frazer, Ph.D., Hugh T. Hornibrook
4. RESOLUTION APPROVING THE APPOINTMENT OF KPMG PEAT MARWICK LLP as the
auditors of the Corporation and authorizing the directors to fix their
remuneration.
FOR [ ] WITHHOLD VOTE [ ]
5. RESOLUTION APPROVING AMENDMENT TO STOCK AWARD PLAN.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(PLEASE SIGN AND DATE ON REVERSE)
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<PAGE>
6. To vote at the discretion of the proxy designee on any amendments or
variations to the foregoing and on any other matters (other than matters
which are to come before the Meeting and which are the subject of
another proxy executed by the undersigned) which may properly come
before the Meeting or any adjournment or adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE CORPORATION AT THE
DIRECTION OF THE BOARD OF DIRECTORS. SHAREHOLDERS HAVE THE RIGHT TO APPOINT A
PERSON TO ATTEND AND ACT ON THEIR BEHALF AT THE MEETING OTHER THAN ONE OF THE
PERSONS LISTED ABOVE AND MAY EXERCISE SUCH RIGHT BY INSERTING THE NAME OF SUCH
PERSON (WHO NEED NOT BE A SHAREHOLDER) IN THE BLANK SPACE PROVIDED ABOVE FOR
THAT PURPOSE. THE UNDERSIGNED REVOKES ANY INSTRUMENT OF PROXY PREVIOUSLY GIVEN
FOR THE PURPOSE OF THE MEETING IN RESPECT OF COMMON SHARES AND PREFERRED SHARES
HELD BY THE UNDERSIGNED.
DATED --------------, 1998.
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Signature of Shareholder(s)
NOTES:
1. Please sign exactly as your name
appears below. If the shares are
jointly held, each joint owner
named should sign. When signing as
attorney, personal representative,
administrator, or other fiduciary,
please give full title. If a
corporation or partnership, please
sign in full corporate or
partnership name by authorized
officer or person. If the proxy
form is not dated in the space
provided, it is deemed to bear the
date on which it is mailed by the
management of the Corporation.
2. IN THE EVENT THAT NO SPECIFICATION
HAS BEEN MADE WITH RESPECT TO THE
VOTING ON ONE OR MORE OF THE
RESOLUTIONS REFERRED TO IN ITEMS 1
THROUGH 5 ABOVE, THE PROXY DESIGNEE
IS INSTRUCTED TO VOTE THE SHARES
REPRESENTED BY THIS PROXY ON EACH
SUCH MATTER AND FOR SUCH
RESOLUTION. MARKING THE "ABSTAIN"
BOX ON ITEMS 1, 2, AND 5 WILL BE
DEEMED TO HAVE THE SAME EFFECT AS A
VOTE AGAINST THE PROPOSAL.
3. To be effective, proxies must be
received before 10 a.m. (Calgary
time) on December 14, 1998, by CIBC
Mellon Trust Company, Suite 600,
333-7th Avenue S.W., Calgary,
Alberta, Canada T2P 2Z1 or be
presented at the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
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