<PAGE> COVER
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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-SB
General Form For Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
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POSITION INC.
(Name of Small Business Issuer in Its Charter)
ALBERTA, CANADA
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6815E - 40th STREET, S.E.
CALGARY, ALBERTA,
CANADA T2C 2W7
(Address of Principal
Executive Office) (Zip Code)
(800) 495-4175
(Issuer's Telephone Number, Including Area Code)
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Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
<PAGE>
TABLE OF CONTENTS Page
GLOSSARY
THE COMPANY
BUSINESS OF THE COMPANY
Background
Company Strategy
Products
Marketing and Business Development Strategy
Distribution
Competition
Manufacturing
Specialized Personnel
Facilities
Proprietary Technology
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Results of Operations
Liquidity and Capital Resources
Trends in Liquidity and Capital Resources
DESCRIPTION OF SECURITIES
Common Shares
Preferred Shares
DIVIDEND POLICY
PRINCIPAL SHAREHOLDERS
RECENT SALES OF UNREGISTERED SECURITIES
<PAGE>
PRICE RANGE AND TRADING VOLUME OF
THE COMMON SHARES
DIRECTORS AND OFFICERS
Aggregate Ownership of Common Shares
Management
Securities Regulatory or Other Sanctions
EXECUTIVE COMPENSATION
Named Executive Officers
Options Granted to Named Executive Officers
Employment Agreements
Compensation of Directors
Directors' and Officers' Insurance
STOCK OPTION PLAN
OPTIONS
INDEBTEDNESS OF DIRECTORS AND
SENIOR OFFICERS AND PROMOTERS
PROMOTERS
INTEREST OF MANAGEMENT AND OTHERS
IN MATERIAL TRANSACTIONS
CONFLICTS OF INTEREST
RISK FACTORS
LEGAL MATTERS
AUDITORS, TRANSFER AGENT AND REGISTRAR
AUDITORS' REPORT
FINANCIAL STATEMENTS
<PAGE>
GLOSSARY
The following is a glossary of certain terms which are commonly used in this
Registration Statement:
"accuracy" or "accurate" means the difference between the position of an
object as estimated by a positioning system and its true position;
"Acquisition Agreement" means the agreement effective May 1, 1996, made at
non arm's length among the Company, Pulsearch Inc. and certain Pulsearch Inc.
shareholders;
"Agent's Option" means the Agent's compensation option granted by the Company
to the Agent pursuant to a Subscription Agreement;
"Company" or "Position" means Position Inc. and includes, depending upon the
context, the corporation formed pursuant to the amalgamation of Position and
Pulsearch Inc.;
"Differential GPS" or "DGPS" means a method for improving the accuracy (and
often other characteristics) of GPS measurements that employs ground
facilities of known position to determine corrections in GPS measurements and
the transmitting of these corrections to users;
"dual frequency" means the usage of two of the positioning signals being
transmitted from GPS satellites to produce higher accuracy;
"ephemeris" means a set of satellite orbit parameters that is used by GPS
receivers and software to calculate GPS satellite positions and velocities;
"Geomatics" is a field of activities which systematically integrates all the
means used to acquire and manage spatial data, and deals with the production
and management of spatial information;
"GIS" means geographical information systems;
"Global Positioning System" or "GPS" means a constellation of 24 satellites
controlled by the U.S. Department of Defense, which system is designed to
provide world-wide positioning services with an accuracy of 100 meters;
"NCS" means NCS International, Inc., a land and marine survey company;
"OEM" means original equipment manufacturer;
"PCTL" means Pulsearch Consolidated Technology Ltd.;
<PAGE>
"precise" means repeatable accuracy to less than one meter;
"Pulsearch" and "Pulsearch Inc." means Pulsearch Navigation Systems Inc.;
"Racal" means Racal Survey USA, Inc. a Houston-based communications and
survey company;
"Selective Availability" or "SA" means the method by which intentional errors
in timing and positioning data are introduced into the civilian GPS signal
whereby SA currently degrades the accuracy of the position to approximately
100 meters;
"Share Sale Agreement" means the agreement effective November 22, 1996, and
entered into among Position, Racal and NCS;
"Trustee" means the CIBC-Mellon Trust Company;
"wireless" means radio frequency communications.
<PAGE> 1
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORICAL
The Company was incorporated as a private company by certificate of
incorporation under the laws of the Province of Alberta on April 18, 1996 as
691807 Alberta Ltd. and changed its name to "Position Inc." on May 17, 1996.
By Articles of Amendment dated October 1, 1996, the Company amended its
articles to become a distributing corporation and also amended its share
capital. On January 17, 1997 the Company effected a short form amalgamation
with its wholly-owned subsidiary Pulsearch Inc., the resulting entity being
Position. On March 5, 1997, the Company amended its articles to further
remove certain private corporation provisions.
The Company's registered and records office is at 1500, 407 - 2nd Street SW,
Calgary, Alberta T2P 2Y3. The Company's principal office is located at
6815E - 40th Street S.E., Calgary, Alberta T2C 2W7. The Company and its
sole subsidiary have approximately 30 full-time and 2 part-time employees. U.S.
Subsidiary Position Inc. USA ("Position USA"), a wholly-owned subsidiary,
was incorporated as a private company by certificate of incorporation under the
laws of the State of Texas on October 28, 1996. The registered and records
office is located at 2500 Wilcrest, Suite 670, Houston, Texas 77042. The
principal office is located at 16155 Park Row, Suite 190, Houston, Texas
77084. Position USA has no employees at this time.
BUSINESS OF THE COMPANY
The Company is in the business of providing electronic guidance products to
facilitate accurate positioning and navigation information in the agricultural
and utility/infrastructure industries. The Company develops, manufactures,
markets and supports these products, integrating Global Positioning System
("GPS"), data communications and geographical information systems ("GIS")
technologies with proprietary software. The products are marketed world-wide
to commercial OEM's and end-users, with current emphasis within North
America.
<PAGE> 2
Company growth is achieved through internal product development, business and
market development, and through acquisition of complementary technology
companies. The Company commenced substantial operations May 1, 1996 with the
purchase of a controlling interest in Pulsearch Inc.
The Company has developed and is marketing two products for the agriculture
Industry and is pursuing cross market applications of its technologies.
Management intends to continue to identify and evaluate new product
opportunities that evolve out of its marketing and development groups which,
in the view of management, have potential to provide growth opportunities for
Position.
Background
Position commenced substantial operations on May 1, 1996, with its first
acquisition, pursuant to the Acquisition Agreement, of a 76% controlling
interest, and subsequently pursuant to the Share Sale Agreement, an
acquisition of a 100% interest in Pulsearch Inc., a geomatics/wireless
solution company with eight years of project engineering experience. Under
Position, the business strategy of the new entity was adjusted from generating
revenues through customized engineering projects towards a focus on
high-volume, high-margin product development and marketing opportunities in
the survey, agriculture and transportation industries. See "Material
Contracts".
Company Strategy
The Company's strategy is to grow the business through two parallel paths,
being:
1. designing, developing, integrating and building precise positioning
products for international distribution in the agricultural and
utility/infrastructure markets; and
2. acquiring technology companies in the GPS and related industries, with
the objective of integrating their development efforts and marketing the
resulting products and applications on an international scale.
Management intends to continue to identify and evaluate new product
opportunities that evolve out of its marketing and development groups, which,
in the view of management, have potential to provide growth opportunities for
Position.
<PAGE> 3
Products
<TABLE>
<CAPTION>
Products built and marketed by Position in the agriculture industry include
the following:
<S> <C> <C>
Product Description Industry
________________ ________________________________________ ____________________________
Cultiva-Contour Precise, parallel guidance system for Contract Custom applicators.
agriculture custom applicators with Large commercial farming
dynamic navigation Operations.
Cultiva-Marker Simple, robust, parallel guidance system Contract Custom
using GPS to guide a farm vehicle in Commercial applicators.
parallel lines to 1 meter accuracy using Combines.
DGPS Large farming operators.
At this time the company is investigating product opportunities in the
utility infrastructure industry and is at the proof of concept stage only.
</TABLE>
Cultiva-Contour;
The Cultiva-Contour; ("Contour") is a precise guidance software/hardware
system for the agriculture industry utilizing GPS technology, virtual view
software and advanced data management algorithms. Contour allows custom
applicators, when applying fertilizers and chemicals, to precisely navigate
fields with a minimum of gap and overlap thereby increasing the efficiency of
their spraying operation. Using the Contour product after a field has been
sprayed, the custom applicators can then return to the Contour recorded
positions on their computer, locate their exact position on the field for
areas that were missed and touch up those gaps with further chemical
application. Contour can also be interfaced with various electronic spray
systems to more precisely lay-down expensive chemicals. The Company has
applied for USA and Canadian patent protection of the underlying "processes"
of Contour. This product is in early commercial production.
<PAGE> 4
Cultiva-Marker;
The Cultiva-Marker; ("Marker") parallel guidance product is a simple,
robust, low cost guidance system employing an economical DGPS engine
to guide farm tractors and self propelled crop sprayers in straight, parallel
lines on farmer's fields. The Marker GPS parallel guidance
system eliminates the operational problems associated with the traditional
marker systems at a competitive price. This device has sub-meter accuracy,
and provides the tractor driver with guidance information to drive straight
and equi-distant lines in the field. This will help to reduce overlap and
gaps (waste) between swaths, and may reduce operator stress and fatigue.
The Company has copyrighted the software and screen layout of Marker.
This product is in commercial production.
Marketing and Business Development Strategy
The Company plans to make further expenditures on research and development,
on software applications, purchasing parts for assembly and manufacturing,
hiring assemblers and sales people, advertising, participating in tradeshows
and general marketing functions.
The marketing strategy is fundamentally focused on the specific needs of the
agriculture industry. The agriculture industry has a number of unique
requirements which are addressed by the Company's product offering
to successfully satisfy the customers' needs.
In addition to the agricultural industry Product Manager, there is also a
Product Manager to identify other industry applications. The Product Manager
is responsible for determining, through extensive market analysis and market
knowledge, what technology can best be applied to solve the users' unique
problems.
Other duties of the Product Managers include: sourcing and aligning with
substantial strategic alliance partners; advertise and promote the Company's
products; maintaining a current understanding of the competition; developing
dealer-distribution channels; monitoring and guiding the life-cycles of the
products; measuring customer satisfaction and pursuing adequate gross
margins to ensure Company profitability.
<PAGE> 5
Distribution
The Company is currently distributing its agriculture products in North
America through six major agriculture distributors. There are a number of
additional agriculture product dealers and distributors who have expressed
interest in carrying these products. The Company is also currently pursuing
distribution opportunities through major U.S. OEMs.
Competition
The GPS industry itself consists of independent hardware manufacturers,
software developers, systems consultants and systems integrators. The GPS
industry, though dominated by large corporations, is fragmented and only
beginning to evolve. Major participants in the GPS industry include Motorola,
Inc. and Rockwell Collins Commercial Avionics. Currently, these companies are
not considered to be direct competitors as they both concentrate on the
low-end consumer product market by mass producing inexpensive GPS receivers
and corresponding products.
Major independent players in the agriculture guidance market are Trimble
Navigation Systems of Sunnyvale California and Satloc, Inc. of Phoenix Arizona.
Both companies have competing products of lesser technology and utility but
have developed a strong market presence through distribution and market
awareness.
Many of the large integrated farm equipment manufactures, such as John Deere,
Case IH, Caterpillar, and AGCO have announced plans for guidance products
as part of their precision agriculture programs, but to date the technology
used is rudimentary compared to the Company's.
All of the current Position applications consist primarily of software that
has been developed by the Company engineers over the previous ten years. A
significant barrier to entry for any competitor is the development of software
source codes that lies at the heart of any systems integration. These
libraries of software routines are the building blocks with which Position
creates and develops the majority of its end-user applications.
The Company competes with manufacturers which, depending on the
product involved, range from large diversified enterprises comparable in scope
and resources to the Company to smaller companies specializing in particular
products. Factors which affect the Company's competitive posture are its
research and development efforts, the quality of its products and services and
its marketing and pricing strategies.
<PAGE> 6
Participation in a very competitive industry, with constant changes in
technology, requires continuing and extensive investment in research and
development programs. Management believes, looking forward, that Position
Inc.'s commitment to research and development programs to improve existing
products and services and to develop new products and services, together with
its utilization of state-of-the-art technology, should allow the Company to
remain competitive.
The international focus of expansion may experience intense competition in
world-wide markets from numerous competitors ranging in size from some
of the world's largest companies to small, specialized firms. Competitive
factors in the market for the segment's products are price, service, delivery,
quality, availability, warranty, product features, company image, time-to-
market and product and system performance.
Manufacturing
In respect of its agricultural-related products, Position anticipates entering
into third-party board-level manufacturing contracts to handle the
sub-assemblies, with Position completing the final assembly, testing and
quality control.
The Company sources its materials from a variety of suppliers. Due to the
commonality of most of the components used in the manufacturing products, the
management of the Company does not foresee any material restrictions on the
Company's operations either from sources or availability of components. There
are numerous competing suppliers who manufacture and sell electronic
components on a commodity basis. These components typically have a high rate
of technical obsolescence and the Company adjusts its manufacturing plans
accordingly.
Raw Materials and Supplies
Raw materials essential to the conduct of all the Company's business
segments generally are available at competitive prices. Many items of equipment
and components used in the production of the Company's products in all the
Company's business segments are purchased from others. Although the Company
has a broad base of suppliers and subcontractors, it is dependent upon the
ability of its suppliers and subcontractors to meet performance and quality
specifications and delivery schedules.
<PAGE> 7
Specialized Personnel
Company personnel are specialists in positioning and navigation, mathematical
modeling, filtering technology, quality control, software development and
complete system design. Position has a variety of engineering personnel with
expertise in surveying, software, computer science, circuit design and
electronics. Of a staff of 32, there are 18 technical staff with varied
and extensive experience in navigation, communications and related
disciplines.
Facilities
The main office and manufacturing space of 15,000 square feet in south Calgary
is leased pursuant to an arm's length lease dated April 1, 1997, with monthly
rental of $7,000. The lease expires April 1, 2000, and possesses a one-year
renewal option (price to be negotiated) and an expansion option.
Proprietary Technology
The Company believes that research and development, along with effective
market distribution, is a substantial barrier of entry into the Company's
target markets.
All of Position's products consist of proprietary software that has been
developed by Position personnel over the previous ten years. A key component
of the Company's GPS and wireless products is its integrated positioning
systems consisting of hundreds of thousands of lines of software code.
The Company's libraries of software routines are the key building blocks of
most of Position's products. While Position has the ability to design and
install hardware systems created for specific applications, its core
competency is the integration of Windows-based user interfaces with data from
a multitude of positioning sensors, such as GPS receivers, digital barometers,
gyros and compasses. The Company's software-driven navigation products use a
software filter to combine data from these various sensors, to yield a
position and velocity to meet user specifications.
The Company has secured copyrights and trademark registrations in both Canada
and the United States for its proprietary interest to its Contour and Marker
products. The Company has filed a patent application for the underlying
technology used in its Contour product.
<PAGE> 8
The Company is currently distributing its agriculture products in North
America through six major agriculture distributors. There are a number of
additional agriculture product dealers and distributors who have expressed
interest in carrying these products. The Company is also currently pursuing
distribution opportunities through major U.S. OEMs.
The Company intends to protect all patents, trademarks and other proprietary
rights to the extent such action is feasible. The finished goods,
advertising, local promotions and other products, services and/or ideas
will be protected and deemed proprietary to the appropriate party. The
intent is to preserve the integrity of the concept and to hold the protected
property to certain standards and monitor use of these trademarks as they
are supposed to apply to certain finished goods and products as directed by
the Company. The Company relies upon certain proprietary patents to
manufacture and develop a unique product. Any representation of these
items or trademarks should only be as directed by the Company and will
be used only with company approval. The Company primarily relies
upon the laws of unfair competition and confidentiality agreements to
protect its designs and other proprietary information.
Loans
The Company intends to utilize trade and other commercial credit, if
available. Working capital, lines of credit, and terms loans secured by
orders and accounts receivable, will be used during the routine course
of its business.
Mergers and Acquisitions
Business opportunities will be reviewed as well as the respective needs
and desires of the Company of the opportunity and, upon the basis of that
review and the relative negotiating strength of the Company, the legal
structure or method deemed by management to be suitable will be selected.
Such structure may include, but is not limited to leases, purchase and sale
agreements, licenses, joint ventures and other contractual arrangements.
The Company may act directly or indirectly through an interest in a
partnership, corporation or other form of organization.
<PAGE> 9
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of
business organization, and although it is likely, there is no assurance that
the Company would be the surviving entity. In addition, the present
management and stockholders may not have control of a majority of
the voting shares of the Company following a reorganization transaction.
As part of such a transaction, the Company's existing directors may resign
and new directors may be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in
a business opportunity through the issuance of Common Stock or
other securities of the Company. Although the terms of any such
transaction cannot be predicted, it should be noted that in certain
circumstances the criteria for determining whether or not an acquisi-
tion is a so-called "tax free" reorganization under the Internal Revenue
Code of 1986, depends upon the issuance to the stockholders of the
acquired company of a controlling interest (i.e. 80% or more) of the
common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of
these provisions rather than other "tax free" provisions provided under
the Internal Revenue Code, the Company's current stockholders would
retain in the aggregate 20% or less of the total issued and outstanding
shares. This could result in substantial additional dilution in the
equity of those who were stockholders of the Company prior to such
reorganization. Any such issuance of additional shares might also be
done simultaneously with a sale or transfer of shares representing a
controlling interest in the Company by the current officers, directors
and principal shareholders.
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available,
from registration under applicable federal and state securities
laws. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either
at the time the transaction is consummated, or under certain conditions
or at specified times thereafter. The issuance of substantial additional
securities and their potential sale into any trading market that might
develop in the Company's securities may have a depressive effect
upon such market.
<PAGE> 10
The Company will participate in a business opportunity only
after the negotiation and execution of a written agreement. Although
the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all
of the parties thereto, specify certain events of default, detail the terms
of closing and the conditions which must be satisfied by each of the
parties thereto prior to such closing, outline the manner of bearing
costs if the transaction is not closed, set forth remedies upon default,
and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
officers and principal shareholders will enter into a letter of intent
with the management, principals or owners of a prospective business
opportunity prior to signing a binding agreement. Such a letter of
intent will set forth the terms of the proposed acquisition but will not
bind any of the parties to consummate the transaction. Execution of
a letter of intent will by no means indicate that consummation of an
acquisition is probable. Neither the Company nor any of the other
parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the ac-
quisition as described in the preceding paragraph is executed. Even
after a definitive agreement is executed, it is possible that the
acquisition would not be consummated should any party elect to
exercise any right provided in the agreement to terminate it on
specified grounds.
It is anticipated that any investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require
substantial management time and attention and substantial costs for
accountants, attorneys and others.
RISK FACTORS
Potential Fluctuations in Quarterly Operating Results
There can be no assurance that the Company will be able to generate
revenue or maintain quarterly profitability in the future. The Company's
quarterly and annual results may vary significantly in the future due to a
number of factors, including: changes in revenue and product mix;
variations in average selling prices; timing of announcement and
introduction of new products by the Company and its competitors;
market acceptance of the Company's and its customer's products; gain or
<PAGE> 11
loss of significant customers; and competitive factors. Any unfavorable
changes in such factors or others could have a material adverse effect on
the Company's operating results.
Limited Operating History
The Company's business is at an early state of its development and has
a limited operating history. The likelihood of the success of the Company
must be considered in light of the risks inherent in, and the difficulties,
costs, complications and delay encountered in, the development and
marketing of new technologies. The Company's plans are based upon
anticipated rapid growth of the business. The success of the Company
will be contingent upon its ability to implement and manage this
expansion.
Marketing
The success of the Company's operating results will depend largely
on the Company's ability to market its products. Failure to achieve
projected rates of market penetration or commercial acceptance could
significantly affect the Company's pattern of revenues and expenses as
currently envisaged.
Marketing and Production Costs
The Company has based its estimates of marketing and production costs
on information which is presently considered by management to be
reliable, and has assumed the cost effective availability of materials and
supplies. The Company is reliant upon certain key suppliers for
components and no assurance can be given that the Company will not
experience delays or other difficulties in obtaining components, as a
result of trade disputes of other matters. Although management believes
that there are alternative suppliers for most of its key requirements, if its
current suppliers are unable to provide the necessary components or
otherwise fail to timely deliver products in the quantities required, any
resulting delays in the manufacture or distribution of existing products
could have a material adverse effect on the Company's results of
operations and its financial condition.
<PAGE> 12
Insurance
The sale and use of the Company's products entail risk of product
liability. Although the Company currently has product liability insurance
which it believes to be adequate for its present operations, there is no
assurance that such insurance will be sufficient or will continue to be
available on reasonable terms.
Dividends
The Company has never paid a dividend on its Common Shares and
there is no assurance that the Company will be in a financial position to
pay such dividends in the near future or at all.
Dependence on Key Personnel
The Company's success depends to a significant extent upon a number of
key employees. The Company has not entered into agreements with key
employees. The Company currently does not have key man insurance on
these employees. The loss of the services of one or more of these key
employees could have an adverse effect on the Company. The success
of the Company will depend upon the ability of key members of its
management to market its technologies successfully.
The Company's future success depends in large on part of the continued
service of its key marketing and management personnel and on its ability
to continue to attract an retain qualified employees. The competition for
such personnel is intense, and the loss of key employees could have a
material effect on the Company's financial condition and results of
operations.
New Products and Technological Change
The market for the Company's products is characterized by changing
technology, evolving industry standards and new product introductions.
The Company's success will depend upon market acceptance of its
products and its ability to enhance its existing products and to introduce
new products and features to meet changing customer requirements.
There can be no assurance that the Company will be successful in
identifying, developing, manufacturing and marketing new products or
enhancing its existing products.
<PAGE> 13
Competition
The Company's ability to market its products may be affected by
technological initiatives developed by industry competitors, including
the Company's customers. Sales of competitive products could have
an adverse effect upon the Company's business. Increased competition
could result in price reductions and loss of market share which would
adversely affect the Company's revenues and profitability. In addition,
the Company competes with more established companies, many of
which have greater financial, marketing and other resources than the
Company.
The Company carries on an extensive product development program.
Management believes, looking forward, that Position Inc.'s
commitment to research and development programs for improving
existing products and services and developing new products and services,
together with its utilization of state-of-the-art technology, should allow
the Company to remain competitive.
International Operations
As the Company carries out its operations and sells its products outside
of Canada, fluctuations in exchange rates may affect the Company's
profitability. In addition, the Company may also be subject to usual
risks associated with international operations including, but not limited
to, unclear taxation rules, political instability and the threat of partial
or total expropriation.
Future Acquisitions
The Company may seek to expand its business through the acquisition
of compatible products or businesses. There can be no assurance that
suitable acquisition candidates can be identified and acquired on terms
favorable to the Company or that the acquired operations can be
profitably operated or integrated into the Company.
<PAGE> 14
Additional Financing
The Company currently has insufficient financial resources to meet its
ongoing obligations. Therefore, additional financing is required.
Management plans to raise additional financing in the fall of 1998
sufficent to finance the Company's planned operations and expenditures
and any operating losses over the next 12 month period, and to meet certain
minimum listing requirements on a stock exchange in the United States. In
addition, the Company expects that in order to achieve its growth objectives,
it may need to raise additional funds from lenders and equity markets in the
futureto finance these growth plans. There can be no assurance that this
additional financing will be available, or if available, it will be available
on favorable terms.
Satellite Technology
The Company's products rely on signals from satellites that it does
not own or operate. Such satellites and their ground support
systems are complex electronic systems subject to electronic and
mechanical failures and possible sabotage. The satellites have
limited design lives and are subject to damage by the hostile space
environment in which they operate.
If a significant number of satellites were to become inoperable, there
could be a substantial delay before they are replaced with new satellites.
A reduction in the number of operating satellites could impair the current
utility of the GPS system or the growth of current and additional market
opportunities, which , in either case, would adversely affect the
Company's results of operations. In addition, there is no assurance that
the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period of time, nor that the
policies of the U.S. government for use of GPS, without charge, will
remain unchanged.
Dependence Upon Third-Party Suppliers.
Although the Company is not dependent on any one supplier, the
Company is dependent on the ability of its third-party suppliers to supply
the Company's raw materials as well as certain specific component parts.
Failure by the Company's third-party suppliers to meet the Company's
requirements could have a material adverse effect on the Company.
There can be no assurance that the Company's third-party suppliers will
dedicate sufficient resources to meet the Company's scheduled delivery
requirements or that the Company's suppliers will have sufficient
resources to satisfy the Company's requirements during any period of
sustained demand. Failure of manufacturers or suppliers to supply, or
<PAGE> 15
delays in supplying, the Company with raw materials or certain
components, or allocations in the supply of certain high demand raw
components could materially adversely affect the Company's operations
and ability to meet its own delivery schedules on a timely and
competitive basis.
Patents, Trademarks and Proprietary Information.
The Company may apply for additional patents relating to other aspects
of its products. There can be no assurance as to the breadth or degree of
protection which pending or future patents or trademarks, if any, may
afford the Company, that any patent or trademark applications will result
in issued patents or trademarks, that the Company's patents or trademarks
will be upheld, if challenged, or that competitors will not develop similar
or superior methods or products outside the protection of any patent issued
to the Company. Although the Company believes that its patent pending and
trademarks and the Company's products do not and will not infringe patents or
trademarks or violate the proprietary rights of others, it is possible that the
Company's patent pending or trademark rights may not be valid or that
infringement of existing or future patents, trademarks or proprietary rights
may occur. In the event the Company's products infringe patents or
proprietary rights of others, the Company may be required to modify the
design of its products, change the name of its products or obtain a
license for certain technology. There can be no assurance that the
Company will be able to do so in a timely manner, upon acceptable terms
and conditions, or at all. Failure to do any of the foregoing could have a
material adverse effect upon the Company. In addition, there can be no
assurance that the Company will have the financial or other resources
necessary to enforce or defend a patent or trademark infringement or
proprietary rights violation action which may be brought against it.
Moreover, if the Company's products infringe patents, trademarks or
proprietary rights of others, the Company could, under certain
circumstances, become liable for damages, which also could have a
material adverse effect on the Company.
Expansion
The Company's proposed product expansion will also require the
implementation of enhanced operational and financial systems and will
require additional management, operational and financial resources.
Failure to implement these systems and add these resources could have a
material adverse effect on the Company's results of operations and
financial condition. There can be no assurance that the Company will be
<PAGE> 16
able to manage its expanding operations effectively or that it will be able
to maintain or accelerate its growth. In addition, there can be no assurance
of the viability of the Company's products in new geographic regions or
particular local markets.
Government Regulation
The Company must comply with state laws and a wide range of other
state and local rules and regulations applicable to their businesses. See
"Business--Government Regulation." Continued compliance with this
broad federal, state and local regulatory network is essential and costly,
and the failure to comply could have a material adverse effect on the
Company. Violations of laws and/or state laws and regulations governing
substantive aspects of doing business in a particular state could subject
the Company and its affiliates to rescission offers, monetary damages,
penalties, imprisonment and/or injunctive proceedings.
Issuance of Preferred Stock may adversely Affect Holders of
Common Stock or Delay or Prevent Corporate Take-Over
The Company's Articles of Incorporation provide that preferred
stock may be issued by the Company from time to time in one or
more series. The Board of Directors of the Company is authorized
to determine the rights, preferences, privileges and restrictions
granted to and imposed upon any wholly unissued series of
preferred stock and the designation of any such shares, without
any vote or action by the Company's shareholders. The Board of
Directors may authorize and issue Preferred stock with voting
power or other rights that could adversely affect the voting
power or other rights of the holders of Common Stock. In
addition, the issuance of preferred stock could have the effect
of delaying, deferring or preventing a change in control of the
Company, because the terms of preferred stock that might be
issued could potentially prohibit the Company's consummation of
any merger, reorganization, sale of substantially all of its
assets, liquidation or other extraordinary corporate transaction
without the approval of the holders of the outstanding shares of
the preferred stock.
<PAGE> 17
No Prior Trading Market; Potential Volatility of Stock Price
The Company has a trading symbol of PZN.CA in respect of its Common
Shares which have been listed and posted for trading through the facilities
of The Alberta Stock Exchange since April 30, 1997.
In the United States there has been no public market for the
Common Stock, and there can be no assurance that an active
trading market will develop or be sustained. At a future date,
provided a public market for the stock does develop, the market
price of the shares of Common Stock is likely to be highly
volatile and may be significantly affected by factors such as
fluctuations in the Company's operating results, announcements
of technological innovations or new products and/or services by
the Company or its competitors, governmental regulatory action,
developments with respect to patents or proprietary rights and
general market conditions. In addition, the stock market has
from time-to-time experienced significant price and volume
fluctuations that are unrelated to the operating performance of
particular companies.
Lack of Diversification
Because of the limited financial resources that the Company has, it is
unlikely that the Company will be able to significantly diversify its
operations from its core area of competency (see Proprietary Technologies).
The Company's probable inability to diversify its activities into more than
a few cross industries will subject the Company to economic fluctuations
within a particular businesses or industries and therefore increase the risks
associated with the Company's operations.
Indemnification of Officers and Directors.
The Company's Bylaws provide for the indemnification of its directors,
officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to
which they become a party arising from their association with or activities
on behalf of the Company. The Company will also bear the expenses of
such litigation for any of its directors, officers, employees, or agents, upon
such person's promise to repay the Company therefor if it is ultimately
determined that any such person shall not have been entitled to
indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
<PAGE> 18
Dependence upon Outside Advisors
To supplement the business experience of its officers and directors, the
Company may be required to employ consultants or advisors. It is
anticipated that such persons may be engaged on an "as needed" basis
without a continuing fiduciary or other obligation to the Company.
Rule 144 Sales
Some of the outstanding shares of Common Stock held by present
stockholders are "restricted securities" within the meaning of Rule 144
under the Securities Act of 1933, as amended. As restricted shares,
these shares may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under
applicable state securities laws. Rule 144 provides in essence that a
person who has held restricted securities for a prescribed period may,
under certain conditions, sell every three months, in brokerage
transactions, a number of shares that does not exceed the greater of 1.0%
of a company's outstanding common stock or the average weekly trading
volume during the four calendar weeks prior to the sale. As a result of
revisions to Rule 144 which became effective on or about April 29, 1997,
there will be no limit on the amount of restricted securities that may be
sold by a nonaffiliate after the restricted securities have been held by the
owner for a period of two years. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations
of shares of Common Stock of present stockholders, may have a
depressive effect upon the price of the Common Stock in any market
that may develop.
Year 2000 Uncertainties
Recently, national attention has focused on the potential problems and
costs resulting from computer programs being written using two digits
rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the
year 2000 complaint, there can be no assurance until the year 2000 that all
systems will function adequately then. If they do not, the result could be a
system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
<PAGE> 19
Management has determined that the application software in the Company's
Products is year 2000 compliant. The Company does not use proprietary
application software in its operations. Further, no proprietary computer
hardware is used in the Company's products or operations. The Company's
accounting system is year 2000 compliant, according to the manufacturer.
It is management's opinion that the year 2000 issue is not a material threat
to the Company's operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
An overview of the Company's operations during the last two fiscal periods
follows:
For period ended: Nine Months Year Ended Nine Months
June 30, 1998 September 30 September 30
1998 1997 1996(1)
(all figures are in Canadian Dollars except for number of Common Shares)
Revenue 2,109,855 1,729,046 728,978
Gross margin 514,549 763,342 352,919
Research, development and
engineering, net 143,279 98,222 47,192
Sales, marketing and
business development 956,951 752,914 178,877
General and administrative 1,031,640 1,292,928 440,505
Interest (14,717) 181,242 25,748
Loss (2,008,106) (1,850,640) (312,401)
Working capital (324,589) 1,902,660 295,878
Capital assets, net 536,961 494,218 77,835
Rental pool equipment - 205,000 -
Deferred development
costs, net 2,100,813 1,120,013 460,060
Lease obligations 68,186 105,330 -
Non-controlling interest - - 157,904
Retained earnings (deficit) (4,114,256) (2,106,150) (255,510)
Share capital 6,174,443 5,948,040 1,000,379
Common shares outstanding(2) 10,931,005 9,889,212 4,415,546
Notes:
1. This reflects consolidated financial information for Position and
Pulsearch. Position's year ends September 30, whereas Pulsearch's years
ended December 31.
2. There are 9,925,712 Common Shares issued and outstanding as of the date
of this Registration Statement of which 4,703,462 Common Shares are subject
to the terms of the escrow agreements, which Common Shares will be releasable
as set forth under "Escrowed Shares".
<PAGE> 20
Results of Operations
The following information should be reviewed in conjunction with the
Company's "Consolidated Financial Statements".
1998 Compared to 1997
Revenue for the nine months ended June 30, 1998 of $2,109,855 represents an
increase of $561,631 from the comparative period in 1997. The first two
quarters of fiscal 1998 consisted of NavSEIS business only, whereas the third
quarter consisted primarily of Agriculture business. In addition to nine
months of NavSEIS business, 1997 saw over $170,000 of engineering project
revenues which were not repeated in 1998. Demand for NavSEIS equipment was
off in 1998 from much higher levels in the first half of 1997 due to reduced
demand caused by unfavorable weather conditions and generally reduced
activity in the North American oil and gas seismic survey industry. The
Company did, however, complete a $242,000 sale of NavSEIS equipment into the
Chinese marketplace. Due to an unfavorable future outlook, increasing
competitive pressure and price erosion, the Company decided to exit the
seismic survey equipment industry in the second quarter of 1998. All existing
NavSEIS equipment and components, including the rental pool, were sold to
Eagle Surveys Ltd. of Calgary, Canada on March 31, 1998 for $625,000. The
third quarter saw the launch of the Company's new Agriculture guidance
products and revenues therefrom of $702,574.
The 1998 gross margin is down to 24% from 37% in 1997 due to the NavSEIS
business in the second quarter. Gross margin was adversely impacted due to
general price erosion, low margins and high commissions typical of sales into
China, and the sale to Eagle Surveys Ltd. which was at cost. In addition, the
Company recorded a write-down of component inventory as part of the wind-down
of NavSEIS production and repair activities, which was charged to cost of
sales. From April 1, 1997 forward, the Company realized a 40% margin on
sales of its newly-released Agriculture products.
General and administrative expense for the nine months ended June 30, 1998 of
$1,031,640 is up $131,065 over the nine months ended June 30, 1997. Much
of this increase arose from the incurrence of shareholder relations costs, new
for 1998. The remainder of the increase is attributable to a general increase
in office costs.
<PAGE> 21
Sales, marketing and business development expense for the nine months ended
June 30, 1998 of $956,951 is up $498,638 over the nine months ended June 30,
1997. Position's focus on product marketing and business development
continued heavily throughout the 1998 year. Accordingly, management
consultants were engaged in marketing and business development and new
salespeople were hired. Related expenses such as advertising and
travel/accommodation are up accordingly as the Company executes management's
Agriculture product rollout and marketing plans.
Interest expense has decreased $188,209 over the nine months ended June 30,
1997 due entirely to the interest and broker finder's fees on the notes used
as bridge financing from November 1996 to April 1997 not being repeated in
1998. Further, $49,273 of interest revenue was received in October, 1997
from investment tax credit refunds.
Depreciation and amortization expense is up $256,888 from the nine months
ended June 30, 1997 due to significant additions to the deferred
development cost balance as a result of ongoing product development activity
(i.e., the base subject to amortization) and the commencement of amortization
of accumulated Agriculture development costs upon product release in April,
1997.
Operations for the nine months ended June 30, 1998 resulted in a net loss of
$2,008,106, whereas the nine months ended June 30, 1997 saw a net loss of
$1,228,874. This increase is primarily due to the increased sales, marketing
and business development and increased amortization expenses discussed above.
1997 Compared to 1996
Revenue for the year ended September 30, 1997 of $1,729,046 represents an
increase of $1,000,068 from the nine month fiscal period ended September 30,
1996. Substantially all (over 90%) of the increase is attributable to NavSEIS
sales which are cyclical, with the winter months being peak sales months;
September 30, 1997 revenues include 1996 winter sales whereas the 1995 winter
sales to December 31, 1995 are included in the December 31, 1995
results. Contributing to this increase is $549,853 of NavSEIS equipment
sales into the Chinese market. The remainder of the increase is attributable
to software sales. Engineering and rental revenues remained consistent
between the two periods as the Company maintains such business with existing
customers. The 1997 gross margin is down to 44% from 48% in 1996 due to
price cuts made to penetrate the Chinese market, partially offset by product
manufacturing cost reductions.
<PAGE> 22
General and administrative expense for the year ended September 30, 1997 of
$1,292,928 is up $852,423 over the nine months ended September 30, 1996.
Much of this increase arose from the following:
(a) a 50% increase in staff between the periods ended;
(b) an overall increase in salary levels effective January 1, 1997 arising
from a company-wide salary review aimed at bringing salaries
in line with industry averages; and
(c) a bonus paid to all employees of Record at January 15, 1997 totaling
$52,000.
The remainder of the increase is attributable to increased rents on the newly
expanded premises, human resources costs incurred in hiring additional staff
and a general increase in office costs due to the increased staffing.
Sales, marketing and business development expense for the year ended September
30, 1997 of $752,914 is up $574,037 over the nine months ended September 30,
1996. Position's focus on product marketing and business development
continued heavily throughout the full 1997 year. Accordingly, new employees
were hired in marketing and management to realize these initiatives and the
Company incurred a full year of sales, marketing and business development
expenditures.
Interest expense has increased $155,494 over the nine months ended September
30, 1996 due entirely to interest and broker finder's fees on the notes used
as bridge financing from November 1996 to April 1997. Short-term deposit
interest on the cash received from the April 1997 public share offering
partially offset the interest incurred on the Company' s line of credit.
Depreciation and amortization expense is up $117,244 from the nine months
ended September 30, 1996 due to significant furniture, equipment and leasehold
additions in 1997 which totaled $487,898, additions to the deferred
development cost balance as a result of ongoing product development activity,
and the amortization of goodwill acquired in November 1996.
Operations for the year ended September 30, 1997 resulted in a net loss of
$1,850,640, whereas the nine months ended September 30, 1996 saw a net loss
of $312,401. This increase is due to the increased expenses discussed above.
The Company had estimated accumulated unrecorded tax losses of $2,680,000 and
unclaimed investment tax credits of $106,000 at September 30, 1997 available
to reduce future income taxes otherwise payable.
1996 Compared to 1995
The following discussion and analysis compares the results for the nine months
ended September 30, 1996 with 75% or 9/12ths of the year ended December 31,
1995 ("Prorated Period"). Revenue for the period ended September 30, 1996 of
$728,978 represents a decrease of $827,884 from the year ended December 31,
1995 and a $438,669 decrease from the Prorated Period. Sales of NavSEIS
<PAGE> 23
equipment, are cyclical, with the winter months being peak sales months; 1996
winter sales were not recognized in the 1996 fiscal period while they were
recognized in the 1995 fiscal period. Engineering revenues were lower in the
nine months ended September 30, 1996 due to a significant contract being
scaled back by the client due to market conditions. Partially offsetting
these declines is an increase in rental revenues in the nine months ended
September 30, 1996 as customers have expressed interest in renting NavSEIS
equipment, usually as a trial before purchasing. The nine months ended
September 30, 1996 gross margin is down accordingly.
Research, development and engineering expense, net of related investment tax
credits, for the nine months ended September 30, 1996 of $47,192 represents a
decrease of $88,481 from the year ended December 31, 1995, and a $54,563
decrease from the Prorated Period. The 1995 year saw an intense focus on the
development of the NavSEIS product; only smaller improvements were made to
NavSEIS in fiscal 1996. In addition, reduced external engineering contracts
in fiscal 1996 (as discussed above) resulted in reduced research and
development activity. General and administrative expenses for the nine months
ended September 30, 1996 of $440,505 is down $55,380 over the year ended
December 31, 1995 and up $68,591 over the Prorated Period. Sales, marketing
and business development expense for the nine months ended September 30, 1996
of $178,877 is up $75,157 over the year ended December 31, 1995 and up $101,087
over the Prorated Period. New for fiscal 1996 was Position's focus on the
product marketing and business development of the Company, whereas Pulsearch's
focus has been restricted to the design and development of GPS systems.
Accordingly, six new employees were hired in the marketing and management ranks
of Position to assume these new responsibilities. Further, additional
expenditures were made as part of these marketing and business development
initiatives.
Interest expense increased for the nine months ended September 30, 1996 as
Pulsearch's line of credit was at or near its limit for most of the period.
Depreciation and amortization expense is slightly up from 1995 primarily due
to greater amortization of deferred development costs charged in 1996 as a
result of ongoing development and 1995 reflecting only a half year of
amortization.
Operations for the nine months ended September 30, 1996 resulted in a loss of
$443,097 whereas 1995 saw earnings of $58,870, due to the lower revenues and
increased expenses discussed above. After considering income taxes and the
non-controlling interest in earnings (loss), the Company experienced a loss for
the nine months ended September 30, 1996 of $312,401 compared to earnings
of $35,088 for the year ended December 31, 1995.
<PAGE> 24
Liquidity and Capital Resources
1998 Compared to 1997
The Company had negative working capital of $324,589 at June 30, 1998,
compared to positive working capital of $1,999,191 at June 30, 1997. The
negative working capital situation at June 30, 1998 evidences the Company's
immediate need for additional financing to facilitate the marketing efforts
and product inventory ramp-up for its two new Agriculture guidance products.
In June, 1997, the Company still had cash from its initial public offering of
$3.6 million (gross), no term debt, and greater tax credit receivables. The
Company is no longer eligible for cash refunds for investment tax credits as
it is now a public company. The Company was fully drawn on its $300,000 bank
line of credit and had a net overdraft position of $58,315, with the bank's
permission. Trade accounts payable have accumulated in the third quarter as
the Company carefully manages its depleting cash reserves. A $500,000,
50-month term loan facility was arranged with the bank in February, 1998 to
finance ongoing operations, which was fully drawn by May, 1998. Management
plans to remedy the negative working capital situation with a follow-on
financing in the fourth quarter of 1998 and from cash-flows generated
internally from the sale of Agriculture guidance products. The continuing
operations of the Company are dependent on management securing sufficient
financing for the marketing efforts and product inventory ramp-up for its two
new Agriculture guidance products.
Capital assets of $536,961 are up $95,605 over June 30, 1997 due to continued
modernizing of equipment necessary for efficient product and business
development. Share capital has increased from $4,871,066 at June 30, 1997 to
$6,174,443 due to the issuance of 700,000 Common Shares for $1,190,000 cash
in a private placement and the exercise of $268,543 in stock options.
1997 Compared to 1996
Working capital at September 30, 1997 of $1,902,660 is up $1,606,782 from
September 30, 1996. Much of this rise is due to the September, 1997 special
warrant offering. Trade accounts receivable are higher in 1997 due to recent
NavSEIS equipment sales and rentals. Inventory is also up resulting from a
manufacturing ramp-up of sales/demo NavSEIS units. Trade payables are up
correspondingly. The bank line of credit is at a level similar to 1996. The
$99,300 in convertible shareholder loans were repaid in December 1996; the
$90,000 in convertible debentures outstanding at September 30, 1996 were
converted to shares in the Company in April 1997. Lease financing was
arranged for the purchase of certain computer and office equipment in order
<PAGE> 25
to preserve as much cash as possible for the Company's development efforts.
Capital assets of $494,218 are up $416,383 over September 30, 1996 due to
office and manufacturing facilities expansion and the modernizing of equipment
necessary for efficient product and business development. $205,000 of NavSEIS
rental equipment was built in the summer of 1997 and is out on rental.
Share capital has increased from $1,000,379 at September 30, 1996 to
$5,948,040 due to the issuance of 4,600,000 Common Shares for cash, one
special warrant for a subscription receivable, 120,000 Common Shares on the
conversion of debentures, and 753,666 Common Shares for the acquisition of
the non-controlling interest in Pulsearch.
1996 Compared to 1995
Working capital at September 30, 1996 of $295,878 is down $139,573 from
December 31, 1995. Much of this decline is due to a significant decline in
trade accounts receivable which are typically higher in the winter months as
these are the highest sales months for the NavSEIS product. Trade payables
are also down at September 30, 1996 which partially offsets the decline in
trade receivables. The second major cause of the decline in working capital
is the issuance in 1996 of $90,000 in convertible debentures, which are
classified as current liabilities.
Equipment and furniture balance of $77,835 at September 30, 1996 is down
$22,516 from December 31, 1995, due entirely to depreciation expense. No
significant additions or disposals of equipment or furniture occurred in 1996.
Share capital has increased from $670,958 at December 31, 1995 to $1,000,379
at September 30, 1996 due to the issuance of 2,175,098 Common Shares for
cash, the repurchase of 5,900 Common Shares and the payment of $11,500 of
acquisition costs for the Company's May 1, 1996 acquisition of Pulsearch.
Trends in Liquidity and Capital Resources
The Company has been experiencing a trend whereby demand is being
placed on operating capital for use in the commercial development and market
development of its products in excess of funds generated from operations.
This trend is expected to continue for the next six to nine months.
In addition, the Company intends to increase its levels of inventory,
necessary for more rapid manufacturing processes and differentiated product
lines. Accounts receivable balances are expected to increase with revenue
increases resulting from the release of new products. These initiatives
will place further demands on operating capital.
<PAGE> 26
Currently, there are no restrictions on the Company's ability to transfer
funds to or from its U.S. subsidiary. The Company is not in arrears on any
of its debt servicing nor is it, or has it ever been, in an unremedied default
of any bank covenants. As at June 30, 1998, the Company had fully drawn on
its $300,000 revolving bank line of credit and have drawn and additional
$58,315 against an temporary overdraft provision of $75,000.
NEED FOR ADDITIONAL FINANCING
No commitments to provide additional funds have been made by management
or current stockholders. Accordingly, there can be no assurance that
any additional funds will be available to the Company from these sources
to allow it to cover its expenses.
See "RISK FACTORS - Additional Financing".
INCOME TAXES ASPECTS
Federal Income Tax Aspects of Investment in the Company
The discussion contained herein has been prepared by the
Company and is based on existing law as contained in the Code,
amended United States Treasury Regulations ("Treasury
Regulations"), administrative rulings and court decisions as of the
date of this Registration Statement. No assurance can be given
that future legislative enactments, administrative rulings or court
decisions will not modify the legal basis for statements contained
in this discussion. Any such development may be applied
retroactively to transactions completed prior to the date thereof,
and could contain provisions having an adverse affect upon the
Company and the holders of the Common Stock. In addition, several
of the issues dealt with in this summary are the subject of
proposed and temporary Treasury Regulations. No assurance can be
given that these regulations will be finally adopted in their
present form.
Basis in Common Stock
The tax basis that a Shareholder will have in his Common Stock
will equal his cost in acquiring his Common Stock. If a
Shareholder acquires Common Stock at different times or at
different prices, he must maintain records of those transactions so
that he can accurately report gain or loss realized upon
disposition of the Common Stock.
<PAGE> 27
Dividends on Common Stock
Distributions made by the Company with respect to the Common
Stock will be characterized as dividends that are taxable as
ordinary income to the extent of the Company's current or
accumulated earnings and profits ("earnings and profits"), if any,
as determined for U.S. federal income tax purposes. To the extent
that a distribution on the Common Stock exceeds the holder's
allocable share of the Company's earnings and profits, such
distribution will be treated first as a return of capital that will
reduce the holder's adjusted tax basis in such Common Stock, and
then as taxable gain to the extent the distribution exceeds the
holder's adjusted tax basis in such Common Stock. The gain will
generally be taxed as a long-term capital gain if the holder's
holding period for the Common Stock is more than one year.
The availability of earnings and profits in future years will
depend on future profits and losses which cannot be accurately
predicted. Thus, there can be no assurance that all or any portion
of a distribution on the Common Stock will be characterized as a
dividend for general income tax purposes. Corporate shareholders
will not be entitled to claim the dividends received deduction with
respect to distributions that do not qualify as dividends. See the
discussion regarding the dividends received deduction below.
Redemption of Common Stock
The Company does not have the right to redeem any Common
Stock. However, any redemption of Common Stock, with the consent
of the holder, will be a taxable event to the redeemed holder.
The Company does not believe that the Common Stock will be
treated as debt for federal income tax purposes. However, in the
event that the Common Stock is treated as debt for federal tax
purposes, a holder generally will recognize gain or loss upon the
redemption of the Common Stock measured by the difference between
the amount of cash or the fair market value of property received
and the holder's tax basis in the redeemed Common Stock. To the
extent the cash or property received are attributable to accrued
interest, the holder may recognize ordinary income rather than
capital gain. Characterization of the Common Stock as debt would
also cause a variety of other tax implications, some of which may
be detrimental to either the holders, the Company, or both
<PAGE> 28
(including, for example, original issue discount treatment to the
Investors). Potential Investors should consult their tax advisors
as to the various ramifications of debt characterization for
federal income tax purposes.
Other Disposition of the Common Stock
Upon the sale or exchange of shares of Common Stock, to or
with a person other than the Company, a holder will recognize
capital gain or loss equal to the difference between the amount
realized on such sale or exchange and the holder's adjusted basis
in such stock. Any capital gain or loss recognized will generally
be treated as a long-term capital gain or loss if the holder held
such stock for more than one year. For this purpose, the period
for which the Common Stock was held would be included in the
holding period of the Common Stock received upon a conversion.
Canadian, State, Local and Foreign Taxes
In addition to the federal income tax consequences described
above, prospective investors should consider potential state, local
and foreign tax consequences of an investment in the Common Stock.
ERISA CONSIDERATIONS FOR TAX-EXEMPT INVESTORS/
SHAREHOLDERS
General Fiduciary Requirements
Title I of ERISA includes provisions governing the responsibility of
fiduciaries to their Qualified Plans. Qualified Plans must be
administered according to these rules. Keogh plans that cover only
partners of a partnership or self-employed owners of a business are
not subject to the fiduciary duty rules of ERISA, but are subject to the
prohibited transaction rules of the Code.
Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a
Qualified Plan is considered to be a fiduciary of such Qualified
Plan (subject to certain exceptions not here relevant).
<PAGE> 29
ERISA Section 404(a)(1) requires a fiduciary of a Qualified
Plan to "discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and (A) for the
exclusive purpose of: (i) providing benefits to participants and
their beneficiaries, and (ii) defraying reasonable expenses of
administering the plan; (B) with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims; (C) by diversifying the investments of a plan so as to
minimize the risk of large losses, unless under the circumstances
it is clearly prudent not to do so; and (D) in accordance with the
documents and instruments governing the plan."
FIDUCIARIES WHO BREACH THE DUTIES THAT ERISA IMPOSES MAY
SUFFER A WIDE VARIETY OF LEGAL AND EQUITABLE REMEDIES, INCLUDING
(i) THE REQUIREMENT TO RESTORE QUALIFIED PLAN LOSSES AND TO PAY
OVER ANY FIDUCIARY'S PROFITS TO THE QUALIFIED PLAN; (ii) REMOVAL AS
FIDUCIARY OF THE QUALIFIED PLAN; AND (iii) LIABILITY FOR EXCISE
TAXES THAT SECTION 4975 OF THE CODE IMPOSES.
CAUTIONARY STATEMENT
This Registration Statement on Form 10SB contains statements relating to
future results of the Company (including certain projections and business
trends) that are "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from those projected as a result of certain risks and uncertainties,
including but not limited to changes in political and economic conditions;
domestic and foreign government spending, budgetary and trade policies; demand
for and market acceptance of new and existing products; successful development
of advanced technologies; and competitive product and pricing pressures, as
well as other risks and uncertainties, including but not limited to those
described above in the discussion under Results of Operations, and those
detailed from time to time in the filings of the Company with the Securities
and Exchange Commission.
<PAGE> 30
ITEM 3. DESCRIPTION OF PROPERTY
The Company's registered and records office is at 1500, 407 - 2nd
Street SW, Calgary, Alberta T2P 2Y3. The Company's
principal office is located at 6815E - 40th Street S.E., Calgary,
Alberta T2C 2W7. The Company and its sole subsidiary have
approximately 30 full-time and 2 part-time employees.
U.S. Subsidiary Position Inc. USA ("Position USA"), a wholly-
owned subsidiary, was incorporated as a private company by
certificate of incorporation under the laws of the State of Texas
on October 28, 1996. The registered and records office is
located at 2500 Wilcrest, Suite 670, Houston, Texas 77042. The
principal office is located at 16155 Park Row, Suite 190, Houston,
Texas 77084. Position USA currently has no full-time employees.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of August 15, 1998, information with
respect to the beneficial ownership of the Company's outstanding
Common Stock by (i) each director and executive officer of the
Company, (ii) all directors and executive officers of the Company as a
group, and (iii) each shareholder who was known by the Company to be
the beneficial owner of more than 5% of the Company's outstanding
Common Stock. Pursuant to the beneficial ownership rules under the
Securities Exchange Act of 1934, as amended, each 5% named person
and all directors and executive officers as a group are deemed to be the
beneficial owners of securities that may be acquired within 60 days of
August 15, 1998 through the exercise of options or warrants. Accordingly,
the number of shares and percentages set forth opposite each
shareholder's name in the table below assumes the exercise of all such
options and warrants. However, the number of shares of Common Stock
issuable upon exercise by any given shareholder are not included in
calculating the percentage of Common Stock beneficially owned by any
other shareholder. Except as otherwise indicated, the persons or entities
listed below have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
<PAGE> 31
Number of Shares Percent of
Name and Address Beneficially Owned Class Owned
- -------------------------------- ------------------- ------------
Paul E. Kowalenko, Officer 677,207 6.2%
Calgary, Alberta, Canada
Bernard D. Parkinson, Officer 500,000 4.6%
Calgary, Alberta, Canada
Brad G. Timinski, Officer - -
Calgary, Alberta, Canada
Dr. Edward J. Krakiwsky, Officer 210,851 1.9%
Calgary, Alberta, Canada
Ian T. Tweedie, Director - -
Calgary, Alberta, Canada
G. Kenneth Little, Director - -
Calgary, Alberta, Canada
Frank Bower, 1,065,020 9.7%
Calgary, Alberta, Canada
James McLellan 942,381 8.6%
Calgary, Alberta, Canada
BPI Mutual Funds 700,000 6.4%
Toronto, Ontario, Canada
As of August 15, 1998 the directors and officers of the Company as a group,
owned beneficially, directly or indirectly, or exercised control or direction
over an aggregate of 1,388,058 Common Shares or approximately 12.7% of the
issued and outstanding Common Shares. See "Directors and Officers".
<PAGE> 32
In any election of directors, the holders of the Preferred Stock, voting
separately as a class, are entitled to elect that number of directors as is
proportionate to their ownership interest in the Company, determined on
an as-converted basis. On an as-converted basis, the holders of the
Preferred Stock currently have a 0% interest in the Company, which
interest may increase over time as mandatory in-kind dividends are paid
with respect to the Preferred Stock. Upon any default in the payment of
dividends on the Preferred Stock, each director who has been elected by
the holders of the Preferred Stock will be entitled to two votes on all
matters on which the directors are entitled to vote, while each director
elected by the holders of Common Stock shall continue to have the right
to cast one vote. Accordingly, a default in the payment of dividends on
the Preferred Stock could result in the directors who have been elected by
the holders of the Preferred Stock having voting control with respect to
matters presented to the Board.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
EXECUTIVE OFFICERS AND BOARD OF DIRECTORS
The members of the Board of Directors provide expertise in
research and development, capital acquisition, sales and marketing,
promotion, mergers and acquisitions, and corporate law. Their technical
acumen, along with their wish to see Position Inc. successful has made their
presence on the Board a resource to the management team.
The following table and biographical data sets forth certain information
regarding the both the directors and the executive officers of the Company.
Name Age Position
- -------------------------- --------- --------------------------
Paul E. Kowalenko 42 President, CEO, Director
Bernard D. Parkinson 44 Vice President Corporate
Development and Secretary
<PAGE> 33
Name Age Position
- -------------------------- --------- --------------------------
Brad G. Timinski 43 Vice President,
Chief Operating Officer
Dr. Edwards J. Krakiwsky 59 Chief Technology Officer
G. Kenneth Little 43 Director
Ian T. Tweedie 49 Director
All current directors hold office until the 1999 annual meeting of the
Company's shareholders and until their successors are duly elected and
qualified; thereafter, directors will be elected annually. The executive
officers are appointed annually by the Board of Directors and serve at the
discretion of the Board. No family relationships exist among any of the
directors and executive officers of the Company.
Management
The principal occupations of each of the directors and officers of the
Company for at least the last five years, as well as certain other background
information, is summarized below:
Paul E. Kowalenko - President & Chief Executive Officer
Mr. Kowalenko age 42, with a Bachelor of Commerce (Accounting) degree
from the University of Calgary and his CMA designation, has been involved
in financial and business management for the past 18 years, having spent the
last 10 of those years as senior executive management within the technology
industry. He has worked in the areas of investor financing, conventional
lender financing, business development and marketing, strategic and corporate
planning, executive information systems design, tax planning and
implementation, and general accounting. Other than during the period of
March 1991 to May 1992, Mr. Kowalenko was the Controller of PCTL and
Pulsearch Inc. from 1988 to 1994 and was President of Pulsearch Inc. from
October 1994 to December 1996. Mr. Kowalenko devotes 100% of his time
to the affairs of the Company.
<PAGE> 34
Bernard D. Parkinson - Vice President Corporate Development and Secretary
Mr. Parkinson age 44, with a Bachelor of General Studies from Carleton and
Athabasca Universities, has over 17 years experience in operations, marketing
and finance. He has 10 years of experience in the computing and banking
industries as a marketer, systems analyst and department head. Through
Corporate Recovery Management Ltd., a management consulting firm of which
he has been President since March 1991, Mr. Parkinson has also owned and
managed a variety of businesses in travel, transportation, oil and gas,
distribution and computers. Corporate Recovery Management Ltd. offers
management and financial advice in the area of corporate workouts, start-ups
and financings, both private and public. Mr. Parkinson has been associated
with Pulsearch Inc. in a business development capacity since November 1995,
and was appointed Vice President Corporate Development for Pulsearch Inc. in
January of 1996 and Vice President, Corporate Development of Position in May
1996 and subsequently was appointed Chief Financial Officer of Position in
September 1996 which he fulfilled until May 1998. Mr. Parkinson devotes
100% of his time to the affairs of the Company.
Brad G. Timinski - Vice President, Chief Operating Officer
Mr. Timinski age 43, has a Bachelor of Science, Electrical Engineering from
the University of Alberta, 1976. He has over 20 years of engineering and
business management experience in various industry segments, including oil &
gas, electric utility, electronic design, and over 10 years in the GPS
industry. Mr. Timinski first entered the GPS industry in 1985 as Vice
President, Engineering with Norstar Instruments, a subsidiary of Nortech
Survey, a survey service company, where he managed the development
program for the Norstar 1000 GPS receiver. The Norstar engineering
team was acquired by NovAtel Communications Ltd., a cellular telephone
company, in 1989. Mr. Timinski managed the engineering team and led
the business development for the NovAtel GPS Business Group, and was
appointed Vice President in 1992. He successfully grew the business
group into a $10 million annual revenue business by 1994. Mr. Timinski
was under contract as Director, DGPS Business Unit to Position from
February 1997 to December 1997 and was appointed Vice President
and Chief Operating Officer in January 1998. Mr. Timinski devotes 100%
of his time to the affairs of the Company.
<PAGE> 35
Dr. Edward J. Krakiwsky - Chief Technology Officer
Dr. Krakiwsky age 59, has a Diploma, Land Surveys from the Southern Alberta
Institute of Technology, a B.Sc., M.Sc. and Ph.D. (Geodetic Science) all from
The Ohio State University. Dr. Krakiwsky has over 31 years of industrial,
teaching and research experience in a wide variety of geodetic engineering
activities which include: research associate on NASA's Geodetic Satellite
Positioning Program; National Research Council exchange scientist with the
French Space Centre; founder and former Head of the Department of Geomatics
Engineering, The University of Calgary; consultant on land navigation to the
Federal and Alberta GIS Agencies dealing with digital maps and standards; and
consultant to Diesel Kiki (ZEXEL), Tokyo and Motorola, Chicago on the
development of Automatic Vehicle Location and Navigation ("AVLN") systems.
He is the founder and President of Intelligent Databases International Ltd., a
company providing market intelligence to the AVLN industry. He is the
originator of the concept behind AVLN and its potential for a business venture
at Position. He is responsible for the long-term technology strategy of the
Company. Dr. Krakiwsky has been Scientific Advisor to PCTL and Pulsearch
Inc. from 1988 to 1996 and Chief Technology Officer of Position since October
1996. Dr. Krakiwsky devotes at least 35% of his time to the affairs of
the Company.
G. Kenneth Little - Director
Mr. Little, LL.B., B.Comm., age 43, is a partner with the law firm Carscallen
Lockwood Cormie. From July 1992 to October 31, 1997, Mr. Little was a
barrister and solicitor with the law firm of Walsh Wilkins. Mr. Little
devotes his time as director to the affairs of the Company on an as-needed
basis.
Ian T. Tweedie - Director
Mr. Tweedie, C.A., age 49, has been the President of Digital Armor Inc., a
product development company from October 1996 to the present. Prior thereto
from December 1995 to October 1996 he was an independent consultant. From
December 1991 to December 1995, he was President of Virtual Universe
Corporation, a public software development corporation. From May 1989 to
November 1991, Mr. Tweedie was self-employed as a consultant.
Mr. Tweedie devotes his time as director to the affairs of the Company on an
as-needed basis.
<PAGE> 36
David J. Howard - Corporate Controller
Mr. Howard, B.Comm. (Hons.), from University of Manitoba, C.A., age 29, has
been Controller of Position since September 1996, and of Pulsearch Inc. from
September 1996 to December 1996. For four years prior thereto he was employed
as an articling student (3 years) and subsequently as a Chartered Accountant
(1 year) with KPMG Chartered Accountants. During this period with KPMG, he
became familiar with the operations and business of the Company while
providing accounting services to Pulsearch Inc.
Mr. Howard devotes 100% of his time to the affairs of the Company.
CERTAIN LEGAL PROCEEDINGS
Securities Regulatory or Other Sanctions
None of the directors, officers, promoters or other members of management of
the Company has been subject to a cease trade order or bankruptcy in his
personal capacity within the previous ten-year period and none of the issuers
with which any of the directors or officers has been a director, officer,
promoter or insider has been subject to a cease trade order or bankruptcy
within the past ten years, while such director or officer was acting in that
capacity. None of the directors, officers, promoters or other member of
management of the Company has, within the ten years prior to the date of this
prospectus, been subject to any penalties or sanctions imposed by a court or
securities regulatory authority relating to trading in securities, promotion
or management of a publicly-traded issuer, or theft or fraud.
<PAGE> 37
ITEM 6. EXECUTIVE COMPENSATION
The following executive compensation was paid for the fiscal years ended
September 30, to the Company's Directors, Officers or Affiliates or other
persons who were executive officers of the Company as at June 30, 1998.
Long Term
Compensation
Annual Compensation
Compensation Awards
--------- --------------- ------------- -------------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary Compensation Options/(1)/ Compensation
($) ($) (#) ($)-
- ------------------ --------- --------------- ------------- -------------
Paul E. Kowalenko
President, CEO,
Director
1998 94,500 - - -
1997 115,500 4,200 214,500 -
1996 63,000 - - -
1995 84,000 - - -
Bernard D. Parkinson
Vice President
Corporate
Development and
Secretary
1998 81,000 - - -
1997 102,000 3,308 164,500 -
1996 45,000 - - -
<PAGE> 38
Brad G. Timinski
Vice President,
Chief Operating
Officer
1998 75,000 - - -
1997 56,000 - - -
Dr. Edwards J. Krakiwsky
Chief Technology Officer
1998 - 31,500 - -
1997 - 30,000 - -
____________________________
Director Compensation
The Company does not reimburse directors for expenses incurred, if any,
in attending meetings of the Board of Directors. The Company does not
pay director fees to directors for their service on the Board.
Options Granted To Executive Officers
The following options to purchase Common Shares were granted to the Named
Executive Officers during the year ended September 30, 1997, pursuant to the
Company's Stock Option Plan. See "Stock Option Plan".
<TABLE>
<CAPTION>
Security Common % of Total Exercise Expiry Market Value
Holder Shares Under Options Price Per Date of Securities
Option Granted In Share1 Underlying
(#) Financial Options on
Year Date of Grant
($/Securities)
___________ __________ _________ _______ ______________
<S> <C> <C> <C> <C> <C>
Paul E. Kowalenko 214,500 22% $0.50 Nov. 1, $0.50
2001
Bernard D. Parkinson 164,500 17% $0.50 Nov. 1, $0.50
2001
Brad G. Timinski 25,000 2% $2.00 Aug. 1, $2.00
2002
Brad G. Timinski 71,000 47% $1.10 May. 1, $1.10
2003
</TABLE>
<PAGE> 39
Notes:
1. The exercise price was determined on the basis of the then transaction
price of the Common Shares. See "Prior Sales".
Employment Agreements
There are currently no employment agreements. It is anticipated that these
will be implemented in the near future.
Compensation of Directors
The directors of the Company are currently compensated for serving as a
director on the basis of options. See "Options Granted to Named Executive
Officers".
Directors' and Officers' Insurance
The Company intends to purchase liability insurance for the directors and
officers of the Company. No part of this premium will be paid by the
directors or officers of the Company.
STOCK OPTION PLAN
The Company maintains a stock option plan (the "Stock Option Plan") designed
to provide incentives to directors, executive officers and employees of the
Company or its subsidiaries and companies wholly owned by these individuals
in order to permit those persons to participate in the growth and success of
the Company.
Under the terms of the Company's Stock Option Plan, the Company is authorized
to set aside as options a maximum of 10% of the Company's Common Shares
outstanding from time to time, for the benefit of directors, officers and full
time employees of the Company or its subsidiaries and companies wholly owned by
these individuals. The Stock Option Plan does not permit any one individual
to hold as options more than 5% of the Common Shares outstanding from time
to time.
Any options so granted will be exercisable at the exercise price and for such
period of time as may be determined by the board of directors of the Company
and approved pursuant to the requirements of the applicable stock exchange, or
if the Company's securities are not listed on a stock exchange, then in
<PAGE> 40
accordance with the conditions established by the board of directors of the
Company.
Any stock options will be non-transferable and terminate on the earlier of the
expiry date or the 90th day following the day on which the director, officer
or employee, as the case may be, ceases to be either a director, officer or
employee of the Company or any of its subsidiaries.
OPTIONS
As at the date of this filing the following options have been granted or
allocated to executive officers and directors, current and previous
employees, and advisors to the Company, pursuant to the Stock Option Plan:
<TABLE>
<CAPTION>
Position with Number of Exercise Price Per Market Value
Company Common Shares Common Share on Date of Grant
Subject to Option
__________________ _________________ _________________ ________________
<S> <C> <C> <C>
Executive Officers
(4) 438,500 $0.50 $0.50
71,000 $1.10 $1.10
25,000 $2.00 $2.00
Directors
(2) 129,000 $0.50 $0.50
Employees 307,500 $0.50 $0.50
10,000 $2.00 $2.00
Advisors 70,000 $1.10 $1.10
</TABLE>
In addition, a maximum of 540,000 Common Shares were reserved as options
for Wolverton Securities Ltd. which acted as agent in connection with the
distribution of a total of 3,600,000 Common Shares effected pursuant to a
Prospectus dated April 7, 1997. These options have an exercise price of
$1.00. As of June 30, 1998, 195,293 of these options have been exercised.
In addition, a maximum of 70,000 Common Shares were reserved as options
for Brant Securities Limited which acted as agent in connection with the
distribution of a total of 700,000 Common Shares effected pursuant to a
Prospectus dated March 30, 1998.
These options have an exercise price of $2.25 and expire March 31, 1999.
As of June 30, 1998, none of these options had been exercised.
<PAGE> 41
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS AND PROMOTERS
No director, senior officer, promoter or other member of management or their
respective associates or affiliates have been indebted to the Company at any
time during the period ended September 30, 1997 or since that date.
PROMOTERS
Paul E. Kowalenko and Bernard D. Parkinson may be considered to be promoters
("Promoters") of the Company as they took the initiative in founding and
organizing the Company. As Promoters of the Company they initially acquired
a total of 1,000,000 Common Shares at a price of $.10 per share. As Mr.
Kowalenko was a shareholder of Pulsearch Inc. prior to its acquisition by
Position, in accordance with the terms of the Acquisition Agreement, he
acquired a total of 177,197 Common Shares of the Company (constituting about
1.8% of the current outstanding Common Shares), in exchange for 60 Class A
Common Shares and 51,927 Preferred Shares of Pulsearch Inc. that he held prior
to such acquisition. The Common Shares so acquired by the Promoters are
subject to escrow.
The Company has also granted options to the Promoters to purchase an aggregate
of 379,000 Common Shares, which options remain unexercised as of the date
hereof. See "Directors and Officers", "Executive Compensation - Options
Granted to Named Executive Officers" and "Interest of Management and Others
in Material Transactions".
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as described under "Promoters", no director or senior officer of
the Company and no person or company holding more than 10% of the Common
Shares, or any associate or affiliate thereof, has any material beneficial
interest in any transaction completed within three years prior to the date of
this prospectus or in any proposed transaction, which has or will materially
affect the Company. See "Conflicts of Interest".
<PAGE> 42
CONFLICTS OF INTEREST
Some of the directors and officers of the Company participate and will
continue to participate in business on their own behalf and on behalf of other
corporations. If any conflicts arise whereby directors have interests in the
corporations or in the business activities which are in competition with the
business of the Company, such conflicts will be subjected to and governed by
the laws applicable to directors and officers in conflict of interest,
including the procedures prescribed in the Business Corporations Act
(Alberta). See "Interest of Management and Others in Material
Transactions".
ITEM 8. DESCRIPTION OF SECURITIES
As of the date hereof, the authorized share capital of the Company consists of
an unlimited number of Common Shares of which 10,931,005 Common Shares are
issued and outstanding and an unlimited number of preferred shares of which no
preferred shares are issued and outstanding. The following is a summary of
the principal attributes of the share capital of the Company.
Common Shares
The rights, privileges, restrictions and conditions attached to the Common
Shares are as follows:
Voting
Holders of Common Shares shall be entitled to receive notice of and to attend
and vote at all meetings of shareholders of the Company, except meetings of
holders of another class of shares. Each Common Share shall entitle the
holder thereof to one vote.
Dividends
Subject to the preferences accorded to holders of Preferred Shares and any
other shares of the Company ranking senior to the Common Shares from time to
time with respect to the payment of dividends, holders of Common Shares shall
be entitled to receive, if, as and when declared by the Board of Directors,
such dividends as may be declared thereon by the Board of Directors from time
to time.
<PAGE> 43
Liquidation, Dissolution or Winding-Up
In the event of the voluntary or involuntary liquidation, dissolution or
winding-up of the Company, or any other distribution of its assets among its
shareholders for the purpose of winding-up its affairs (such event referred to
herein as a "Distribution"), holders of Common Shares shall be entitled,
subject to the preferences accorded to holders of Preferred Shares and any
other shares of the Company ranking senior to the Common Shares from time to
time with respect to payment on a Distribution, to share equally, share for
share, in the remaining property of the Company.
Preferred Shares
The rights, privileges, restrictions and conditions attached to the Preferred
Shares, as a class, are as follows:
Issuance in Series
Subject to the filing of Articles of Amendment in accordance with the Business
Corporations Act (Alberta) (the "Act"), the Board of Directors may at any time
and from time to time issue the Preferred Shares in one or more series, each
series to consist of such number of shares as may, before the issuance
thereof, be determined by the Board of Directors.
Attributes
Subject to the filing of Articles of Amendment in accordance with the Act, the
Board of Directors may from time to time fix, before issuance, the
designation, rights, privileges, restrictions and conditions attached to each
series of Preferred Shares including, without limiting the generality of the
foregoing, the amount, if any, specified as being payable preferentially to
such series on a Distribution; the extent, if any, of further participation on
a Distribution; voting rights, if any; and dividend rights (including whether
such dividends be preferential, cumulative or non-cumulative), if any.
Liquidation
In the event of a Distribution, holders of each series of Preferred Shares
shall be entitled, in priority to holders of Common Shares and any other
shares of the Company ranking junior to the Preferred Shares from time to
time with respect to payment on a Distribution, to be paid rateably with holders
of each other series of Preferred Shares the amount, if any, specified as being
payable preferentially to the holders of such series on a Distribution.
<PAGE> 44
Dividends
The holders of each series of Preferred Shares shall be entitled, in priority
to holders of Common Shares and any other shares of the Company ranking
junior to the Preferred Shares from time to time with respect to the payment of
dividends, to be paid rateably with holders of each other series of Preferred
Shares, the amount of accumulated dividends, if any, specified as being
payable preferentially to the holder of such series.
The Company has never paid any dividends on its Common Shares. The
Company intends to retain its earnings to finance the growth and development
of its business and does not expect to pay dividends in the near future. The
Board of Directors of the Company will review this policy from time to time
having regard to the Company's financing requirements, its financial condition
and other factors considered relevant.
Restrictions of Transfer
"Affiliates" of Position Inc. under the Securities Act of 1933, as
amended (the "Securities Act") are persons who generally include
individuals or entities that control, are controlled by, or are under
common control with Position Inc. and may include certain officers and
directors of Position Inc. as well as principal stockholders of
Position Inc.. Persons who are affiliates of Position Inc. will be
permitted to sell their shares of Position Inc. only pursuant to an
effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such exemptions
afforded by Section 4(1) or 4(2) of the Securities Act or Rule 144
thereunder.
A total of 3,135,641 shares of Position Inc. Common Stock could be sold
pursuant to Rule 144 under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to this Registration Statement will be passed
upon on behalf of the Company by Carscallen Lockwood Cormie, Calgary,
Alberta. Certain United States securities and corporate legal matters relating
to this Registration Statement will be passed upon behalf of the Company
by the Law Offices of Mark T. Thatcher, Newport, Rhode Island.
<PAGE> 45
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Company are KPMG Chartered Accountants of 1200,
205 - 5th Avenue S.W., Calgary, Alberta, T2P 4B9.
The transfer agent and registrar for the Common Shares is CIBC-Mellon
Trust Company, at its principal office in Calgary, being 600, 333 - 7th
Avenue S.W., Calgary, Alberta, T2P 2Z1.
PART III
ITEM 1. MARKET FOR COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
The Company has a trading symbol of PZN.CA in respect of its Common
Shares which have been listed and posted for trading through the facilities
of The Alberta Stock Exchange since April 30, 1997. Based upon information
supplied by The Alberta Stock Exchange the following table summarizes the
particulars of trading of the Common Shares of the Company through the
facilities of The Alberta Stock Exchange on a monthly basis since April 1997.
<TABLE>
<CAPTION>
Price Range Trading Volume
High Low (Shares)
<S> <C> <C> <C>
1997
April $2.20 $1.75 42,700
May $2.50 $2.00 188,800
June $2.30 $2.05 62,360
July $2.15 $1.90 90,400
August $2.05 $1.92 32,575
September $2.10 $1.95 55,400
October $2.04 $1.93 44,300
November $2.00 $1.65 38,700
December $1.84 $1.60 33,600
1998
January $1.70 $1.30 23,000
February $1.95 $1.45 45,985
March $1.80 $1.50 24,755
April $1.50 $1.00 116,405
May $1.40 $1.02 73,960
June $1.25 $1.00 159,428
July $1.10 $0.51 49,702
August 1 to 21 $0.80 $0.58 18,990
</TABLE>
<PAGE> 46
There is no United States public market for Position Inc. Common Stock.
The Position Inc. Common Stock may be traded in the over-the-counter market
in the near future, however, there can be no assurance as to the price
at which trading in Position Inc. Common Stock will occur.
With respect to U.S. legal, reporting, financial and other information
relating to Position Inc., The Law Offices of Mark T. Thatcher, whose
address is 360 Thames Street, Newport, Rhode Island 02840 will file
annual and periodic reports with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934. Copies
of such reports may be inspected by anyone without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington D.C. 20549, and copies may be obtained
from the Commission at prescribed rates. The Commission also maintains
a Website where investors may obtain reports of companies that file
electronically--including Position Inc., the address being http://www.sec.gov.
In addition, Position Inc. will provide without charge, upon the request of
any stockholder, a copy of its Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1998, to be filed with the Commission. Any such
requests should be directed to the Secretary of Position Inc., address 6815E-
40th Street, S.E., Calgary, Alberta, Canada T2C 2W7.
The Company has never paid dividends on its Common Stock and does
not anticipate that it will do so in the foreseeable future. The Company is
prohibited from paying dividends on its Common Stock without the
consent of the holders of at least two-thirds of the Company's Preferred
Stock.
ITEM 2. LEGAL PROCEEDINGS
None
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE> 47
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On September 30, 1997, one Special Warrant was issued and sold at a
price of $1,190,000 pursuant to a private placement to one investor in
reliance on an exemption from prospectus requirements contained in the
securities legislation of the Province of Ontario. Proceeds of the Special
Warrant issue, net of $85,000 of issue costs, were received November 4, 1997.
The Special Warrant was convertible into 700,000 Common Shares and 700,000
Warrants of the Company at no additional cost. Each Warrant entitles the
holder to purchase one Common Share on or before March 31, 1999 at an
exercise price of $2.25. In addition, the agent received an option of 70,000
Common Shares, exercisable on or before March 31, 1999 at an exercise price
of $2.25.
The Company qualified for distribution the 700,000 Common Shares, the 700,000
Warrants, and the 70,000 agent options by way of Prospectus dated March 30,
1998, at which time the Special Warrant holder exercised the conversion rights
and the above mentioned securities were distributed. The Company did not
receive any further proceeds from the distribution of the Common Shares and
Warrants, as such proceeds were realized on the distribution of the Special
Warrant pursuant to the private placement.
During the past twelve months, the Company has issued the following Common
Shares:
<TABLE>
<CAPTION>
Date of Number of Common Issue Price Total Consideration Nature of
Issuance Shares Issued Per Share Realized ($) Consideration
- ---------- ---------------- ----------- ------------------- -------------
<S> <C> <C> <C> <C>
October 7,
1997(1) 2,000 0.50 1,000 Cash
November 6,
1997(1) 34,500 0.50 17,250 Cash
March 23,
1998(1) 195,293 1.00 195,293 Cash
March 30,
1998(2) 700,000 1.70 1,190,000 Cash
<PAGE> 48
April 1,
1998(1) 10,000 0.50 5,000 Cash
May 20,
1998(1) 2,000 0.50 1,000 Cash
June 29,
1998(1) 98,000 0.50 49,000 Cash
</TABLE>
Notes:
1. Exercise of options.
2. Common Shares issued pursuant to a private placement offering made
pursuant to a Prospectus.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws contain provisions which provide, among other things,
that the Company shall indemnify certain persons, including officers and
directors, against judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with any action,
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interest of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. As to any action brought by or in the right
of the Company, such indemnification is limited to expenses (including
attorney's fees) actually and reasonably incurred in connection with the
defense or settlement of the case, and shall not be made, absent court
approval, if it was determined that such person was liable for negligence
or misconduct in the performance of his duty to the Company.
<PAGE> 49
PART F/S
FINANCIAL STATEMENTS
The index to the Company's Financial Statements appears under Item 15
of the Form 10-SB.
FINANCIAL STATEMENTS AND EXHIBITS
(a) The following financial statements of the Company
are filed as part of this report:
Page
Auditors' Report and Comments by Auditors F-1
Consolidated Balance Sheet - September 30, 1997 F-2
Consolidated Statements of Operations and F-3
Retained Earnings (deficit) and Changes in
Financial Position for the Year Ended
September 30, 1997
Notes to Financial Statements F-4
Consolidated Balance Sheet (Unaudited)- F-5
Nine Months Ended June 30, 1998
Consolidated Statements of Operations and F-6
Retained Earnings (deficit) and Changes in
Financial Position (Unaudited) -
Nine Months Ended June 30, 1998
Notes to Financial Statements F-7
Nine Months Ended June 30, 1998
<PAGE> 50
AUDITORS' REPORT
Auditors' Report to the directors
We have audited the consolidated balance sheets of Position Inc. as at
September 30, 1997 and 1996 and the consolidated statements of operations and
retained earnings (deficit) and changes in financial position for the year
ended September 30, 1997, the nine months ended September 30, 1996, and the
year ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
Except as explained in the following paragraph, we conducted our audits in
accordance with generally accepted auditing standards. Those standards
require that we plan and perform our audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
As 1996 was our initial engagement as auditors of the Company, we were not
present at the physical inventory count at the beginning of the 1995 fiscal
year, and we have not been able to satisfy ourselves as to inventory
quantities at that date by other auditing procedures. Accordingly, we were
unable to determine whether adjustments to cost of sales, income taxes, net
earnings for the year or opening retained earnings might be necessary.
In our opinion, except for the effect of adjustments, if any, which might have
been determined to be necessary had we been able to observe the physical
inventory count at the beginning of the 1995 fiscal year, the consolidated
statements of operations and retained earnings (deficit) and changes in
financial position present fairly, in all material respects, the results of
operations and changes in financial position of the Company for the year ended
December 31, 1995, in accordance with generally accepted accounting
principles. Further, in our opinion, the consolidated balance sheets as at
September 30, 1997 and 1996 and the statements of operations and retained
earnings (deficit) and changes in financial position for the year ended
September 30, 1997 and the nine months ended September 30, 1996 present
fairly, in all material respects, the financial position of the Company as at
September 30, 1997 and 1996 and the results of its operations and the changes
in its financial position for the year ended September 30, 1997 and the nine
months ended September 30, 1996, in accordance with generally accepted
accounting principles.
<PAGE> 51
Chartered Accountants
Calgary, Canada
November 14, 1997 (except for note 18, which
is as at March 30, 1998)
COMMENTS BY AUDITORS FOR U.S.. READERS ON
CANADA - U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph following the opinion paragraph when there are
substantial uncertainties about the company's ability to continue as a going
concern, as referred to in note 1c. of these consolidated financial statements.
Our report to the shareholders dated November 14, 1997 is expressed in
accordance with Canadian reporting standards which do not permit a
reference to such matters in the auditors' report when the facts are adequately
disclosed in the financial statements.
Chartered Accountants
Calgary, Canada
November 14, 1997
<PAGE> 52
Consolidated Balance Sheets
September 30, 1997 and 1996
1997 1996
__________ ___________
Assets
Current assets:
Cash $ - $ 5,223
Accounts receivable 449,931 132,454
Special warrant
subscription receivable (note 14c) 1,105,000 -
Investment tax credits receivable (note 5) 665,500 695,500
Inventory (note 6) 697,996 255,918
Deferred financing costs - 33,842
2,918,427 1,122,937
Capital assets (note 7) 494,218 77,835
Rental pool equipment 205,000 -
Investment, at cost (note 9) - 69,000
Deferred development costs, net 1,120,013 460,060
Goodwill 188,072 -
Patents and trademarks 37,257 -
$4,962,987 $ 1,729,832
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness (note 10) $ 345,042 $ 300,000
Accounts payable 619,552 337,759
Current portion of lease obligations 51,173 -
Convertible debentures (note 11) - 90,000
Convertible shareholder loans (note 12) - 99,300
1,015,767 827,059
Lease obligations (note 8) 105,330 -
Non-controlling interest - 157,904
<PAGE> 53
Shareholders' equity:
Share capital (note 14) 5,948,040 1,000,379
Deficit (2,106,150) (255,510)
3,841,890 744,869
Future operations (note 1c)
Subsequent event (note 18)
$4,962,987 $ 1,729,832
See accompanying notes to consolidated financial statements.
<PAGE> 54
Consolidated Statements of Operations and Retained Earnings (Deficit)
Year ended September 30, 1997, nine months ended September 30, 1996, and year
ended December 31, 1995, with comparative figures for December 31, 1994
<TABLE>
<CAPTION>
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
___________ _____________ ____________ ___________
(unaudited)
<S> <C> <C> <C> <C>
Revenue (note 4) $ 1,729,046 $ 728,978 $ 1,556,862 $ 2,033,506
Cost of sales 965,704 376,059 657,471 959,458
763,342 352,919 899,391 1,074,048
Expenses:
Research,development
and engineering
expenses 98,222 90,316 255,786 458,426
Investment tax credits
earned on research
and development
expenses (note 5) - (43,124) (120,113) (47,658)
General and
administrative 1,292,928 440,505 495,885 401,443
Sales, marketing and
business development 752,914 178,877 103,720 80,023
Interest 181,242 25,748 21,435 17,763
Depreciation and
amortization 220,938 103,694 83,808 73,278
Write-off of
investment 69,000 - - -
2,615,244 796,016 840,521 983,275
Earnings (loss) from
operations (1,851,902) (443,097) 58,870 90,773
<PAGE> 55
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
Income tax recovery
(expense) - deferred
(note 13) - 30,800 (12,561) (18,239)
Non-controlling interest
in (earnings) loss 1,262 99,896 (11,221) (45,194)
Earnings (loss) for the
period (1,850,640) (312,401) 35,088 27,340
Retained earnings
(deficit),
beginning of period (255,510) 56,891 21,803 (5,537)
Retained earnings
(deficit),
end of period $(2,106,150) $ (255,510) $ 56,891 $ 21,803
Earnings (loss) per
share (note 15):
Basic $ (0.244) $ (0.092 $ 0.015 $ 0.012
See accompanying notes to consolidated financial statements.
<PAGE> 56
Consolidated Statements of Changes in Financial Position
Year ended September 30, 1997, nine months ended September 30, 1996, and year
ended December 31, 1995, with comparative figures for December 31, 1994
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
Cash provided by
(used in):
Operations:
Earnings (loss)
for the period $(1,850,640) $ (312,401) $ 35,088 $ 27,340
Items not involving cash:
Depreciation and
amortization 220,938 103,694 83,808 73,278
Write-off of
investment 69,000 - - -
Deferred income taxes - (30,800) 12,561 18,239
Non-controlling interest
in (earnings) loss (1,262) (99,896) 11,221 45,194
(1,561,964) (339,403) 142,678 164,051
Change in non-cash
operating working capital:
Accounts receivable (317,477) 483,687 (202,458) (367,760)
Inventory (442,078) (87,731) 80,743 (31,110)
Accounts payable 281,793 (147,790) 328,129 102,922
(2,039,726) (91,237) 349,092 (131,897)
Investing:
Capital assets (487,898) (4,277) (33,998) (15,215)
Deferred
development costs (776,625) (125,314) (325,013) (119,497)
Rental pool equipment (205,000) - - -
Acquisition (note 3) (376,833) - - -
<PAGE> 57
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
Investment tax
credits receivable 30,000 (175,000) (424,500) (96,000)
Patents and trademarks (37,889) - - -
Investment - - - (69,000)
(1,854,245) (304,591) (783,511) (299,712)
Financing:
Issue of Special Warrant 1,105,000 - - -
Special Warrant
subscription receivable (1,105,000) - - -
Issues of share
capital, net 3,842,661 341,511 - 838,855
Issue of notes payable 1,100,000 - - -
Repayment of notes
payable (1,100,000) - - -
Deferred financing costs 33,842 (33,842) - -
Lease obligations,
net of repayments 156,503 - - -
Issue (repayment) of
convertible debent. (90,000) 90,000 - -
Issue (repayment) of
convertible
shareholder loans (99,300) - 99,300 -
Other, net - (12,090) - -
Bank indebtedness - 5,000 295,000 -
Repayment of debt - - - (357,500)
3,843,706 390,579 394,300 481,355
Increase (decrease) in
cash position (50,265) (5,249) (40,119) 49,746
Cash position,
beginning of period 5,223 10,472 50,591 845
<PAGE> 58
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
Cash position,
end of period $ (45,042) $ 5,223 $ 10,472 $ 50,591
</TABLE>
Cash position is defined as cash less cheques issued in excess of cash on hand.
See accompanying notes to consolidated financial statements.
<PAGE> 59
Notes to Consolidated Financial Statements
Year ended September 30, 1997, nine months ended September 30, 1996, and year
ended December 31, 1995, with comparative figures for the year ended December
31, 1994 (1994 information is unaudited)
1a. Incorporation
Position Inc. (the "Company") was incorporated under the laws of the Province
of Alberta on April 18, 1996 as 691807 Alberta Ltd. An amendment to the
articles of the Company to change its name to Position Inc. was registered May
17, 1996.
Pulsearch Navigation Systems Inc. ("Pulsearch"), was incorporated under the
laws of the Province of Alberta on May 18, 1993 as 567441 Alberta Ltd. An
amendment to the articles of Pulsearch to change its name to Pulsearch
Navigation Systems Inc. was registered December 6, 1993.
Position Inc. and Pulsearch were amalgamated to form Position Inc. on January
17, 1997.
1b. Business of the Company
The Company is in the business of developing, manufacturing, marketing and
supporting electronic positioning, navigation and guidance products. These
products integrate Global Positioning System ("GPS"), data communications and
geographical information systems technologies with proprietary software and
are marketed world-wide to commercial end-users. Growth is achieved through
internal product development, business and market development, and through
acquisition of complementary technology companies. The Company commenced
substantial operations May 1, 1996 with the purchase of a controlling interest
in Pulsearch.
1c. Future operations
The Company's ability to continue as a going concern is dependent on obtaining
financing and promoting and developing its business and products to the point
that it achieves profitable operations and positive cash flows on a commercial
scale.
<PAGE> 60
Certain product development costs have been deferred and are awaiting product
revenue streams against which they are to be amortized. The recoverability of
these deferred development costs is dependent on obtaining sufficient funds to
finance the product development to commercial completion and on the successful
penetration of the related products into viable markets.
The Company has obtained financing through periodic private placements and an
initial public offering of Common Shares and has adopted a strategic plan to
expand its marketing initiatives and product lines aimed at achieving
profitable operations and positive cash flows on a commercial scale. In
addition, management is continuing to identify and secure strategic alliances
with key suppliers, customers and distributors to enhance its competitive
advantage.
These financial statements have been prepared on the basis that the Company
will continue to realize its assets and discharge its obligations in the
ordinary course of business and do not reflect adjustments, such as
revaluation to liquidation values and reclassification of balance sheet items,
which would otherwise be necessary if the going-concern assumption were not
valid.
2a. Basis of financial statement presentation
Effective May 1, 1996, the Company acquired, through an exchange of shares, a
75.77% controlling interest in Pulsearch (notes 3 and 14). The exchange
involved all holders of common and preferred shares in Pulsearch, except for
the non-controlling interest shareholder, exchanging their shares for Class
"A" common shares in the Company. (The Class "A" shares were subsequently
replaced with Common Shares - see note 14.)
Due to the non-arm's length nature of this transaction, these financial
statements are prepared on a continuity of interest basis whereby the assets,
liabilities and deficit of Pulsearch are recorded at their carrying amounts,
as if the new consolidated corporate structure arising from the acquisition
had always existed. Generally accepted accounting principles do not allow for
a revaluation in carrying amounts of the assets and liabilities acquired in
transactions of this nature.
<PAGE> 61
2b. Significant accounting policies
Inventory
Inventory of component parts and subassemblies is valued at the lower of cost,
on the specific item basis, and net realizable value. Inventories of work in
progress and finished goods are valued at component and subcontractor cost
plus estimated direct labor cost on a specific item basis.
Deferred development costs
The Company defers, to future periods, development costs net of related
investment tax credits ("ITCs") when the project under development is clearly
defined, technically feasible and a market exists for the related product or,
where the project is used internally in the development or production of other
marketable products, its usefulness has been established. All research costs
and all development costs not meeting the above criteria are expensed as
research, development and engineering expenses in the period incurred.
Deferred development costs are subject to a net recoverable amount test
quarterly whereby the amount deferred must not exceed expected related
revenues less related production, selling and administrative expenses. Any
excess of cost over net recoverable amount is written off in the period the
excess is determined.
During the year ended September 30, 1997, $776,625 of development costs were
deferred. Effective October 1, 1996, the Company is no longer eligible for
refundable investment tax credits. For the nine-month period ended September
30, 1996, $257,190 of development costs, less $131,876 of related ITCs, were
deferred.
Depreciation and amortization
The Company depreciates its capital assets over their estimated useful lives
using the declining balance method and rates as follows:
Automotive 30%
Computer equipment 30%
Electronics 20%
Furniture, fixtures and office equipment 20%
Leasehold improvements are depreciated straight-line over the term of the
lease plus renewal period(s).
<PAGE> 62
Rental pool equipment is carried at cost. Allowances for declines in value
are made on a specific item basis in the event estimated market value is less
than cost.
Deferred development costs are accumulated by specific project and amortized
over the estimated useful lives of each project on the declining balance
basis. Annual amortization rates range from 20% to 30%.
Goodwill arising from the excess purchase price on the acquisition of the
non-controlling interest represents value in the technological expertise of
Pulsearch employees and in Pulsearch products including those under
development and is amortized straight-line over 60 months.
Patent and trademark amounts represent expenditures necessary to obtain
patents on technological developments and to obtain product trademarks and are
amortized over 60 months, which approximates the estimated economic lives of
the related technology or products.
All unamortized balances are reviewed quarterly for any impairment in value by
evaluating the recoverability of the amounts through estimated related future
earnings. Consideration is also given to product life cycles and technical
obsolescence.
Revenue recognition
Sales revenue is recognized when goods are shipped or services are provided to
customers. Rental revenue is recognized on a monthly basis.
2c. Comparative figures
Certain amounts for the 1996, 1995 and 1994 periods have been reclassified to
conform with the presentation adopted for the 1997 year.
3. Business combination
The Company acquired its 100% interest in Pulsearch through two separate
transactions dated May 1, 1996 and November 22, 1996.
In a share purchase agreement effective May 1, 1996, the Company acquired
76.14% of the issued and outstanding Class "A" common shares and 75.48% of the
issued and outstanding (non-voting) preferred shares, for a net controlling
interest of 75.77%, in Pulsearch in exchange for the issuance of 2,356,436
Class "A" shares of the Company, with a legal stated capital amount of
<PAGE> 63
$1,178,200. Due to the non-arm's length nature of this transaction (notes 2a
and 14a), this acquisition has been accounted for on the continuity of
interests method whereby the assets, liabilities and deficit of Pulsearch were
combined with those of the Company at Pulsearch's carrying (book) amounts on
that date. The excess of consideration paid over the carrying amounts of the
Pulsearch's net assets has been charged to share capital.
On November 22, 1996, the Company acquired the remaining non-controlling
interest in a separate acquisition. As consideration, 753,666 Common Shares
valued at $376,833 were issued. This was an arm's length transaction and was
therefore accounted for as a purchase. The excess of purchase price over the
Company's recorded non-controlling interest at the acquisition date was
allocated to goodwill.
The results of Pulsearch's operations have been consolidated in these
financial statements as if the consolidated entity which arose on May 1, 1996
had always existed.
Pulsearch was a private multi-discipline, high-technology engineering,
research and development company engaged in the application of Global
Positioning System and complementary technology and proprietary software to
commercial uses.
On January 17, 1997, Position Inc. and Pulsearch amalgamated to form
Position Inc.
<TABLE>
<CAPTION>
Pulsearch's carrying amounts were as follows:
May 1, 1996
<S> <C> <C>
Assets: Cash $ 2,600
Accounts receivable 84,200
Investment tax credits receivable 590,500
Inventories 229,500
Investment 69,000
Equipment and furniture 88,600
Deferred development costs 437,400
1,501,800
Liabilities: Bank overdraft (265,700)
Accounts payable (318,100)
Convertible shareholder loans (99,300)
Non-controlling interest (218,100)
<PAGE> 64
Deficit 81,300
Company's share of net assets acquired 681,900
Excess of legal value of consideration
paid over carrying amounts acquired1 507,800
Acquisition expenses (11,500)
Legal stated capital amount of
Position Inc. Common Shares issued $ 1,178,200
</TABLE>
1. Due to the non-arm's length nature of the acquisition of the
Company's controlling interest in Pulsearch (notes 2a and 14), this
acquisition has been accounted for on the continuity of interests method
whereby the assets, liabilities and deficit of Pulsearch are combined with
those of the Company at Pulsearch's carrying (book) amounts. The excess of
consideration paid over the carrying amounts of Pulsearch's net assets has
been charged to share capital.
The Company acquired the remaining non-controlling interest in a separate
acquisition dated November 22, 1996. As consideration, 753,666 Common Shares
valued at $376,833 were issued. The excess of purchase price over the
Company's recorded non-controlling interest was allocated to goodwill. The
results of Pulsearch's operations have been consolidated in these financial
statements as if the consolidated entity which arose on May 1, 1996 had always
existed.
4. Related party transactions
Amounts due to and from companies which are controlled or directed by an
officer or a significant shareholder of the Company are as follows.
<TABLE>
<CAPTION>
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
<S> <C> <C> <C> <C>
Revenue $ 406,000 $ 211,000 $ 600,000 $ 674,000
Expenditures 47,000 15,000 60,000 44,000
Accounts receivable 2,000 48,000 340,000 237,000
Accounts payable 4,000 3,000 45,000 -
</TABLE>
Management expects similar related party transactions to occur in the future.
<PAGE> 65
5. Investment tax credits receivable
Certain research and development expenditures of Pulsearch gave rise to
refundable investment tax credits ("ITC"). All ITC amounts, including the
amounts receivable at September 30, 1997, are subject to technical and
financial audit by Revenue Canada. Adjustments, if any, to the receivable
amounts reported will be recorded in the period in which they are determined.
$416,000 of ITC receivable was collected October 6, 1997.
6. Inventory
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
<S> <C> <C> <C>
Component parts and subassemblies $ 371,221 $ 139,052
Work in progress 46,435 93,886
Finished goods 280,340 22,980
$ 697,996 $ 255,918
7. Capital assets
Accumulated Net book
September 30, 1997 Cost depreciation value
Furniture, fixtures and
office equipment $ 156,802 $ 19,002 $ 137,800
Computers and electronics 376,842 154,557 222,285
Automotive 2,500 1,797 703
Leasehold improvements 185,081 51,651 133,430
$ 721,225 $ 227,007 $ 494,218
Accumulated Net book
September 30, 1996 Cost depreciation value
Furniture, fixtures and
office equipment $ 19,616 $ 8,369 $ 11,247
Computers and electronics 160,934 110,603 50,331
Automotive 2,500 1,540 960
Leasehold improvements 50,287 34,990 15,297
$ 233,337 $ 155,502 $ 77,835
</TABLE>
<PAGE> 66
Capital assets include office equipment and computers acquired through capital
leases with net book values of $64,126 and $92,398, respectively (1996: $nil).
8. Lease obligations
In June through August 1997, the Company entered into three separate 36-month
lease agreements and one 24-month agreement for office equipment and computers
totaling $168,546. All are standard commercial agreements with implicit
interest rates ranging from 11% to 15% per annum. In each instance, it is the
Company's intention and encouraged under the terms of the lease, to exercise
the buy-out option so as to obtain title to the equipment at the end of the
lease. The Company, therefore, accounts for the leased assets and obligations
as capital items and depreciates the leased assets as part of capital assets
(note 7).
<TABLE>
<CAPTION>
Years ended September 30 1998 1999 2000 Total
<C> <C> <C> <C>
<S>
Future minimum lease payments $ 67,495 $ 65,420 $ 39,460 $ 172,375
Buy-out amounts - 10 12,753 12,763
Less interest component (16,322) (9,595) (2,718) (28,635)
$ 51,173 $ 55,835 $ 49,495 $ 156,503
</TABLE>
The Company has two operating lease commitments to its landlord for a combined
15,000 ft2 of office, laboratory and manufacturing space rented for a total
of $7,000 per month. The rental agreements expire April 1, 2000 and each
contains a one-year renewal option.
9. Investment
Pulsearch granted a software license to a USA-based company to exploit
commercial development of GPS-based navigation in the golfing industry.
Pulsearch received 20,000 common shares of the licensee valued at $69,000 (US
$50,000), representing 7.1% of the outstanding capital stock of the licensee
at the transaction date. The Company accounts for this investment by the cost
method.
During 1997, circumstances occurred which cause management to have doubt over
the realizable value of this investment. As a consequence of these
circumstances and the uncertainty involved in reasonably determining a new
value for the investment, the entire amount of the investment has been written
off. The Company still retains its share holding in the licensee.
<PAGE> 67
10. Bank indebtedness
The Company has an operating line of credit of up to $300,000 due on demand
and bearing interest at bank prime rate plus 1% (1996: bank prime rate plus
2%). This credit facility is secured by a general security agreement and a
general assignment of book debts. The Company was also in an overdraft
position at September 30, 1997, in the amount of $45,042, representing cheques
issued in excess of cash on hand. Both the operating line of credit and
overdraft position were repaid with the proceeds of the ITC refund payment
received October 6, 1997.
11. Convertible debentures
In July, 1996, the Company issued two $30,000 convertible debentures. These
debentures bore interest at the greater of bank prime rate plus 2% (calculated
monthly and payable on September 1, 1997) or 50% of net monthly equipment
rental income, after deducting principal repayment and rental costs (payable
quarterly). Principal repayments of $5,000 per month were to commence October
1, 1996. The debentures were convertible at the lenders' discretion prior to
September 1, 1997, at a rate of 1 Common Share for every $0.75 of debenture
principal outstanding at the date of conversion. These debentures were
converted into 80,000 Common Shares on April 24, 1997.
In September, 1996, the Company issued another $30,000 convertible debenture,
due April 1, 1999, bearing interest at bank prime rate plus 2%, payable
monthly commencing November 1, 1996. This debenture automatically converted
to Common Shares in the Company, at a rate of 1 Common Share for every $0.75
of debenture, upon completion of the Initial Public Offering of the Company.
This debenture was converted into 40,000 common shares on April 24, 1997.
12. Convertible shareholder loans
In October, 1995, Pulsearch received loans from certain shareholders totaling
$99,300. These loans bore no interest, were due November 1, 1997, and were at
any time, at the option of Pulsearch, repayable or convertible into common
shares of Pulsearch, in whole or pro rata part, at the rate of 1 Class "A"
common share for each $500 of loan. These loans were repaid in full, without
premium or discount, in December, 1996.
<PAGE> 68
13. Income taxes
<TABLE>
<CAPTION>
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
<C> <C> <C> <C>
<S>
Earnings (loss) from
operations $(1,851,902) $ (443,097) $ 58,870 $ 90,773
Effective income tax rate 44.60% 19.12% 19.12% 18.84%
Expected income tax
expense (recovery) (825,948) (84,720) 11,256 17,102
Reconciling items:
Expenses not
deductible for tax 107,554 1,861 1,305 1,137
Unrecognized benefit
of available losses 718,394 52,059 - -
Income tax (recovery)
expense $ - $ (30,800) $ 12,561 $ 18,239
</TABLE>
The Company has estimated income tax losses carried forward of $2,680,000
(September 30, 1996: $1,525,000; December 31, 1995: $980,000; December 31,
1994: $135,000) and unclaimed investment tax credits of $106,000 (September
30, 1996: $110,000; December 31, 1995: $110,000; December 31, 1994: $110,000)
available to reduce future income taxes otherwise payable. These amounts
begin to expire in 1999.
<PAGE> 69
14a. Share capital
Authorized:
Common Shares - unlimited number, without nominal or par value.
Preferred Shares - unlimited number, characteristics to be determined on issue.
Articles of amendment were filed effective October 1, 1996 changing the
classes of shares of the Company. Position Inc. shares formerly issued as
"Class "A" Shares" were replaced with "Common Shares". All other classes of
Position Inc. common shares authorized prior to that date, of which none were
issued or outstanding, were removed.
Issued and outstanding, excluding non-controlling interest:
<TABLE>
<CAPTION>
Common Shares1 Special Warrant Amount
<C> <C> <C>
<S>
December 31, 1995 2,246,348 - $ 670,958
Issued for cash January 1996 -
April 1996 110,088 11,010
May 1, 1996 2,356,436 - 681,968 2
Pulsearch acquisition expenses
(note 3) (11,500)
Issued for cash 2,065,010 330,501
Repurchased (5,900) (590)
September 30, 1996 4,415,546 - 1,000,379 2
Issued for cash,
October 1, 1996 1,000,000 426,618
Acquisition of
non-controlling interest 753,666 376,833
Issued for cash, April 7, 1997 3,600,000 2,949,210
Issued on conversion
of debentures 120,000 90,000
9,889,212 - 4,843,040
Issued for subscription
receivable,
September 30, 1997 1 1,105,000
September 30, 1997 9,889,212 1 $5,948,040
</TABLE>
<PAGE> 70
i) Pulsearch common and preferred shares issued to the controlling
interest prior to the May 1, 1996 share exchange are represented as equivalent
Common Shares of Position Inc. (See "Basis of Financial Statement
Presentation" note 2a.)
ii) Due to the non-arm's length nature of the May 1, 1996 acquisition of
the Company's controlling interest in Pulsearch, the acquisition has been
accounted for on the continuity of interests basis (notes 2a and 3). The
consolidated share equity presented in these financial statements differs from
its legal stated capital amount by $507,800 due to the difference between the
legal stated capital amount of the Common Shares issued upon the acquisition
of Pulsearch and the actual carrying amounts of Pulsearch's net assets
acquired.
At September 30, 1996, the non-controlling interest shareholder held 260 Class
"A" common shares and 217,921 Class "I" preferred shares of Pulsearch with
carrying amounts of $75 and $217,921 respectively.
14b. Escrowed shares
On April 1, 1997, the Company entered into two share escrow agreements with
key shareholders, one statutory and one voluntary, whereby 2,395,672 Common
Shares were escrowed under the statutory agreement and 2,307,790 Common Shares
were escrowed under the voluntary agreement. The Common Shares governed by the
voluntary escrow agreement will be released in conjunction with the Common
Shares released under the statutory escrow agreement such that effectively
one-third of the total number of Common Shares governed by both escrow
agreements in total will be released by each anniversary commencing April 8,
1998.
14c. Special Warrant
On September 30, 1997, the Company issued one Special Warrant by way of a
private placement. The Special Warrant was priced at $1,190,000 and is
convertible into 700,000 Common Shares and 700,000 common share purchase
warrants ("Warrants") for no additional consideration. The Warrants entitle
the holder to purchase an additional 700,000 Common Shares at an exercise
price of $2.25 each and expire March 31, 1999. In the event the Company does
not qualify for distribution, by way of a prospectus, the underlying Common
Shares and Warrants by March 31, 1998, a penalty of up to 70,000 additional
Common Shares and an entitlement to an additional 70,000 Common Shares under
the Warrants would have to be distributed to the warrant holder. Proceeds of
the Special Warrant issue, net of $85,000 of issue costs, were received
<PAGE> 71
November 4, 1997.
Pursuant to this issue, the Company granted to an agent a non-assignable
warrant to acquire anytime up to March 31, 1999 an option to purchase up to
70,000 Common Shares at a price of $2.25 per Common Share. The option expires
March 31, 1999.
14d. Stock options
On November 1, 1996, 986,000 stock options ("Options") were granted to
directors, officers and employees of the Company under the Company's stock
option plan (the "Plan"). Under the Plan, Options may be granted to a maximum
of 10% of the Company's Common Shares outstanding at the time of the listing
and posting for trading of said Common Shares on a stock exchange (the "Listed
Shares"). The amount and exercise price of the Options granted are subject to
the approval of both the Company's Board of Directors and any applicable
stock exchange. The Plan does not permit any one individual to hold as
Options more than 5% of the Listed Shares outstanding. The Options currently
outstanding expire after five years and have exercise prices ranging from
$0.50 to $2.00. At September 30, 1997, 978,500 Options were outstanding.
On April 24, 1997, 540,000 Agent's Options were granted to a securities
brokerage company under the terms of the agency agreement surrounding the
Company's April 1997 initial public offering. Each option entitles the holder
to purchase one Common Share at an exercise price of $1.00. These options
expire on April 24, 1999.
<PAGE> 72
15. Earnings (loss) per share
Earnings (loss) per share amounts are calculated as follows:
<TABLE>
<CAPTION>
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
<C> <C> <C> <C>
<S>
Earnings (loss) for the
period $(1,850,640) $ (312,401) $ 35,088 $ 27,340
Weighted average number
of shares outstanding:
Basic 7,594,000 3,386,000 2,356,000 2,356,000
Fully diluted 9,122,000 3,669,000 2,397,000 2,356,000
Earnings (loss)
per share:
Basic $ (0.244) $ (0.092) $ 0.015 $ 0.012
Fully diluted N/A N/A N/A N/A
16. Segmented information
The Company sells its products and services world-wide. The geographic
breakdown of these sales, to the nearest thousand dollars, is as follows:
Nine months
Year ended ended
September September 30, Years ended December 31,
30, 1997 1996 1995 1994
(unaudited)
Canada $ 726,000 $ 293,000 $ 661,000 $ 481,000
United States 413,000 279,000 660,000 1,464,000
Other foreign countries 590,000 157,000 236,000 89,000
$ 1,729,000 $ 729,000 $1,557,000 $2,034,000
</TABLE>
<PAGE> 73
17. Financial instruments
The carrying amounts of the Company's financial assets and liabilities at
September 30, 1997 and 1996 approximate their fair value due to their short
terms to maturity.
18. Subsequent event
Pursuant to a Subscription Agreement, the Company filed a
prospectus qualifying for sale 700,000 Common Shares and 700,000 Common Share
purchase warrants to be issued by the Company on exercise or deemed exercise
of one Special Warrant previously issued on September 30, 1997, by way of a
private placement.
<PAGE> 74
Consolidated Financial Statements of
Position Inc.
Nine months ended June 30, 1998 and 1997
(unaudited)
Consolidated Balance Sheet
June 30, 1998 and 1997
(unaudited)
1998 1997
Assets
Current assets:
Cash $ - $ 891,439
Accounts receivable 437,889 465,726
Investment tax credits receivable 248,938 665,500
Inventory 614,601 657,793
1,301,428 2,680,458
Capital assets 536,961 441,356
Deferred development costs, net 2,100,813 835,717
Goodwill 161,624 194,501
Patents and trademarks 43,564 9,064
$ 4,144,390 $ 4,161,096
Liabilities and Shareholders' Equity
Current liabilities:
Bank indebtedness $ 358,315 $ 297,239
Accounts payable 1,106,529 335,429
Current portion of lease obligations 51,173 48,599
Current portion of term loan 110,000 -
1,626,017 681,267
<PAGE> 75
Lease obligations 68,186 93,147
Term loan 390,000 -
Shareholders' equity:
Share capital 6,174,443 4,871,066
Deficit (4,114,256) (1,484,384)
2,060,187 3,386,682
$ 4,144,390 $ 4,161,096
<PAGE> 76
Consolidated Statement of
Operations and Deficit
Nine months ended June 30, 1998 and 1997
(unaudited)
1998 1997
Revenue $ 2,109,855 $ 1,548,224
Cost of sales 1,595,306 949,978
514,549 598,246
Expenses:
Research, development and engineering 143,279 77,126
General and administrative 1,031,640 900,575
Sales, marketing and business development 956,951 458,313
Depreciation and amortization 405,502 148,614
2,537,372 1,584,628
Loss from operations 2,022,823 986,382
Interest expense (revenue) (14,717) 173,492
Write-off of investment - 69,000
Loss for the period 2,008,106 1,228,874
Deficit, beginning of period 2,106,150 255,510
Deficit, end of period $ 4,114,256 $ 1,484,384
Per share information:
Basic:
Loss per share $ 0.197 $ 0.180
Weighted average number
of shares outstanding 10,220,000 6,828,000
<PAGE> 77
Consolidated Statement of
Changes in Financial Position
Nine months ended June 30, 1998 and 1997
(unaudited)
1998 1997
Cash provided by (used in):
Operations:
Loss for the period $(2,008,106) $(1,228,874)
Items not involving cash:
Depreciation and amortization 405,502 148,614
(1,602,604) (1,080,260)
Change in non-cash operating
working capital:
Accounts receivable (87,958) (333,272)
Inventory 388,395 (401,875)
Accounts payable 486,977 (2,330)
(815,190) (1,817,737)
Investing:
Capital assets (220,273) (398,669)
Deferred development costs (1,176,300) (433,433)
Investment tax credits receivable 416,562 -
Patents and trademarks (12,331) (9,064)
Acquisition - (378,095)
Write-off of investment - 69,000
(992,342) (1,150,261)
Financing:
Bank indebtedness - (2,761)
Special warrant subscription proceeds 1,105,000 -
Lease obligations proceeds (repayments) (37,144) 141,746
Term loan 500,000 -
Issue of share equity 226,403 3,780,687
Deferred financing costs - 33,842
Repayment of convertible shareholder loans - (99,300)
1,794,259 3,854,214
Increase (decrease) in cash (13,273) 886,216
Cash, beginning of period (45,042) 5,223
Cash, end of period $ (58,315) $ 891,439
<PAGE> 78
PART III
ITEM I. INDEX TO EXHIBITS
(b) Exhibits
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Not applicable
7 Not applicable
9 Not applicable
10.1 MATERIAL CONTRACTS
Except for contracts entered into the ordinary course of business,
the only contracts entered into by the Company or Pulsearch within
two years of the date hereof which may reasonably be regarded as
material are the following:
.1. Stock Option Agreements between the Company and various security
holders. See "Executive Compensation - Options Granted to
Executive Officers".
.2. Escrow Agreement dated April 1, 1997 between the Company, the
Escrow Agent and various security holders. See "Escrowed
Shares".
.3. Position Escrow Agreement dated April 1, 1997 between the Company,
Wolverton, and various security holders. See "Escrowed Shares".
.4. Position Escrow Agreement dated April 1, 1998 between the Company,
JFM Geomatics Ltd. And MICA Geomatics Ltd., and various security
holders. See "Escrowed Shares".
.5. Software License Agreement dated April 1, 1998 between the Company,
JFM Geomatics Ltd., and Mica Geomatics Ltd.
.6. Debenture and Warrant Agreement in the amount of USD$220,000
dated July, 1998
<PAGE> 79
Copies of the foregoing contracts may be inspected during normal business
hours at the head office of the Company at 6815E - 40th Street S.E., Calgary,
Alberta, at the offices of the Alberta Securities Commission, 19th Floor,
10025 Jasper Avenue, Edmonton, Alberta T5J 3Z5 and at the offices of the
Ontario Securities Commission, Suite 1700, Box 55, 20 Queen Street West,
Toronto, Ontario M5H 3S8.
(b) Exhibits (CONTINUED)
11 Not applicable
14 Not applicable
16 Not applicable
21 Not applicable
22.1 Subsidiaries of the Registrant
23.1 Consent of Counsel, Mark T. Thatcher, P.C.
24 Not applicable
27 Financial Data Schedule
28 Not applicable
99 Not applicable
ITEM 2. DESCRIPTION OF EXHIBITS
See Item I above.
<PAGE> 80
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized.
POSITION INC.
Date August 27, 1998
By /s/ Paul E. Kowalenko
By:_________________________
PAUL E. KOWALENKO
Chief Executive Officer
BUSINESS CORPORATIONS ACT FORM 9
(SECTION 179)
Alberta Consumer and
Corporate Affairs ARTICLES OF AMALGAMATION
- --------------------------------------------------------------------------------
1. NAME OF AMALGAMATED CORPORATION 2. CORPORATE ACCESS NO.
POSITION INC. 20722377
- --------------------------------------------------------------------------------
3. THE CLASSES AND ANY MAXIMUM NUMBER OF SHARES THAT THE CORPORATION IS
AUTHORIZED TO ISSUE.
The Corporation is authorized to issue an unlimited number of Common shares
and an unlimited number of Preferred Shares, issuable in series, subject to
the rights, privileges, restrictions and conditions described below.
1. COMMON SHARES
The rights, privileges, restrictions and conditions attached to the
Common Shares shall be as follows:
1. Voting
1.1 Holders of Common Shares shall be entitled to receive notice
of and attend and vote at all meetings of shareholders of the Corporation,
except meetings of holders of another class of shares. Each Common Share
shall entitle the holder thereof to one vote.
<PAGE>
2. Dividends
2.1 Subject to the preferences accorded to holders of Preferred
Shares and any other shares of the Corporation ranking senior to the Common
Shares from time to time with respect to the payment of dividends, holders of
Common Shares shall be entitled to receive, if, as and when declared by the
Board of Directors, such dividends as may be declared thereon by the Board of
Directors from time to time.
3. Liquidation, Dissolution or Winding-up
3.1 In the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, or any other distribution of its
assets among its shareholders for the purpose of winding-up its affairs (such
event referred to herein as a "Distribution"), holders of Common Shares shall
be entitled, subject to the preferences accorded to holders of Preferred
Shares and any other shares of the Corporation ranking senior to the Common
Shares from time to time with respect to payment on a Distribution, to share
equally, share for share, in the remaining property of the Corporation.
II. PREFERRED SHARES
The rights, privileges, restrictions and conditions attached to the
Preferred Shares, as a class, shall be as follows:
1. Issuance in Series
1.1 Subject to the filing of Articles of Amendment in accordance
with the Business Corporations Act (Alberta) (the "Act"), the Board of
Directors may at any time and from time to time issue the Preferred Shares in
one or more series, each series to consist of such number of shares, as may,
before the issuance thereof, be determined by the Board of Directors.
1.2 Subject to the filing of Articles of Amendment in accordance
with the Act, the Board of Directors may from time to time fix, before
issuance, the designation, rights, privileges, restrictions and conditions
attached to each series of Preferred Shares including, without limiting the
generality of the foregoing, the amount, if any, specified as being payable
preferentially to such series on a Distribution; the extent, if any, of
further participation on a Distribution; voting rights, if any; and divided
rights (including whether such dividends be preferential, cumulative or
non-cumulative), if any.
2. Liquidation
2.1 In the event of the voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, or any other distribution of its assets
among its shareholders for the purpose of winding-up its affairs (such
event referred to herein as a "Distribution"), holders of each series of
Preferred Shares shall be entitled, in priority to holders of Common Shares
and any other shares of the Corporation ranking junior to the Preferred Shares
from time to time with respect to payment on a Distribution, to be paid
rateably with holders of each series of Preferred Shares the amount, if any,
specified as being payable preferentially to the holders of such series on a
Distribution.
3. Dividends
3.1 The holders of each series of Preferred Shares shall be
entitled, in priority to holders of Common Shares and any other shares of the
Corporation ranking junior to the Preferred Shares from time to time with
respect to the payment of dividends, to be paid rateably with holders of each
other series of Preferred Shares, the amount of accumulated dividends, if
any, specified as being payable preferentially to the holder of such series.
Dividends may, in the discretion of the Board of Directors of the Corporation,
be paid on any one or more class of shares to the exclusion of the others.
- --------------------------------------------------------------------------------
4. RESTRICTIONS IF ANY ON SHARE TRANSFERS.
1. No shares of the capital of the Corporation shall be transferred
without the express consent of a majority of the Directors to be signified by
a resolution passed by the Board of Directors.
2. The Corporation may distribute its securities to the public or
make any invitation to the public to subscribe for securities.
- --------------------------------------------------------------------------------
5. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS.
Minimum of One (1) Director and Maximum of Ten (10) Directors.
- --------------------------------------------------------------------------------
6. RESTRICTIONS IF ANY ON BUSINESS THE CORPORATION MAY CARRY ON.
None.
- --------------------------------------------------------------------------------
7. OTHER PROVISIONS IF ANY.
1. At all meetings of the Board of Directors every question shall be
decided by a majority of the votes cast on the question. Subject to any
Unanimous Shareholders Agreement, in cases of an equality of votes the
Chairman of the meeting shall not be entitled to a second or casting vote.
2. At any meetings of Shareholders every question shall, unless
otherwise required by the Articles, By-Laws, any Unanimous Shareholders
Agreement, or Business Corporations Act, be determined by the majority of the
votes cast on the question. Subject to any Unanimous Shareholders Agreement,
in case of an equality of votes either upon a show of hands or upon a poll,
the Chairman of the meetings shall not be entitled to a second or casting
vote.
3. The Corporation shall have a lien on the shares registered in the
name of the shareholder or his legal representative for a debt of that
shareholder to the Corporation.
4. The Board of Directors may, between annual general meetings,
appoint one or more additional directors of the Corporation to serve until the
next annual general meeting, but the number of additional directors shall not
at any time exceed one third of the number of directors who held office at
the expiration of the last annual meeting of the Corporation.
- --------------------------------------------------------------------------------
8. NAME OF AMALGAMATING CORPORATIONS. CORPORATE ACCESS NO.
PULSEARCH NAVIGATION SYSTEMS INC. 20567441
POSITION INC. 20691807
- --------------------------------------------------------------------------------
9. DATE SIGNATURE TITLE
December 20, 1996 "G. Kenneth Little" Solicitor
- --------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY FILED
- --------------------------------------------------------------------------------
BUSINESS CORPORATIONS ACT FORM 4
(SECTION 27 OR 171)
ARTICLES OF AMENDMENT
- --------------------------------------------------------------------------------
1. NAME OF CORPORATION: 2. CORPORATE ACCESS NUMBER
POSITION INC. 20722377
- --------------------------------------------------------------------------------
3. THE ARTICLES OF THE ABOVE-NAMED CORPORATION ARE AMENDED AS FOLLOWS:
4. In accordance with Sections 167(1)(l) of the Business Corporations Act,
the following provisions shall be deleted from Item 4, RESTRICTIONS IF ANY ON
SHARE TRANSFERS, in the Articles of Incorporation:
1. No shares of the capital of the Corporation shall be
transferred without the express consent of a majority of the Directors to be
signified by a resolution passed by the Board of Directors.
3. The Corporation may distribute its securities to the public
or make any invitation to the public to subscribe for securities.
In accordance with Sections 167(1)(m) of the Business Corporations Act, the
following provisions shall be deleted from Item 7, OTHER PROVISIONS IF ANY,
in the Articles of Incorporation:
1. At all meetings of the Board of Directors every question
shall be decided by a majority of the votes cast on the question. Subject to
any Unanimous Shareholders Agreement, in cases of an equality of votes of the
Chairman of the meeting shall not be entitled to a second or casting vote.
<PAGE>
2. At any meeting of the Shareholders every question shall,
unless otherwise required by the Articles, Bylaws, any Unanimous Shareholders
Agreement, or Business Corporations Act, be determined by the majority of the
votes cast on the question. Subject to any Unanimous Shareholders Agreement,
in case of an equality of votes either upon a show of hands or upon a poll,
the Chairman of the meeting shall not be entitled to a second or casting vote.
3. The Corporation shall have a lien on the shares registered in
the name of the shareholder or his legal representative for a debt of that
shareholder to the Corporation.
- --------------------------------------------------------------------------------
DATE SIGNATURE TITLE
March 5, 1997 "Paul E. Kowalenko" President
- --------------------------------------------------------------------------------
BE IT ENACTED as a By-Law of the Corporation as follows:
Section One
INTERPRETATION
1.01 DEFINITIONS
Definitions in the By-Laws of the Corporation, unless the context
otherwise requires:
(a)"Act" means the Business Corporations Act, Statutes of Alberta 1981 c.B-15,
Regulations thereto, and any statute that may be substituted therefor, as from
time to time amended; marginal references to sections of the Act herein are
not made for the purpose of modifying or affecting the meaning of any
provision of this By-Law in any way but are inserted only for the purpose of
directing attention to provisions of the Act which may be regarded as
relevant;
(b)"appoint" includes "elect" and vice versa;
(c)"Articles" means the articles attached to the Certificate of Incorporation
of the Corporation as from time to time amended or restated;
(d)"Board" means the Board of Directors of the Corporation;
(e)"By-Laws" means this By-Law and all other By-Laws of the Corporation from
time to time in force and effect relating to transaction of business and
affairs of the Corporation in addition hereto, or in amendment hereof or in
substitution for all or any part of this By-Law;
(f)"Corporation" means the Corporation incorporated by Certificate of
Incorporation under the Act and bearing the name stated at the head of this
By-Law;
(g)"Director" means a person occupying the position of director by whatever
name called and "Directors" and "Board of Directors" includes a single
director;
<PAGE>
(h)"Meetings of shareholders" includes an annual meeting of shareholders and
a Special Meeting of shareholders; "Special Meeting of shareholders" includes
both a meeting of any class or classes acting separately from any other class
or classes and also a meeting, other than an annual meeting, of all
shareholders entitled to vote at an annual meeting of shareholders;
(i)"non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act (Alberta);
(j)"ordinary resolution" means a resolution:
(i)passed by a majority of the votes cast by the shareholders who voted in
respect of that resolution; or
(ii)signed by all the shareholders entitled to vote on that resolution;
Page 2 SECTION REFERENCE
(k)"recorded address" means in the case of a shareholder his address as
recorded in the securities register; and in the case of joint shareholders the
address appearing in the securities register in respect of such joint holding
determined under Section 8.09 and in the case of a Director, officer, auditor
or member of a committee of Directors, his latest address as recorded in the
records of the Corporation;
(l)"Unanimous Shareholder Agreement" means: 1(z)
(i)a written agreement to which all the shareholders of a corporation are or
are deemed to be parties, whether or not any other person is also a party;
or 140
(ii)a written declaration by a person who is the beneficial owner of all the
issued shares of a corporation,
that provides for any of the following matters:
(a) the regulation of the rights and liabilities of the shareholders, as
shareholders, among themselves or between themselves and any other party to
the agreement;
<PAGE>
(b) the regulation of the election of Directors;
(c) the management of the business and affairs of the Corporation, including
the restriction or abrogation, in whole or in part, of the powers of the
Directors; and
(d) any other matter that may be contained in an Unanimous Shareholder
Agreement pursuant to any other provision of the Act.
1.02 Save as aforesaid, words and expressions defined in the Act
have the same meaning when used herein.
1.03 Words importing the singular number include the plural and vice
versa; words importing gender include the masculine, feminine and neuter
genders; and words importing persons include individuals, bodies corporate,
partnerships, trusts and unincorporated organizations.
Section Two
BUSINESS OF THE CORPORATION
2.01 BANKING ARRANGEMENTS
The banking business of the Corporation including, without
limitation, the borrowing of money and the giving of security therefor, shall
be transacted with such banks, trust companies or other bodies corporate or
organizations as may from time to time be designated by or under the authority
of the Board. Such banking business or any part thereof shall be transacted
under such agreements, instructions and delegations of powers as the Board
may from time to time by resolution prescribe or authorize.
<PAGE>
2.02 VOTING RIGHTS IN OTHER BODIES CORPORATE
The signing officers of the Corporation may execute and deliver proxies 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 favor of such person or persons as may be determined by the officers
executing such proxies or arranging for the issuance of voting certificates
or such other evidence of the right to exercise such voting rights. In
addition, the Board may from time to time direct the manner in which the
person or persons by whom any particular voting rights or class of voting
rights may or shall be exercised.
2.03 WITHHOLDING INFORMATION FROM SHAREHOLDERS
Subject to the provisions of the Act, no shareholders shall be entitled to
discovery of any information respecting any details or conduct of the
Corporation's business which, in the opinion of the Board, would not be
in the interests of the shareholders or the Corporation to communicate to
the public. The Board may from time to time determine whether to what
extent and at what time and place and under what conditions or regulations
the accounts, records and documents of the Corporation or any of them shall
be open to the inspection of shareholders and no shareholder shall have any
right of inspecting any account, record or document of the Corporation
except as conferred by the Act or authorized by the Board or by resolution
passed at a general meeting of shareholders.
Section Three
BORROWING AND SECURITIES
3.01 BORROWING POWER
Without limiting the borrowing powers of the Corporation as set
forth in the Act, the Board is authorized from time to time:
such terms as may be deemed expedient;
(b)to issue, re-issue, sell or pledge bonds, debentures, notes or other
evidence of indebtedness of the Corporation, whether secured or unsecured
for such sums and at such prices as may be deemed expedient;
(c)to give a guarantee on behalf of the Corporation to secure performance of
an obligation of any person; and
(d)to charge, mortgage, hypothecate, pledge or otherwise create a security
interest in all or any property of the Corporation, owned or subsequently
acquired, to secure any obligation of the Corporation.
3.02 The Board may from time to time delegate to such one or more of
the Directors and officers of the Corporation as may be designated by the
Board all or any of the powers conferred on the Board by Section 3.01 to such
extent and in such manner as the Board shall determine at the time of each
such delegation.
<PAGE>
Section Four
DIRECTORS
4.01 QUORUM
Subject to the Articles or By-Laws a majority of the number of Directors
appointed constitutes a quorum at any meeting of Directors, and
notwithstanding any vacancy among the Directors, a quorum of Directors
may exercise all the powers of the Directors.
4.02 QUALIFICATION
No person shall be a Director of the Corporation:
(a)if he is less than Eighteen (18) years of age;
(b)if he is a dependent adult as defined in the Dependent Adults Act or
is the subject of a certificate of incapacity under that Act;
(c)if he is a formal patient as defined in the Mental Health Act, 1972;
(d)if he is the subject of an order under the Mentally Incapacitated Persons
Act appointing a committee of his person or estate or both;
(e)if he has been found to be a person of unsound mind by a court elsewhere
than in Alberta;
(f)if he is not an individual; or
(g)if he has the status of a bankrupt.
A Director need not be a shareholder. Fifty (50%) percent of the Directors
shall be resident Canadians. When required by the Act, but not otherwise,
at least two Directors shall not be officers or employees of the Corporation
or Its affiliates.
4.03 ELECTION AND TERM
Each Director named in the Notice of Directors filed at the time of
incorporation shall hold office from the date of the Certificate of
Incorporation until the first meeting of shareholders. An election of
Directors shall take place at the first meeting of shareholders and at each
annual meeting of shareholders thereafter. All the Directors shall retire at
each annual meeting but, if qualified, shall be eligible for re-election. A
Director shall retain office only until the election of his successor. The
<PAGE>
number of Directors to be elected at any such meeting shall be the number of
Directors then in office unless the Directors or the shareholders otherwise
determine. The election shall be by ordinary resolution. If an election of
Directors is not held at the proper time, the incumbent Directors shall
continue in office until their successors are elected.
4.04 REMOVAL OF DIRECTORS
Subject to the provisions of the Act, the shareholders may by
ordinary resolution passed at a special meeting remove any Director from
office and the vacancy created by such removal may be filled at the same
meeting failing which it may be filled by the Directors.
4.05 VACATION OF OFFICE
A Director ceases to hold office when:
(a)he dies;
(b)he is removed from office by the shareholders;
(c)he ceases to be qualified for election as a Director; or
(d)his written resignation is sent or delivered to the Corporation,
or if a time is specified in such resignation, at the time so specified,
whichever is later.
4.06 VACANCIES
Subject to the Act and the Articles, a quorum of the Board may fill
a vacancy in the Board, except a vacancy resulting from an increase in the
minimum number of Directors or from a failure of the shareholders to elect
the minimum number of Directors and may also add to their numbers and appoint
additional Director(s) but so that the total number of Directors shall not
exceed the maximum number fixed by the Articles. In the absence of a quorum
of the Board, or if the vacancy has arisen from a failure of the shareholders
to elect the minimum number of Directors the Board shall forthwith call a
special meeting of the shareholders to fill the vacancy. If the Board fails
to call such meeting or if there are no such Directors then in office, any
shareholder may call the meeting.
4.07 ACTION BY THE BOARD
Subject to any Unanimous Shareholder Agreement, the Board shall
manage the business and affairs of the Corporation. Subject to Sections
4.08 and 4.09
the powers of the Board may be exercised by resolution passed at a meeting
at which a quorum is present or by resolution in writing signed by all the
Directors entitled to vote on that resolution at a meeting of the Board
and any resolution in writing so signed shall be as valid as if it had been
passed at a meeting of Directors or a committee of Directors. A copy of
every such resolution in writing shall be kept with the minutes of the
proceedings of Directors or committee of Directors. Where there is a vacancy
in the Board, the remaining Directors may exercise all the powers of the
Board so long as a quorum remains in office. Where the Corporation has
only one Director, that Director may constitute a meeting. An act of a
Director is valid notwithstanding any irregularity in his election or
appointment or a defect in his qualifications.
4.08 CANADA RESIDENCY
The Board shall not transact business at a meeting, other than
filling a vacancy in the Board, unless Fifty (50%) percent of the
Directors present are resident Canadians, except where:
(a)a resident Canada Director who is unable to be present approves in writing
or by telephone or other communications facilities the business transacted at
the meeting; and
(b)the number of resident Canadian Directors present at the meeting, together
with any resident Canadian Director who gives his approval under clause (a),
totals at least half of the Directors present at the meeting.
4.09 MEETINGS BY TELEPHONE
A Director may participate in a meeting of the Board or of a
committee of Directors by means of such telephone or other communications
facilities as permit all persons participating in the meeting to hear each
other, and a Director participating in such a meeting by such means is deemed
to be present at the meeting.
4.10 PLACE OF MEETINGS
Meetings of the Board may be held at any place.
4.11 CALLING OF MEETINGS
Meetings of the Board shall be held from time to time and at such
place as the Board may determine. In addition, each of the Chairman of the
Board, the President, the Managing Director or any two Directors may convene
or direct the convening of a meeting of the Board.
<PAGE>
4.12 NOTICE OF MEETING
Except as otherwise provided in Section 4.13, notice of the time
and place of each meeting of the Board shall be given in the manner provided
in Section 12.01 to each Director not less than Forty-Eight (48) hours before
the time when the meeting is to be held. A notice of a meeting of Directors
need not specify the purpose of or the business to be transacted at the
meeting except where Section 109(5) of the Act requires such purpose or
business to be specified, including any proposal to:
(a)submit to the shareholders any question or matter requiring the approval
of the shareholders;
(b)fill a vacancy among the Directors or in the office of auditor;
(c)issue securities;
(d)declare dividends;
(e)purchase, redeem or otherwise acquire shares issued by the Corporation;
(f)pay a reasonable commission referred to in Section 39 of the Act;
(g)approve a management proxy circular referred to in Part 12 of the Act;
(h)approve any financial statements referred to in Section 149 of the Act; or
(i)adopt, amend or repeal By-Laws.
A Director may in any manner waive notice of or otherwise consent to a
meeting of the Board either before or after the convening of the meeting.
4.13 REGULAR MEETINGS
The Board may by resolution appoint a day or days in any month or
months for regular meetings of the Board at a place and hour to be named
in The resolution. No notice shall be required for any such regular meeting.
4.14 FIRST MEETING OF NEW BOARD
Provided a quorum of Directors is present, each newly elected Board
may without notice hold its first meeting immediately following the meeting
of shareholders at which such Board is elected.
<PAGE>
4.15 ADJOURNED MEETING
Notice of an adjourned meeting of the Board is not required if the
time and place of the adjourned meeting is announced at the original meeting.
4.16 CHAIRMAN
The Chairman of any meeting of the Board shall be the first
mentioned of such of the following officers as have been appointed and who is
a Director and is present at the meeting: Chairman of the Board, President,
Managing Director, or a Vice-President who is a Director. If no such officer
is present, the Directors present shall choose one of their number to be
Chairman.
4.17 VOTES TO GOVERN
At all meetings of the Board every question shall be decided by a
majority of the votes cast on the question. Subject to any Unanimous
Shareholders Agreement, in cases of an equality of votes the Chairman of the
meeting shall not be entitled to a second or casting vote.
4.18 CONFLICT OF INTEREST
A Director or officer who is a party to, or who is a Director or
officer of or has a material interest in any person who is a party to, a
material contract or proposed material contract with the Corporation shall
disclose the nature and extent of his interest at the time and in the manner
provided by the Act. Any such contract or proposed contract shall be referred
to the Board or shareholders for approval even if such contract is one that in
the ordinary course of the Corporation's business would not require approval
by the Board or shareholders, and a Director interested in a contract so
referred to the Board shall not vote on any resolution to approve the same
except as provided by the Act.
4.19 REMUNERATION AND EXPENSES
Subject to the Articles, the By-Laws, or any Unanimous Shareholder
Agreement, 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 traveling and other expenses properly incurred
by them in attending meetings of the Board or any committee thereof. Nothing
herein contained shall preclude any Director from serving the Corporation in
any other capacity and receiving remuneration therefor.
<PAGE>
Section Five
COMMITTEES
5.01 COMMITTEE OF DIRECTORS
The Board may appoint a committee of Directors, however designated,
and delegate to such committee any of the powers of the Board except those
which, under the Act, a committee of Directors has no authority to exercise.
Fifty (50%) percent of the members of such committee shall be resident
Canadians.
5.02 TRANSACTION OF BUSINESS
Subject to the provisions of Section 4.09, the powers of a committee
of Directors may be exercised by a meeting at which a quorum is present or
by resolution in writing signed by all the members of such committee who
would have been entitled to vote on that resolution at a meeting of the
committee. Meetings of such committee may be held at any place.
5.03 AUDIT COMMITTEE
When required by the Act the Board shall, and at any other time the
Board may, elect annually from among its number an audit committee to be
composed of not fewer than Three (3) Directors of whom a majority shall not
be officers or employees of the Corporation or its affiliates. The audit
committee shall have the powers and duties provided in the Act.
5.04 PROCEDURE
Unless otherwise determined by the Board, each committee of
Directors shall have the power to fix its quorum at not less than a majority
of its members, to elect its Chairman and to regulation its procedures.
Section Six
OFFICERS
6.01 APPOINTMENT
Subject to any Unanimous Shareholder Agreement, the Board may from
time to time appoint a President, one or more Vice-Presidents (to which title
may be added words indicating seniority or function), a Secretary, a Treasurer
and such other officers as the Board may determine, including one or more
assistants to any of the officers so appointed. The Board may specify the
duties of and, in accordance with this By-Law and subject to the provisions of
the Act, delegate to such officers powers to manage the business and affairs
of the Corporation. Subject to Sections 6.02 and 6.03, an officer may but
need not be a Director and one person may hold more than one office.
6.02 CHAIRMAN OF THE BOARD
The Board may from time to time also appoint a Chairman of the Board
who shall be a Director. If appointed, the Board may assign to him any of
the powers and duties that are by any provisions of this By-Law assigned to the
President; and he shall, subject to the provisions of the Act, have such other
powers and duties as the Board may specify. During the absence or disability
of the Chairman of the Board, his duties shall be performed and his powers
exercised by the President or by the Managing Director, if any.
6.03 PRESIDENT
If appointed, the President shall be the chief operating and executive
officer and, subject to the authority of the Board, shall have
general supervision of the business of the Corporation; and he shall have
such other powers and duties as the Board may specify.
6.04 VICE-PRESIDENT
A Vice-President shall have such powers and duties as the Board or
the chief executive officer may specify.
6.05 SECRETARY
The Secretary shall attend and be the Secretary of all meetings of
the Board, shareholders and committees of the Board and shall enter or cause
to be entered in records kept for that purpose minutes of all proceedings
thereat; he shall give or cause to be given, as and when instructed, all
notices to shareholders, Directors, officers, the auditor and members of
committees of Directors; he shall be the custodian of the stamp or mechanical
device generally used for affixing the corporate seal of the Corporation and
of all books, papers, records, documents and instruments belonging to the
Corporation, except when some other officer or agent has been appointed for
that purpose; and he shall have such other powers and duties as the Board or
the chief executive officer may specify.
6.06 TREASURER
The Treasurer shall keep proper accounting records in compliance
with the Act and shall be responsible for the deposit of money, the
safekeeping of securities and the disbursement of the funds of the
Corporation; he shall render to the Board whenever required an account of
all his transactions as Treasurer and of the financial position of the
Corporation; and he shall have such other powers and duties as the Board
or the chief executive officer may specify.
<PAGE>
6.07 MANAGING DIRECTOR
The Board may from time to time appoint a Managing Director who
shall be a resident Canadian and a Director. The Managing Director shall,
subject to the provisions of the Act, have such powers and duties as
the Board may specify.
6.08 POWERS AND DUTIES OF OTHER OFFICERS
The powers and duties of all other officers shall be such as the
terms of their engagement call for or as the Board or the chief executive
officer may specify. Any of the powers and duties of an officer to whom an
assistant has been appointed may be exercised and performed by such assistant,
unless the Board or the chief executive officer otherwise directs.
6.09 VARIATION OF POWERS AND DUTIES
The Board may from time to time and subject to the provisions of
the Act, vary, add to or limit the powers and duties of any officer.
6.10 TERM OF OFFICE
The Board, in its discretion, may remove any officer of the
Corporation from his position as officer. Otherwise each officer appointed
by the Board shall hold office until the earlier of the date his resignation
becomes effective, the date his successor is appointed or he shall cease to
be qualified for that office under Section 6.02 or 6.03 if applicable.
6.11 TERMS OF EMPLOYMENT AND REMUNERATION
The terms of employment and the remuneration of officers appointed
by the Board shall be settled by it from time to time.
6.12 CONFLICT OF INTEREST
An officer shall disclose his interest in any material contract or
proposed material contract with the Corporation in accordance with Section
4.18.
6.13 AGENTS AND ATTORNEYS
The Board shall have power from time to time to appoint agents or
attorneys for the Corporation in or outside of Canada with such powers or
management or otherwise (including the power to sub-delegate) as may be
thought fit.
<PAGE>
6.14 FIDELITY BONDS
The Board may require such officers, employees and agents of the
Corporation as the Board deems advisable to furnish bonds for the faithful
discharge of their powers and duties, in such form and with such surety as
the Board may from time to time determine.
Section Seven
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 LIMITATION OF LIABILITY
No Director shall be liable for the acts, receipts, neglects or
defaults of any other Director or officer or employee, or for joining in any
receipt or other act for conformity, or for any loss, damage or expense
happening to the Corporation through the insufficiency or deficiency of title
to any property acquired for or on behalf of the Corporation, or for the
insufficiency or deficiency of any security in or upon which any of the moneys
of the Corporation shall be invested, or for any loss or damage arising from
the bankruptcy, insolvency or tortuous acts of any person with whom any of
the moneys, securities or effects of the Corporation shall be deposited, or for
any loss occasioned by an error of judgment or oversight on his part, or for
any other loss, damage or misfortune whatever which shall happen in the
execution of the duties of his office or in relation thereto, unless the
same are occasioned by his own wilful neglect or default; provided that
nothing herein shall relieve any Director or officer from the duty to act
in accordance with the Act and the regulations thereunder or from liability
for any breach thereof.
7.02 INDEMNITY
Subject to the limitations contained in the Act, the Corporation
shall indemnify a Director or officer, a former Director or officer, 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 creditor (or a person who undertakes or has undertaken any liability on
behalf of the Corporation or any such body corporate) and his heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, 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, if
(a)he acted honestly and in good faith with a view to the best interests of
the Corporation; and
<PAGE>
(b)in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, he had reasonable grounds for believing that
his conduct was lawful.
7.03 INSURANCE
Subject to the limitations contained in the Act, the Corporation may
purchase and maintain such insurance for the benefit of its Directors and
officers as such, as the Board may from time to time determine.
Section Eight
SHARES
8.01 ALLOTMENT AND ISSUE
Subject to the Articles, the By-Laws, and any Unanimous Shareholders
Agreement the Board may from time to time allot, or grant options to purchase
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 it is
fully paid as prescribed by the Act. The Board may issue certificates,
warrants or other evidences of conversion privileges, options or rights to
acquire securities (as defined in the Act) of the Corporation. Subject to
the Articles, no holder of any class of share of the capital of the Corporation
shall be entitled as of right to subscribe for, purchase or receive any part
of any new or additional issue of shares of any class, whether now or hereafter
authorized or any bonds, debentures or other securities convertible into
shares of any class.
8.02 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, whether from the Corporation
or from any other person, or procuring or agreeing to procure purchasers for
any such shares.
8.03 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, upon compliance with such restrictions on
<PAGE>
transfer, if any, as are authorized by the Articles, and upon satisfaction of
any lien referred to in Section 8.05.
8.04 TRANSFER AGENTS AND REGISTRARS
The Board may from time to time appoint a registrar to maintain the
securities register and a transfer agent to maintain the register of transfers
and may also appoint one or more branch registrars to maintain branch
securities registers and one or more branch transfer agents to maintain
branch registers or transfers, but one person may be appointed both registrar
and transfer agent. The Board may at any time terminate any such appointment.
8.05 LIEN FOR INDEBTEDNESS
If the Articles provide that the Corporation shall have a lien on
shares registered in the name of a shareholder indebted to the Corporation,
such lien may be enforced, subject to any other provision of the Articles and
to any Unanimous Shareholder Agreement, by the sale of the shares thereby
affected or by any other action, suit, remedy or proceeding 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
subject to the lien.
8.06 NON-RECOGNITION OF TRUSTS
Subject to the provisions of the Act, the Corporation shall treat as
absolute owner of any share the person in whose name the share is registered
in the securities register 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.
8.07 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 acknowledgment of his right to obtain a share certificate, stating
the number and class or series of shares held by him as shown on the
securities register. Share certificates and acknowledgments of a
shareholder's right to a share certificate, respectively, shall be in such
form as the Board shall from time to time approve. Any share certificate
shall be signed in accordance with the Act; provided that, unless the Board
otherwise determines, certificates representing shares in respect of which a
transfer agent or registrar has been appointed shall not be valid unless
countersigned by or on behalf of such transfer agent or registrar. The
signature of one of the signing officers or, in the case of share certificates
<PAGE>
which are not valid unless countersigned by or on behalf of a transfer agent
or registrar, the signature of both signing officers, 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.
8.08 REPLACEMENT OF SHARE CERTIFICATES
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 Three ($3.00) Dollars
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.
8.09 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. Joint shareholders may collectively designate in
writing an address as their recorded address for service of notice and payment
of dividends but in default of such designations the address of the first
named joint shareholder shall be deemed to be the recorded address aforesaid.
8.10 DECEASED SHAREHOLDERS
In the event of the death of a holder, or of one of the joint holders, of
any share, the Corporation shall not be required to make any entry
in the securities register in respect thereof or to make payment of any
dividends thereon except upon production of all such documents as may be
required by law and upon compliance with the reasonable requirements of the
Corporation and its transfer agents.
<PAGE>
Section Nine
DIVIDENDS AND RIGHTS
9.01 DIVIDENDS
Subject to the provisions of the Act, the Board may from time to
time declare dividends payable to the shareholders according to their
respective rights and interests in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation.
9.02 DIVIDEND CHEQUES
A dividend payable in cash shall be paid by cheque drawn on the
Corporation's bankers or one of them to the order of each registered holder of
shares of the class or series in respect of which it has been declared and
mailed by prepaid ordinary mail to such registered holder at his recorded
address, unless such holder otherwise directs. In the case of joint holders
the cheque shall, unless such joint holders otherwise direct, be made payable
to the order of all of such joint holders and mailed to them at their recorded
address. The mailing of such cheque as aforesaid, unless the same is not
paid on due presentation, shall satisfy and discharge the liability for the
dividend to the extent of the sum represented thereby plus the amount of any
tax which the Corporation is required to and does withhold.
9.03 NON-RECEIPT OF CHEQUES
In the event of non-receipt of any dividend cheque by the person to
whom it is sent as aforesaid, the Corporation shall issue to such person a
replacement cheque for a like amount on such terms as to indemnity,
reimbursement of expenses and evidence of non-receipt and of title as the
Board may from time to time prescribe, whether generally or in any particular
case.
9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS
The Board may fix in advance a date, preceding by not more than
Fifty (50) days the date for the payment of any dividend or the date for the
issue of any warrant or other evidence of right to subscribe for securities of
the Corporation, as a record date for the determination of the persons
entitled to receive payment of such dividend or to exercise the right to
subscribe for such securities, provided that notice of any such record date
is given, not less than Seven (7) days before such record date, by newspaper
advertisement in the manner provided in the Act. Where no record date is
fixed in advance as aforesaid, the record date for the determination of the
persons entitled to receive payment of any dividend or to exercise the right
to subscribe for securities of the Corporation shall be at the close of
business on the day on which the resolution relating to such dividend or
<PAGE>
right to subscribe is passed by the Board.
9.05 UNCLAIMED DIVIDENDS
Any dividend unclaimed after a period of Six (6) years from the date
on which the same has been declared to be payable shall be forfeited and
shall revert to the Corporation.
Section Ten
MEETINGS OF SHAREHOLDERS
10.01 ANNUAL MEETINGS
The annual meeting of shareholders shall be held at such time in
each year and, subject to the Act and to Section 10.04, at such place as the
Board, the Chairman of the Board, the President or the Managing Director may
from time to time determine, for the purpose of considering the financial
statements and reports required by the Act to be placed before the annual
meeting, electing Directors, appointing auditors and for the transaction of
such other business as may properly be brought before the meeting.
10.02 SPECIAL MEETINGS
The Board, the Chairman of the Board, the President or the Managing
Director shall have the power to call a Special Meeting of shareholders at
any time.
10.03 SPECIAL BUSINESS
All business transacted at a Special Meeting of shareholders and all
business transacted at an annual meeting of shareholders, except
consideration of the financial statements, auditors' reports, election of
Directors and re-appointment of the incumbent auditors, is deemed to be
special business.
10.04 PLACE OF MEETINGS
Meetings of shareholders shall be held at the registered office of
the Corporation or elsewhere in the municipality in which the registered
office is situate or, if the Board shall so determine, at some other place in
Alberta or, if all the shareholders entitled to vote at the meeting so agree,
at some place outside Alberta.
<PAGE>
10.05 NOTICE OF MEETINGS
Notice of the time and place of each meeting of shareholders shall
be given in the manner provided in Section 12.01 not less than Twenty-One
(21) days nor more than Fifty (50) days before the date of the meeting to each
Director, to the auditor and to each shareholder who at the close of business
on the record date, if any, for notice is entered in the securities register
as the holder of one or more shares carrying the right to vote at the
meeting. Notice of a meeting of shareholders called for any purpose other
than consideration of the financial statements and auditors' reports, election
of Directors and re-appointment of the incumbent auditors shall state the
nature of such business in sufficient detail to permit the shareholder to
form a reasoned judgment thereon and shall state the text of any special
resolution to be submitted to the meeting. A shareholder and any other person
entitled to attend a meeting of shareholders may in any manner waive notice of
or otherwise consent to a meeting of shareholders.
10.06 LIST OF SHAREHOLDERS ENTITLED TO NOTICE
For every meeting of shareholders, the Corporation shall, if it has
more than Fifteen (15) shareholders entitled to vote at a meeting of
shareholders, prepare a list of shareholders entitled to receive notice of the
meeting, arranged in alphabetical order and showing the number of shares
entitled to vote at the meeting held by each shareholder. If a record date
for the meeting is fixed pursuant to Section 10.07, the shareholders listed
shall be those registered or constructively registered pursuant to the Act at
the close of business on a day not later than Ten (10) days after such record
date. If no record date is fixed, the shareholders listed shall be those
registered or constructively registered as aforesaid at the close of business
on the day immediately preceding the day on which notice of the meeting is
given, or where no such notice is given, the day on which the meeting is
held. The list shall be available for examination by any shareholder during
usual business hours at the registered office of the Corporation or at the
place where the securities register is kept and at the place where the
meeting is held.
10.07 RECORD DATE FOR NOTICE
The Board may fix in advance a record date, preceding the date of
any meeting of shareholders by not more than Fifty (50) days and not less than
Twenty-One (21) days for the determination of the shareholders entitled to
notice of the meeting, provided that notice of any such record date is given,
not less than Seven (7) days before such record date, by newspaper
advertisement in the manner provided in the Act. If no record date is so
fixed, the record date for the determination of the shareholders entitled to
notice of the meeting shall be the close of business on the day immediately
<PAGE>
preceding the day on which the notice is given, or if no notice is given, the
day on which the meeting is held.
10.08 MEETINGS WITHOUT NOTICE
A meeting of shareholders may be held without notice at any time
and place permitted by the Act
(a)if all the shareholders entitled to vote thereat are present in person or
represented by proxy or if those not present or represented by proxy waive
notice of or otherwise consent to such meeting being held; and
(b)if any other person entitled to attend is present or waived notice of or
otherwise consents to such meeting being held.
At such meeting any business may be transacted which the Corporation at a
meeting of shareholders may transact. If the meeting is held at a place
outside Alberta, shareholders not present or represented by proxy, but who
have waived notice of or otherwise consented to such meeting, shall also be
deemed to have consented to the meeting being held at such place.
10.09 MEETINGS BY TELEPHONE
A shareholder or any other person entitled to attend a meeting of
shareholders may participate in the meeting by means of such telephone or
other communications 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 to be present at the meeting.
10.10 CHAIRMAN, SECRETARY AND SCRUTINEERS
The Chairman of any meeting of shareholders shall be the first
mentioned of such of the following officers as have been appointed and who is
present at the meeting: Chairman of the Board, President, Managing Director,
or a Vice-President who is a shareholder. If no such officer is present
within Fifteen (15) minutes from the time fixed for holding the meeting, the
persons present and entitled to vote shall choose one of their number to be
Chairman. If the Secretary of the Corporation is absent, the Chairman shall
appoint some person, who need not be a shareholder, to act as Secretary of the
meeting. If desired, one or more scrutineers, who need not be shareholders,
may be appointed by a resolution or by the Chairman with the consent of the
meeting.
<PAGE>
10.11 PERSONS ENTITLED TO BE PRESENT
The only persons entitled to be present at a meeting of shareholders
shall be those entitled to vote thereat, the Directors and auditors of the
Corporation and others who, although not entitled to vote, are entitled or
required under any provision of the Act or the Articles or By-Laws to be
present at the meeting. Any other person may be admitted only on the
invitation of the Chairman of the meeting or with the consent of the meeting.
10.12 QUORUM
Subject to the Act, a quorum for the transaction of business at any
meeting of shareholders shall be One (1) person present in person, being a
shareholder entitled to vote thereat or a duly appointed proxy for an absent
shareholder so entitled and holding or representing by proxy 10% of the
outstanding shares of the Corporation entitled to vote at the meeting. If a
quorum is present at the opening of any meeting of shareholders, the
shareholders present or represented by proxy may proceed with the business of
the meeting notwithstanding that a quorum is not present throughout the
meeting. If a quorum is not present within one-half hour of the time
appointed for convening of any meeting of shareholders, the shareholders
present or represented by proxy may adjourn the meeting to a fixed time and
place subject to Section 10.20 but may not transact any other business
provided, however, that if no provision for adjournment is made at any such
meeting or adjourned meeting at which a quorum is not present, the meeting
shall be dissolved. If at the adjourned meeting a quorum is not present
within one-half hour of the time appointed for the meeting, the person or
persons present being a shareholder entitled to vote thereat or a duly
appointed proxy for an absent shareholder so entitled to vote shall be a
quorum.
10.13 RIGHT TO VOTE - RECORD DATE FOR VOTING
Subject to the provisions of the Act as to authorized representative
of any other body corporate, at any meeting of shareholders in respect of
which the Corporation has prepared the list referred to in Section 10.06,
every person who is named in such list shall be entitled to vote the shares
shown thereon opposite his name except, where the Corporation has fixed a
record date in respect of such meeting pursuant to Section 10.07, to the
extent that such person has transferred any of his shares after such record
date and the transferee, upon producing properly endorsed certificates
evidencing such shares or otherwise establishing that he owns such shares,
demands not later than Ten (10) days before the meeting that his name be
included in such list in which event the transferee alone shall be entitled
to vote the transferred shares at the meeting. In the absence of a list
prepared as aforesaid in respect of a meeting of shareholders, every person
<PAGE>
shall be entitled to vote at the meeting who at the time is entered in the
securities register as the holder of one or more shares carrying the right to
vote at such meeting.
10.14 PROXIES
Every shareholder entitled to vote at a meeting of shareholders, may
appoint a proxyholder, or one or more alternate proxyholders, who need not be
shareholders, to attend and act at the meeting in the manner and to the extent
authorized and with the authority conferred by the proxy. A proxy shall be
in writing executed by the shareholder or his attorney and shall conform with
the requirements of the Act. An instrument of proxy shall be valid only at
the meeting in respect of which it is given or any adjournment thereof.
10.15 TIME FOR DEPOSIT OF PROXIES
The Board may specify in a notice calling a meeting of shareholders
a time, preceding the time of such meeting by not more than Forty-Eight (48)
hours exclusive of non-business days, before which time proxies to be used at
such meeting must be deposited. A proxy shall be acted upon only if, prior to
the time so specified, it shall have been deposited with the Corporation or an
agent thereof specified in such notice or, if no such time is specified in
such notice, unless it has been received by the Secretary of the Corporation
or by the Chairman of the meeting or any adjournment thereof prior to the
time of voting.
10.16 JOINT SHAREHOLDERS
If two or more persons hold shares jointly, any one of them present
in person or represented by proxy at a meeting of shareholders may, in the
absence of the other or others, vote the shares; but if two or more of those
persons are present in person or represented by proxy and vote, they shall
vote as one on the shares jointly held by them and in the absence of agreement
between those so voting the person named first in the register shall vote the
shares.
10.17 VOTES TO GOVERN
At any meeting of shareholders every question shall, unless
otherwise required by the Articles, By-Laws, any Unanimous Shareholders
Agreement, or the Act, be determined by the majority of the votes cast on the
question. Subject to any Unanimous Shareholders Agreement, in case of an
equality of votes either upon a show of hands or upon a poll, the Chairman of
the meeting shall not be entitled to a second or casting vote.
<PAGE>
10.18 SHOW OF HANDS
Subject to the provisions of the Act any question at a meeting of
shareholders shall be decided by a show of hands unless a ballot thereon is
required or demanded as hereinafter provided. Upon a show of hands every
person who is present and entitled to vote shall have one vote. Whenever a
vote by show of hands shall have been taken upon a question, unless a ballot
thereon is so required or demanded, a declaration by the Chairman of the
meeting that the vote upon the question has been carried or carried by a
particular majority or not carried and an entry to that effect in the minutes
of the meeting shall be prima facie evidence of the fact without proof of the
number or proportion of the votes recorded in favor of or against any
resolution or other proceeding in respect of the said question, and the
result of the vote so taken shall be the decision of the shareholders upon the
said question.
10.19 BALLOTS
On any question proposed for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken thereon, any
shareholder or proxyholder entitled to vote at the meeting may require or
demand a ballot. A ballot so required or demanded shall be taken in such
manner as the Chairman shall direct. A requirement or demand for a ballot may
be withdrawn at any time prior to the taking of the ballot. If a ballot is
taken each person present shall be entitled in respect of the shares which he
is entitled to vote at the meeting upon the question, to that number of votes
provided by the Act or the Articles, and the result of the ballot so taken
shall be the decision of the shareholders upon the said question.
10.20 ADJOURNMENT
If a meeting of shareholders is adjourned for less than Thirty (30)
days, it shall not be necessary to give notice of the adjourned meeting, other
than by announcement at the earliest meeting that is adjourned. If a meeting
of shareholders is adjourned by one or more adjournments for an aggregate of
Thirty (30) days or more, notice of the adjourned meeting shall be given as
for an original meeting. At any such adjourned meeting no business shall be
transacted other than business left unfinished at the meeting from which the
adjournment took place.
<PAGE>
10.21 RESOLUTION IN WRITING
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 the shareholders unless a written statement with
respect to the subject matter of the resolution is submitted by a Director or
the auditors in accordance with the Act.
10.22 ONLY ONE SHAREHOLDER
Where the Corporation has only one shareholder or only one holder of
any class of series of shares, the shareholder present in person or by proxy
constitutes a meeting.
NOTE: With respect to a Shareholder Requisition refer to Section 137
of the Act.
10.23 MEETING ON REQUISITION OF SHAREHOLDERS
The holders of not less than Five (5%) percent of the issued shares
of the Corporation that carry the right to vote at a meeting sought to be
held may requisition the Directors to call a meeting of shareholders for the
purposes stated in the requisition. The requisition, which may consist of
several documents of like form each signed by one or more shareholders, shall
state the business to be transacted at the meeting and shall be sent to each
Director and to the registered office of the Corporation.
Section Eleven
DIVISIONS AND DEPARTMENTS
11.01 CREATION AND CONSOLIDATION OF DIVISIONS
The Board may cause the business and operations of the Corporation
or any part thereof to be divided or to be segregated into one or more
divisions upon such basis, including without limitation, character or type of
operation, geographical territory, product manufactured or service rendered,
as the Board may consider appropriate in each case. The Board may also cause
the business and operations of any such division to be further divided into
sub-units and the business and operations of any such divisions or sub-units
to be consolidated upon such basis as the Board may consider appropriate in
each case.
<PAGE>
11.02 NAME OF DIVISION
Any division of its sub-units may be designated by such name as the
Board may from time to time determine and may transact business, enter into
contracts, sign cheques and other documents of any kind and do all acts and
things under such name, provided that the Corporation shall set out its name
in legible characters in all contracts, invoices, negotiable instruments and
orders for goods or services issued or made by or on behalf of the
Corporation. Any such contract, cheque or documents shall be binding upon
the Corporation as if it had been entered into or signed in the name of the
Corporation.
11.03 OFFICERS OF DIVISION
From time to time the Board or if authorized by the Board, the chief
executive officer, may appoint one or more officers for any division,
prescribe their powers and duties and settle their terms of employment and
remuneration. The Board, or if authorized by the Board, the chief executive
officer, may remove at its or his pleasure any officer so appointed, without
prejudice to such officer's rights under any employment contract. Officers
of divisions or their sub-units shall not, as such, be officers of the
Corporation.
Section Twelve
NOTICES
12.01 METHOD OF GIVING NOTICE
Any notice (which term includes any communication or document) to
be given (which term includes sent, delivered or served) pursuant to the Act,
the regulations thereunder, the Articles, the By-Laws or otherwise to a
shareholder, Director, officer, auditor or member of a committee of Directors
shall be sufficiently given if delivered personally to the person to whom it
is to be given or if delivered to his recorded address or if mailed to him at
his recorded address by prepaid ordinary or air mail or if sent to him at his
recorded address by any means of prepaid transmitted or recorded
communication. A notice so delivered shall be deemed to have been given when
it is delivered personally or to the recorded address as aforesaid; a notice
so mailed shall be deemed to have been given when deposited in a post office
or public letter box; and a notice so sent by any means of transmitted or
recorded communication shall be deemed to have been given when dispatched or
delivered to the appropriate communication company or agency or its
representative for dispatch. The Secretary may change or cause to be changed
the recorded address of any shareholder, Director, officer, auditor or member
of a committee of Directors in accordance with any information believed by
him to be reliable.
<PAGE>
12.02 NOTICE TO JOINT SHAREHOLDERS
If two or more persons are registered as joint holders of any share,
any notice shall be addressed to all such joint holders but notice given to
any one or more of such persons at the recorded address for such joint
shareholder shall be sufficient notice to all of them.
12.03 COMPUTATION OF TIME
In computing the date when notice must be given under any provision
requiring a specified number of days' notice of any meeting or other event,
the date of giving the notice shall be excluded and the date of the meeting
or other event in respect of which the notice is being given shall be
included.
12.04 UNDELIVERED NOTICES
If any notice given to a shareholder pursuant to Section 12.01 is
returned on Three (3) consecutive occasions because he cannot be found or
served or is unknown at his recorded address, the Corporation shall not be
required to give any further notices to such shareholder until he informs the
Corporation in writing of his new recorded address.
12.05 PROOF OF SERVICE
A certificate of the Secretary or other duly authorized officer of
the Corporation in office at the time of the making of the certificate, or of
any agent of the Corporation as to the facts in relation to the mailing or
delivery or sending of any notice to any shareholder, Director, the auditors,
or any officer, or of publication of any notice, shall be conclusive evidence
thereof and shall be binding on every shareholder, Director, the auditors, or
any officer of the Corporation as the case may be.
12.06 OMISSIONS AND ERRORS
The accidental omission to give any notice to any shareholder,
Director, officer, auditor or member of a committee of Directors or the
non-receipt of any notice by any such person or any error in any notice
affecting the substance thereof shall not invalidate any action taken at any
meeting held pursuant to such notice or otherwise founded thereon.
12.07 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW
Every person who by, operation of law, transfer, death of a
shareholder or any other means whatsoever, becomes entitled to any share,
shall be bound by every notice in respect of such share which shall have been
duly given to the shareholder from whom he derives his title prior to such
person's name and address being entered on the securities register (whether
<PAGE>
such notice was given before or after the happening of the event upon which
he became so entitled) and prior to his furnishing to the Corporation the
proof of authority or evidence of his entitlement prescribed by the Act.
12.08 WAIVER OF NOTICE
Any shareholder (or his duly appointed proxyholder), Director,
officer, auditor or member of a committee of Directors may at any time waive
the sending of any notice, or waive or abridge the time for any notice,
required to be given to him under any provision of the Act, the regulations
thereunder, the Articles, the By-Laws or otherwise and such waiver or
abridgement shall cure any default in the giving or in the time of such
notice, as the case may be. Any such waiver or abridgement shall be in
writing except a waiver of notice of a meeting of shareholders or of the Board
which may be given in any manner.
Section Thirteen
CONTINUATION
13.01 CONTINUATION
Upon the continuation of an Alberta company the Board of Directors
may require any shareholder of the Alberta company to surrender his share
certificate for the purpose of having it canceled and replaced by new share
certificate that complies with Section 45 of the Act.
ENACTED by the Board on January 7, 1997.
ARTICLES 8.01 and 10.12 amended February 10, 1997
/S/ Paul Kowalenko
___________________________________________
PAUL KOWALENKO - Director & President
<PAGE>
POSTION, INC.
By-Law No. 1, being a By-Law
relating generally to the
transaction of the business
and affairs of the Corporation.
CONTENTS:
Page
1. Interpretation 1
2. Business of the Corporation 3
3. Borrowing and Securities 3
4. Directors 4
5. Committees 8
6. Officers 8
7. Protection of Directors, Officers and Others 10
8. Shares 11
9. Dividends and Rights 13
10.Meetings of Shareholders 14
11.Divisions and Departments 18
12.Notices 19
13.Continuation 21
<PAGE>
By-Law No. 2, being a By-Law relating to the borrowing powers of the
Corporation.
BE IT ENACTED as a By-Law of the Corporation as follows:
1. In this By-Law "Director" means a Director of the Corporation and
"Officer" means an Officer of the Corporation.
2. The Directors may from time to time:
(a)borrow money on the credit of the Corporation;
(b)issue, sell or pledge debt obligations (including bonds, debentures,
notes or other similar obligations, whether secured or unsecured) of the
Corporation; and
(c)charge, mortgage, hypothecate or pledge all or any currently owned or
subsequently acquired real or personal, movable or immovable property of the
Corporation, including book debts, rights, powers, franchises and undertaking,
to secure any such debt obligations or any money borrowed, or other debt or
liability of the Corporation.
3. The Directors may from time to time delegate to any Director or
committee of Directors or Officer of Officers the power to make arrangements
with reference to the money borrowed or to be borrowed as provided in Section
2 of this By-Law, and as to the terms and conditions of the borrowing thereof,
and as to the security to be given therefor, with power from time to time to
vary or modify any such arrangements, terms and conditions and to give such
additional security for any moneys borrowed or remaining due by the
Corporation, all as the Directors may so delegate, and generally to manage,
transact and settle the borrowing of money by the Corporation.
4. The Directors may from time to time delegate to any Director or
committee of Directors or Officer of Officers the power to sign, execute and
give on behalf of the Corporation all documents, agreements, promises and
other writings necessary or desirable for the purposes aforesaid and to draw,
make, accept, endorse, execute and issue cheques, promissory notes, bills of
exchange, bills of lading and other negotiable or transferable instruments,
and the same, and all renewals thereof or substitutions therefor so signed,
shall be binding upon the Corporation.
<PAGE>
5. The powers conferred by this By-Law be and be deemed to be in
supplement of and not in substitution for any powers to borrow money for the
purposes of the Corporation possessed by its Directors or Officers
independently of a borrowing By-Law.
ENACTED by the Board of Directors on January 7, 1997.
/S/ Paul Kowalenko
_______________________________________________
PAUL KOWALENKO - Director and President
STOCK OPTION AGREEMENT
THIS AGREEMENT made effective the _____ day of ____________, 19___.
BETWEEN:
, an individual of the City
of Calgary, in the Province of Alberta
(herein referred to as the "Optionee")
- -and-
POSITION INC., a body corporate,
incorporated under the laws of the Province of Alberta
having an office in the City of Calgary, in the Province
of Alberta
(herein referred to as the "Corporation")
WHEREAS
1. the Corporation is incorporated under the laws of the Province of
Alberta, having an authorized capital consisting of an unlimited number of
Common Shares and Preferred Shares without nominal or par value; and
2. the board of directors have agreed to grant unto the Optionee an option
to purchase an aggregate of • Shares in consideration of the Optionee's
ongoing services and contributions to the Corporation or any of its
subsidiaries or affiliates; and
3. the granting of such option to the Optionee was authorized by the
board of directors of the Corporation effective •.
<PAGE>
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and mutual covenants hereinafter set forth, and for other valuable
consideration, the parties hereto have agreed as follows:
ARTICLE 1
DEFINITIONS
1.1 In this Agreement the following terms shall have the following
meanings:
(a) "Agreement", "herein", "hereto" and similar expressions
means this Agreement, and includes any Agreement amending this Agreement or
any Agreement or instrument which is supplemental or ancillary hereof;
(b) "Board" means the board of director of the Corporation;
(c) "Expiration Date" means •;
(d) "Option Date" in respect of the Share Option means the date
of this Agreement;
(e) "Option Shares" means the Shares the Optionee is entitled
to purchase under a Share Option;
(f) "Share" means a Common Share of the Corporation as
constituted at the date hereof;
(g) "Share Option" means an option to purchase treasury shares
granted to the Optionee pursuant to this Agreement, and includes any portion
of that option; and
(h) "Treasury Share" means a theretofore unissued Share which
is purchased directly from the Corporation by or for the account of the
Optionee.
1.2 In this Agreement, the masculine gender shall include the
feminine gender and the singular shall include the plural and vice versa
wherever the context requires.
<PAGE>
ARTICLE 2
SHARE OPTION
2.1 The Corporation hereby grants to the Optionee, subject to the
terms and conditions hereinafter set out, an irrevocable option to purchase at
any time or from time to time on or before the Expiration Date, • Shares
of the Corporation at a price of $• per Share.
2.2 At 4:30 p.m., Calgary time, on the Expiration Date, the Share
Option shall forthwith expire and terminate and be of no further force or
effect whatsoever as to such of the Option Shares in respect of which the
Share Option hereby granted has not been exercised.
2.3 The Optionee agrees and acknowledges that the Corporation
reserves the right to redeem and cancel such number of Share Options granted
hereby as it determines necessary to meet the limits set out in the Stock
Option Plan respecting the total number of Share Options which may be
outstanding from time to time.
ARTICLE 3
CURRENCY DURING TERM OF EMPLOYMENT
3.1 (a) If subsequent to the Option Date and prior to the
Expiration Date, the Optionee's position as a director, an officer or an
employee of the Corporation is terminated by reason of the death of the
Optionee, the Share Option may be exercises during the period expiring the
earlier of the Expiration Date or one year after such date of death. In the
event of the Optionee's death, the rights of the Optionee under the Share
Option may be exercised by the person or persons to whom the Optionee's
rights under the Share Option shall pass by will or applicable law, if no such
person has such right, by the Optionee's executors or administrators, subject
to the time limitations as aforesaid.
(b) If subsequent to the Option Date and prior to the Expiration
Date, the Optionee's position as a director, an officer or an employee or the
Corporation is terminated for any reason other than the death of the
Optionee, the Share Option may be exercised during the period expiring the
earlier of the Expiration Date or ninety (90) days following the date of
termination.
<PAGE>
ARTICLE 4
MATERIAL CHANGE
4.1 In the event that, prior to the Expiration Date or exercise in
full of the Share Option, the outstanding share capital of the Corporation
shall be subdivided or consolidated into a greater or lesser number of Shares,
or, in the event of the payment of a stock dividend by the Corporation, or in
the event that all of the shareholders of the Corporation are granted the
right to purchase additional Shares of the Corporation, the number and price
of Option Shares remaining subject to the Share Option shall be increased or
reduced accordingly, as the case may be.
4.2 If, prior to the Expiration Date or exercise in full of the Share
Option granted hereby, the Corporation shall, at any time arrange with or
merge into another corporation, the Optionee will thereafter receive, upon the
exercise of the Share Option, the securities or properties to which a holder
of the number of Shares then deliverable upon the exercise of the Share Option
would have been entitled upon such arrangement or merger, and the Corporation
will take steps in connection with such arrangement or merger as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
in relation to any securities or property thereafter deliverable upon the
exercise of the Option granted hereby. A sale of all or substantially all of
the assets of the Corporation for consideration, (apart from the assumption
of obligations), consisting primarily of securities shall be deemed to be an
arrangement or merger for the foregoing purposes.
ARTICLE 5
RESERVATION OF TREASURY SHARES
5.1 The Corporation shall at all times during the term of this
Agreement, reserve and keep available a sufficient number of Treasury Shares
to satisfy the requirements hereof.
ARTICLE 6
RESTRICTION ON ASSIGNMENT
6.1 The Share Option granted hereby is, insofar as the Optionee is
concerned, personal and non-assignable and neither this Assignment nor any
rights in regard thereto shall be transferable or assignable except upon the
death of the Optionee pursuant to Clause 3.1 hereof.
<PAGE>
ARTICLE 7
EXERCISE OF THE SHARE OPTION
7.1 The Share Option may be exercises by the Optionee in accordance
with the provisions hereof in whole or in part, from time to time, by delivery
of written notice of such exercise and by tendering the payment therefore in
cash or by certified cheque to the Corporation at its principal office or
registered office in the City of Calgary, in the Province of Alberta. Such
notice shall state the number of the Option Shares with respect to which the
Share Option is then being exercises. The Share Option shall be deemed for
all purposes to have been exercised to the extent stated in such notice upon
delivery of the notice and a tender of payment in full, notwithstanding any
delay in the issuance and delivery of the certificates for the Shares so
purchased.
ARTICLE 8
RIGHTS OF THE OPTIONEE PRIOR TO EXERCISE DATE
8.1 The Share Option herein granted shall not entitle the Optionee to
any rights whatsoever as a shareholder of the Corporation with respect to any
Shares subject to the Share Option until it has been exercised in accordance
with Clause 7.1 and Option Shares have been issued as fully paid and
non-assessable.
ARTICLE 9
FURTHER ASSURANCES
9.1 The parties hereto covenant that they shall and will from time to
time and at all times hereafter do and perform all such acts and things and
execute all such additional documents as may be required to give effect to
the terms and intention of this Agreement.
ARTICLE 10
INTERPRETATION
10.1 It is understood and agreed by the parties hereto that questions
may arise as to the interpretation, construction or enforcement of this
Agreement and the parties are desirous of having the Board of the Corporation
determine any such questions of interpretation, construction or enforcement.
It is therefore understood and agreed by and between the parties hereto that
any question arising under the terms of this Agreement as to interpretation,
construction or enforcement shall be referred to the Board of the Corporation
and their majority decision shall be final and binding on both of the parties
hereto.
<PAGE>
ARTICLE 11
ENTIRE AGREEMENT
11.1 This Agreement supersedes all other agreements, documents,
writings and verbal understandings among the parties relating to the subject
matter hereto and represents the entire agreement between the parties
relating to the subject matter hereof.
ARTICLE 12
ENUREMENT
12.1 Subject to the other provisions hereof, this Agreement shall
enure to the benefit of and be binding upon the parties hereto and their
respective heirs, executors, administrators, successors and permitted assigns.
12.2 This Agreement shall continue to constitute a binding
obligation of the Corporation notwithstanding any change of control of its
voting securities during the term hereof.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the day and year first above written.
SIGNED )
in the presence of: )
)
__________________________ ) ____________________________
)
POSITION INC.
Per:___________________________
ESCROW AGREEMENT
THIS AGREEMENT made in triplicate this 1st day of April, 1997
AMONG:
POSITION INC.
(herein called the "Issuer")
OF THE FIRST PART
- -and-
THE R-M TRUST COMPANY
(herein called the "Trustee")
OF THE SECOND PART
- -and-
PAUL E. KOWALENKO, FRANK W. BOWER,
CHIP HOME PRODUCTS LIMITED,
CORPORATE RECOVERY MANAGEMENT LTD.,
JFM GEOMATICS LTD. AND NCS INTERNATIONAL INC.
(herein called the "Security Holders")
OF THE THIRD PART
WHEREAS in furtherance of complying with the requirements of the Securities
Act, and Alberta Securities Commission Policy 4.9, the Security Holders are
desirous of depositing in escrow certain securities in the Issuer owned to
the be received by them;
AND WHEREAS the Trustee has agreed to undertake and perform its duties
according to the terms and conditions hereof;
NOW THEREFORE this agreement witnesses that in consideration of the sum of
ONE ($1.00) DOLLAR paid by the parties to each other, receipt of this sum being
acknowledged by each of the parties, the Security Holders jointly and
severally covenant and agree with the Issuer and with the Trustee and the
<PAGE>
Issuer and the Trustee covenant and agree with the other and with the
Security Holders jointly and severally as follows:
1. Each of the Security Holders hereby places and deposits in escrow with
the Trustee those of his securities to the Issuer which are represented by the
certificates described in Schedule "A" attached to this agreement and the
Trustee hereby acknowledges receipt of those certificates. The Security
Holders agree to deliver promptly to the Trustee any replacement securities
or certificates if and when issued or allotted for deposit in escrow.
2. The Parties agree that, subject to the provisions of paragraph 6
herein, the securities and the beneficial ownership of or any interest in
them and the certificate representing them (including any replacement
securities or certificates) shall not be sold, assigned, hypothecated,
alienated, released from escrow, transferred within escrow, or otherwise in
any manner dealt with, without written consent of the Executive Director of
the Alberta Securities Commission (hereinafter referred to as the "Executive
Director") given to the Trustee or except as may be required by reason of the
death or bankruptcy of any Security Holder, in which cases the Trustee shall
hold the said certificates subject to this agreement, for whatever person or
company shall be legally entitled to become the registered owner thereof and
shall provide to the Executive Director written notice of the new registered
owner , but the securities shall remain in escrow, subject to this agreement.
3. The Security Holders direct the Trustee to retain their respective
securities and the certificates (including any replacement securities or
certificates) representing them and not to do or cause anything to be done to
release them from escrow or to allow any transfer, hypothecation or alienation
there of except as provided in paragraph 6, without the written consent of the
Executive Director. The Trustee accepts the responsibilities placed on it by
the agreement and agrees to perform them in accordance with the terms of this
agreement and the written consents, orders or directions of the Executive
Director.
4. If during the period in which any of the securities are retained in
escrow pursuant hereto, any dividend is received by the Trustee in respect of
the escrowed securities, any such dividend shall be promptly paid or
transferred to the respective Security Holders entitled thereto.
5. All voting rights attached to the escrowed securities shall at all
times be exercised by the respective registered owners thereof.
<PAGE>
6. The escrowed securities governed by this agreement shall be
automatically released as follows:
(a) 10% of the escrowed securities immediately after nine months following
the date of the receipt for the Issuer's prospectus assuring its initial public
offering (the "Initial Release"); and
(b) 30% of the escrowed securities after each of the first, second and
third anniversaries of the Initial Release.
7. The Security Holders hereby jointly and severally agree to and do
hereby release and indemnify and save harmless the Trustee from and against
all claims, suits, demands, costs, damages and expenses which may be
occasioned by reason of the trustee's compliance in good faith with the terms
hereof.
8. The Issuer hereby acknowledges the terms and conditions of this
agreement and agrees to take all reasonable steps to facilitate its
performance and to pay the Trustee's proper charges for its services as
trustee of this escrow.
9. If the Trustee should wish to resign, it shall give at least three
months' notice to the Issuer which may, with the written consent of the
Executive Director, by writing appoint another Trustee in its place and such
appointment shall be binding on the Security Holders and the new Trustee
shall assume and be bound by the obligations of the Trustee hereunder.
10. Where required, the written consent of the Executive Director as to a
release from escrow of all or part of the escrowed securities shall terminate
this agreement only in respect to those securities so released. For greater
certainty this paragraph does not apply to securities transferred within
escrow.
11. This agreement may be executed in several parts in the same form and
the parts as so executed shall together form one original agreement, and the
parts if more than one shall be read together and constructed as if all the
signing parties hereto had executed one copy of this agreement.
12. Wherever the singular or masculine are used throughout this agreement,
the same shall be construed as being the plural or feminine or neuter where
the context so requires.
<PAGE>
13. This agreement may be amended upon agreement of the Security Holders,
the Trustee and the Issuer and upon the written consent having been obtained
from the Executive Director.
14. This agreement shall enure to the benefit of and be binding on the
parties to this agreement and each of their heirs, executors, administrators,
successors and assigns.
15. Signatures received by facsimile are an acceptable form of execution
of this agreement.
IN WITNESS WHEREOF the Issuer and Trustee have caused their respective
corporate seals to be hereto affixed and the Security Holders have hereto set
their respective hands and seals.
POSITION INC.
Per:
Paul E. Kowalenko
President
Per:
Bernard D. Parkinson
(c/s)
Vice President Business Development
THE R-M TRUST COMPANY
Per:
Per:
(c/s)
SIGNED, SEALED AND DELIVERED by the respective Security Holders whose names
are subscribed in the right-hand column below in the presence of the
respective persons whose names are subscribed in the left-hand column.
WITNESSES SECURITY HOLDERS
Witness to the signature of Paul E. Kowalenko
Paul E. Kowalenko
Witness to the signature of Frank W. Bower
Frank W. Bower
CHIP HOME PRODUCTS LIMITED
Per:
Per:
CORPORATE RECOVERY
MANAGEMENT LTD.
Per:
Per:
JFM GEOMATICS LTD.
Per:
Per:
NCS INTERNATIONAL INC.
Per:
Per:
<PAGE>
SCHEDULE "A" to an Escrow Agreement dated April 1, 1997, and made among
POSITION INC. (therein called the "Issuer"), THE R-M TRUST COMPANY (therein
called the "TRUSTEE") and some security holders of the Issuer (therein called
the "Security Holders")
Name of registered Number of Certificate Numbers of Signature of
Security Holders Securities Escrowed Securities Escrowed Security Holder
__________________ ___________________ ______________________ _______________
Paul E Kowalenko 109,337 1
Frank W. Bower 657,117 8
Chip Home Products 308,500 2 Per:
Limited Per:
Corporate Recovery 308,500 4 Per:
Management Ltd.
JFM Geomatics Ltd. 547,206 3 Per:
Per:
NCS International
Inc. 465,012 72 Per:
Per:
POSITION ESCROW AGREEMENT
THIS AGREEMENT made in triplicate this 1st day of April, 1997
AMONG:
POSITION INC.
(herein called the "Issuer")
OF THE FIRST PART
- -and-
THE R-M TRUST COMPANY
(herein called the "Trustee")
OF THE SECOND PART
- -and-
WOLVERTON SECURITIES LTD.
(herein called the "Agent")
OF THE THIRD PART
- -and-
PAUL E. KOWALENKO, FRANK W. BOWER, JOHN B. SCHLEPPE,
GARRY E. BOURNS, CHIP HOME PRODUCTS LIMITED, CORPORATE RECOVERY MANAGEMENT
LTD., MICA GEOMATICS LTD. KRAKIWSKY CONSULTANTS LTD.,
JFM GEOMATICS LTD. AND NCS INTERNATIONAL INC.
(herein called the "Security Holders") OF THE FOURTH PART
WHEREAS in furtherance of complying with the requirements of the Issuer, the
Security Holders are desirous of depositing in escrow certain securities in
the Issuer owned or to be received by them;
<PAGE>
AND WHEREAS certain of the Security Holders in addition to escrowed shared
held pursuant to this agreement, have a portion of their securities subject to
an Escrow Agreement dated April 1, 1997 (the "Mandatory Escrow Agreement"),
which is required to be entered into by Alberta Securities Commission Policy
4.9;
AND WHEREAS the Issuer and the Security Holders desire that the total number
of securities (the "Total Escrowed Shares") held subject to the Mandatory
Escrow Agreement dated and this agreement (collectively the "Escrow
Agreements") be released from escrow commencing on the first anniversary from
the date of the receipt (the "Receipt Date") for the Issuer's prospectus
governing its initial public offering, such that one third of the Total
Escrowed Shares held by a Security Holder shall be released on a pro-rata
basis on each of the first, second and third anniversaries of the Receipt
Date;
AND WHEREAS the Trustee has agreed to undertake and perform its duties
according to the terms and conditions hereof;
NOW THEREFORE this agreement witnesses that in consideration of the sum of ONE
($1.00) DOLLAR paid by the parties to each other, receipt of this sum being
acknowledged by each of the parties, the Security Holders jointly and
severally covenant and agree with the Issuer and with the Trustee and the
Issuer, Agent and the Trustee covenant and agree with the other and with the
Security Holders jointly and severally as follows:
1. Each of the Security Holders hereby places and deposits in escrow with
the Trustee those of his securities of the Issuer which are represented by the
certificates described in Schedule "A" attached to this agreement and the
Trustee hereby acknowledges receipt of those certificates. The Security
Holders agree to deliver promptly to the Trustee any replacement securities or
certificates if and when issued or allotted for deposit in escrow.
2. The Parties agree that, subject to the provisions of paragraph 6 and 10
herein, the securities and the beneficial ownership of or any interest in them
and the certificate representing them (including any replacement securities
or certificates) shall not be sold, assigned, hypothecated, alienated, released
from escrow, transferred within escrow, or otherwise in any manner dealt with,
except as may be required by reason of the death or bankruptcy of any Security
Holder, in which cases the Trustee shall hold the said certificates subject
to this agreement, for whatever person or company shall be legally entitled to
become the registered owner thereof, but the securities shall remain in
escrow, subject to this agreement.
<PAGE>
3. The Security Holders direct the Trustee to retain their respective
securities and the certificates (including any replacement securities or
certificates) representing them and not to do or cause anything to be done to
release them from escrow or to allow any transfer, hypothecation or alienation
there of except as provided in paragraph 6, without the written consent of
the Agent. The Trustee accepts the responsibilities placed on it by the
agreement and agrees to perform them in accordance with the terms of this
agreement and the written consents, orders or directions of the Agent.
4. If during the period in which any of the securities are retained in
escrow pursuant hereto, any dividend is received by the Trustee in respect of
the escrowed securities, any such dividend shall be promptly paid or
transferred to the respective Security Holders entitled thereto.
5. All voting rights attached to the escrowed securities shall at all
times be exercised by the respective registered owners thereof.
6. Subject to paragraph 10, the escrowed securities governed by this
agreement shall be automatically released on a pro-rata basis in accordance
with the terms of Schedule "B" hereto. The intention of this agreement is to
provide for release from escrow, subject to the Mandatory Escrow Agreement,
of one third of the Total Escrowed Shares on each of the first, second and
third anniversaries of the Receipt Date.
7. The Security Holders hereby jointly and severally agree to and do
hereby release and indemnify and save harmless the Trustee and the Agent from
and against all claims, suits, demands, costs, damages and expenses which may
be occasioned by reason of the Trustee's and Agent's compliance in good faith
with the terms hereof.
8. The Issuer hereby acknowledges the terms and conditions of this
agreement and agrees to take all reasonable steps to facilitate its
performance and to pay the Trustee's proper charges for its services as
trustee of this escrow.
9. If the Trustee should wish to resign, it shall give at least three
months' notice to the Issuer which may, with the written consent of the
Executive Director, by writing appoint another Trustee in its place and such
appointment shall be binding on the Security Holders and the new Trustee
shall assume and be bound by the obligations of the Trustee hereunder.
<PAGE>
10. Notwithstanding paragraph 6, upon the receipt by the Trustee of the
written consent of the Agent as to a release from escrow of all or part of
the escrowed securities, such escrowed securities shall be released by the
Trustee and this agreement shall terminate only in respect to those securities
so released. For greater certainty this paragraph does not apply to securities
transferred within escrow.
11. This agreement may be executed in several parts in the same form and
the parts as so executed shall together form one original agreement, and the
parts if more than one shall be read together and construed as if all the
signing parties hereto had executed one copy of this agreement.
12. Wherever the singular or masculine are used throughout this
agreement, the same shall be construed as being the plural or feminine or
neuter where the context so requires.
13. This agreement may be amended upon agreement in writing of the
Security Holders, the Trustee, the Agent and the Issuer.
14. This agreement shall enure to the benefit of and be binding on the
parties to this agreement and each of their heirs, executors, administrators,
successors and assigns.
15. Signatures received by facsimile are an acceptable form of execution
of this agreement.
IN WITNESS WHEREOF the Issuer, Agent and Trustee have caused their
respective corporate seals to be hereto affixed and the Security Holders have
hereto set their respective hands and seals.
POSITION INC.
Per:
Paul E. Kowalenko
President
Per:
Bernard D. Parkinson
(c/s)
Vice President Business Development
THE R-M TRUST COMPANY
Per:
Per:
(c/s)
WOLVERTON SECURITIES LTD
Per:
Per:
(c/s)
SIGNED, SEALED AND DELIVERED by the respective Security Holders whose names
are subscribed in the right-hand column below in the presence of the
respective persons whose names are subscribed in the left-hand column.
WITNESSES SECURITY HOLDERS
Witness to the signature of Paul E. Kowalenko
Paul E. Kowalenko
Witness to the signature of Frank W. Bower
Frank W. Bower
Witness to the signature of John B. Schleppe
John B. Schleppe
Witness to the signature of Garry E. Bourns
Garry E. Bourns
CHIP HOME PRODUCTS LIMITED
Per:
Per:
<PAGE>
CORPORATE RECOVERY
MANAGEMENT LTD.
Per:
Per:
MICA GEOMATICS LTD.
Per:
Per:
KRAKIWSKY CONSULTANTS LTD.
Per:
Per:
JFM GEOMATICS LTD.
Per:
Per:
NCS INTERNATIONAL INC.
Per:
Per:
<PAGE>
SCHEDULE "A" to an Escrow Agreement dated April 1, 1997, and made among
POSITION INC. (therein called the "Issuer"), THE R-M TRUST COMPANY (therein
called the "TRUSTEE"), WOLVERTON SECURITIES LTD. (therein called the "Agent")
and some security holders of the Issuer (therein called the "Security
Holders")
Name of registered Number of Certificate Numbers of Signature of
Security Holders Securities Escrowed Securities Escrowed Security Holder
__________________ ___________________ ______________________ _______________
Paul E Kowalenko 67,870 1
Frank W. Bower 407,903 8
John B. Schleppe 10,200 26
Garry E. Bourns 312,000 15
Chip Home Products 191,500 2 Per:
Limited
Per:
Corporate Recovery 192,500 4 Per:
Management Ltd.
Per:
Mica Geomatics Ltd. 287,637 5 Per:
Per:
Krakiwsky
Consultants 210,851 7 Per:
Ltd.
Per:
JFM Geomatics Ltd. 547,206 3 Per:
Per:
NCS International
Inc. 288,654 72 Per:
Per:
<PAGE>
SCHEDULE "B"
POSITION ESCROW AGREEMENT
Shareholder Anniversary 1 Anniversary 2 Anniversary 3 Total
Paul Kowalenko 48,135 19,735 - 67,870
John Schleppe 3,400 3,400 3,400 10,200
Frank Bower 289,295 118,608 - 407,903
Garry Bourns 104,000 104,000 104,000 312,000
Chip Home
Products Ltd. 135,817 55,683 - 191,500
Mica Geomatics
Ltd. 95,879 95,879 95,879 287,637
Corporate
Recovery
Management Ltd. 135,817 55,683 - 191,500
Krakiwsky
Consultants Ltd. 70,284 70,284 70,283 210,851
JFM
Geomatics Ltd. 240,906 98,769 - 339,675
NCS
International,
Inc. 204,721 83,933 - 288,654
SCHEDULE "B"
ESCROW AGREEMENT
THIS AGREEMENT dated effective the 1st day of April, 1998.
AMONG:
JFM GEOMATICS LTD. and MICA GEOMATICS LTD.
(the "Licensee")
- - and -
POSITION INC.
(the "Corporation")
- - and -
CIBC MELLON TRUST COMPANY,
a trust company incorporated under the
law of Canada, having an office in the
City of Calgary
(the "Escrow Agent")
WHEREAS, pending fulfilment by the Licensee of the terms of the
Intellectual Property License Agreement (the "License Agreement") between the
Licensee and the Corporation dated effective April 1, 1998, the Corporation
wishes that 100,000 common shares in the capital stock of the Corporation
owned by the Licensee (herein referred to as the "Shares") be delivered to the
Escrow Agent.
NOW THEREFORE in consideration of the sum of One ($1.00) Dollar paid
by the parties to each other, the receipt of which is hereby acknowledged, and
in consideration of this Agreement and the mutual terms and conditions set
forth herein, the parties covenant and agree as follows:
<PAGE>
1. Pledge of Shares
The Licensee does hereby pledge and hypothecate the Shares to and in favour of
the Corporation as general and continuing security for the due fulfilment by
the Licensee of the terms of the License Agreement.
2. Delivery
On or before April 14, 1998, the Licensee shall deliver the Shares (herein
referred to as the "Escrowed Material") to the Escrow Agent.
3. Appointment of Escrow Agent
The Licensee and the Corporation do each hereby appoint the Escrow Agent to
hold and release the Escrowed Materials in accordance with the provisions of
this Agreement, and the Escrow Agent hereby accepts the said appointment.
Further, in circumstances where the License Agreement has been breached by the
Licensee entitling the Licensor to exercise its rights to realize upon the
Escrowed Material pursuant to paragraph 8 of this Agreement, the Corporation
hereby appoints the Escrow Agent as agent of the Corporation to carry out the
following:
(a) upon receipt of instructions from the Corporation, to sell,
through a stock exchange, or otherwise, such number of shares, at such price
or within such range of prices as instructed by the Corporation; and
(b) provide the net proceeds of the sale of any shares to the
Corporation forthwith upon receipt.
4. Restriction on Disposition of the Escrowed Materials
Unless and until the Escrowed Materials become releasable by the Escrow Agent
to the Licensee as provided in paragraph 7 of this Agreement, the Licensee
shall not, without the prior written consent of the Corporation, further
mortgage, pledge, charge, hypothecate or encumber the Escrowed Materials, or
any part thereof or any interest therein, or sell, assign, transfer, convey or
otherwise dispose of the Escrowed Materials or any part thereof or any
interest therein.
<PAGE>
5. The Licensee's Rights in Relation to the Escrowed Materials
Subject to the security created by this Agreement upon the Escrowed Materials
in favour of the Corporation, the Escrowed Materials shall remain the property
of the Licensee and the Licensee alone shall be entitled to exercise all
rights in relation thereto, unless and until the Escrowed Materials become
releasable by the Escrow Agent to the Corporation as provided in paragraph 8
of this Agreement.
6. Event of Default
An "Event of Default" means the failure by the Licensee to fulfil the terms of
the License Agreement.
7. Release of the Escrowed Materials to the Licensee
Upon the due fulfilment by the Licensee of the terms of the License Agreement,
the Corporation shall deliver to the Escrow Agent and the Licensee, a
statutory declaration so stating, duly sworn by the Corporation, and the
Escrow Agent shall deliver the Escrowed Materials to the Licensee upon receipt
of such declaration, whereupon this Agreement shall terminate. In addition to
the statutory declaration of the Corporation contemplated above, upon due
fulfilment by the Licensee of the terms of the License Agreement the Licensee
may deliver to the Escrow Agent and the Corporation a statutory declaration so
stating, duly sworn by the Licensee. The Escrow Agent shall hold the Escrowed
Materials for a period of 5 business days from the date upon which such notice
is given to the Corporation (as verified by a further statutory declaration
duly sworn by the Licensee and delivered to the Escrow Agent) after which the
Escrow Agent shall deliver the Escrowed Materials to the Licensee, whereupon
this Agreement shall terminate; PROVIDED THAT, if before the expiry of the
said period of 5 business days from the date upon which such notice is given
to the Corporation, the Escrow Agent is notified by the Corporation that they
dispute the claim of the Licensee to the Escrowed Materials, the Escrow Agent
shall retain the Escrowed Materials pending settlement of the dispute between
the Corporation and the Licensee and shall thereafter release the Escrowed
Materials only in accordance with a notice signed by the Licensee and the
Corporation or pursuant to an order of a Judge of the Court of Queen's Bench
of the Province of Alberta.
<PAGE>
8. Release of the Escrowed Materials to the Corporation
If an Event of Default occurs, the Corporation shall deliver to the Escrow
Agent and the Licensee a statutory declaration stating particulars of such
default duly sworn by the Corporation. If the said default is not fully
remedied within the period of 30 days from the date upon which such notice is
given to the Licensee (as verified by a further statutory declaration duly
sworn by the Corporation and delivered to the Escrow Agent), the Escrow Agent
shall deliver the Escrowed Materials to the Corporation; PROVIDED THAT, if
before the expiry of the said period of 30 days from the date upon which such
notice is given to the Licensee, the Escrow Agent is notified by the Licensee
that they dispute the claim of the Corporation to the Escrowed Materials, the
Escrow Agent shall retain the Escrowed Materials pending settlement of the
dispute between the Corporation and the Licensee and shall thereafter release
the Escrowed Materials only in accordance with a notice signed by the Licensee
and the Corporation or pursuant to an order of a Judge of the Court of Queen's
Bench of the Province of Alberta.
9. Indemnification of Escrow Agent
The Licensee and the Corporation do jointly and severally hereby release the
Escrow Agent from, and agree to indemnify and save the Escrow Agent harmless
from and against any and all costs, expenses, losses, claims, demands, actions
and causes of action, directly or indirectly, resulting from or related to the
exercise in good faith by the Escrow Agent of its functions hereunder. This
paragraph shall survive the termination of this Agreement.
10. Replacement of Escrow Agent
(a) The Escrow Agent may at any time upon 30 days prior written
notice given to the Licensee and the Corporation, resign as Escrow Agent under
this Agreement, and upon receipt of such notice, the Corporation shall appoint
a trust company in Calgary, Alberta, as Escrow Agent under this Agreement.
The appointment of the further Escrow Agent shall be made by notice in writing
served on the Licensee and signed by the Corporation and by the further Escrow
Agent. On service of such notice in the circumstances specified above, the
Licensee and the Corporation and the further Escrow Agent named in the said
notice shall be bound by all the terms of this Agreement in the same manner as
though this Agreement had been re-executed among them, but no release in
favour of any party hereto shall result from such deemed re-execution.
Failing such appointment occurring within 30 days of receipt of said notice of
resignation either the resigning Escrow Agent, the Licensee or the Corporation
may apply to a Justice of the Court of Queen's Bench of Alberta (or any
successor thereof) on such notice as such Justice may direct, for the
<PAGE>
appointment of a further Escrow Agent.
(b) The Corporation may, and the Licensee may, with the consent of
the Corporation, at any time hereafter by 30 days prior written notice to the
Escrow Agent remove the Escrow Agent from the position of Escrow Agent under
this Agreement, and upon such removal taking effect, the Corporation shall
appoint a further Escrow Agent in place of the Escrow Agent in the same manner
and on the same terms and conditions as are contained in subparagraph (a) of
this paragraph 10.
11. Conditions of Escrow Agent
The acceptance by the Escrow Agent of its obligations under this Agreement is
subject to the following terms and conditions:
(a) The Escrow Agent shall not be responsible or liable in any manner
whatsoever for the sufficiency, correctness, genuineness or validity of any
security deposited with it;
(b) The Escrow Agent shall be entitled to act upon any written
notice, request, waiver, consent, receipt, statutory declaration or other
paper or document furnished to it and executed by the Licensee or the
Corporation, both as to the due execution, validity and effectiveness of its
provisions and as to the truth and acceptability of any information therein
contained, which the Escrow Agent in good faith believes to be genuine and
what it purports to be;
(c) The Escrow Agent shall not be liable for any act done or step
taken or omitted by it in good faith.
(d) The Escrow Agent may consult with and obtain advice from
independent legal counsel in the event of any question as to any matter
hereunder, and it shall incur no liability and shall be fully protected in
acting in good faith in accordance with the option and instructions of such
counsel. The reasonable costs of such services shall be added to and be a
part of the Escrow Agent's fees hereunder.
(e) The Escrow Agent shall have no duties except those which are
expressly set forth herein and they shall not be bound by any notice of a
claim or demand with respect thereto or any waiver, modification, amendment,
termination or recision of this Agreement, unless received by them in
accordance with this Agreement; and
<PAGE>
(f) The Corporation and the Licensee each agree to pay to the Escrow
Agent half of all fees and disbursements of the Escrow Agent relating to the
Escrow Agent's performance of its obligations hereunder. The Escrow Agent
shall render all accounts to the Licensee directly for payment and the
Licensee agrees to pay all such accounts in their entirety, with it being the
obligation of the Licensee to reconcile with the Corporation directly
regarding said accounts.
12. Notices
All notices and other communications required or permitted pursuant to or in
relation to this Agreement shall be in writing and shall be:
(a) personally served upon an individual party, or a representative
of the Licensee, the Corporation or the Escrow Agent, as the case may be, in
which case such notice or other communication shall conclusively be deemed to
have been given to the addressee at the time of service; or
(b) sent by telecopy addressed to the addressee at the following
respective addresses and telecopy numbers:
To the Licensee:
c/o Carscallen Lockwood Cormie
1500, 407-2nd Street S.W.
Calgary, Alberta, Canada
T2P 2Y3
Facsimile: 403-262-2952
Attention: G. Kenneth Little
To the Corporation:
6815E - 40th Street S.E.
Calgary, Alberta
T2C 2W7
Fax: 720-0044
To the Escrow Agent:
CIBC Mellon Trust Company
600, 333 - 7th Avenue S.W.
Calgary, Alberta
T2P 2Z1
Attention: Rick Kutryk
Fax: 264-2100
<PAGE>
in which case such notice or other communication shall conclusively be deemed
to have been given to the addressee on the first day following the sending of
the telecopy, excluding Saturdays, Sundays and statutory holidays. Any party
may by notice to the other parties change its address for service.
13. Further Assurances
Each of the parties shall, upon the request of any other party, execute and
deliver or cause to be executed and delivered all such documents, deeds, and
other instruments of further assurance and do or cause to be done all such
acts and things as may be reasonably necessary or advisable to implement and
give full effect to the provisions of this Agreement.
14. Waiver and Amendment
This Agreement may only be amended by further written agreement executed and
delivered by all parties. No waiver or consent by any party of or to any
breach or default by another party shall be effective unless evidenced in
writing executed and delivered by the party so waiving or consenting. No
waiver or consent effectively given as aforesaid shall operate as a waiver or
consent of or to any further or other breach of default in relation to the
same or any other provision of this Agreement.
15. Headings
The headings to the paragraphs of this Agreement are for convenience of
reference only and shall not in any way limit, amplify or otherwise affect the
interpretation or construction of the provisions of this Agreement.
16. Proper Law
This Agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the Province of
Alberta. Each of the parties hereby irrevocably attornes to the jurisdiction
of the courts of the Province of Alberta in relation to all matters concerning
this Agreement.
<PAGE>
17. Interpretation of Words
Where the meaning is not inconsistent, all terms used herein shall have the
same meaning as in the Asset Purchase Agreement.
18. Severable
The provisions of this Agreement shall be several, so that if any provision
hereof shall be held to be illegal or unenforceable, the remaining provisions
hereof shall continue in full force and effect.
19. Counterparts
This Agreement may be executed in counterparts, each of which shall be deemed
to be original and which taken together shall be deemed to constitute one and
the same instrument, and it shall not be necessary in making proof of this
Agreement to produce more than one counterpart.
20. Enurement
This Agreement shall be binding upon and enure to the benefit of the parties,
the successors and assigns of corporate parties and the heirs, executors,
administrators, successors and assigns of individual parties.
JFM GEOMATICS LTD.
Per:
MICA GEOMATICS LTD.
Per:
POSITION INC.
Per:
CIBC MELLON TRUST COMPANY
Per:
INTELLECTUAL PROPERTY LICENSE AGREEMENT
THIS AGREEMENT DATED the 1st day of April, 1998.
BETWEEN:
POSITION INC., a body corporate incorporated pursuant to the laws of Alberta
with an office in the City of Calgary
(hereinafter referred to as the "Licensor")
- - and -
JFM GEOMATICS LTD. and MICA GEOMATICS LTD., both being bodies corporate
incorporated pursuant to the laws of the Province of Alberta
(hereinafter referred to collectively as the "Licensee")
WHEREAS the Licensor owns and holds the copyrights and any
applications thereof to the computer programs and other intellectual property
described in Schedule "A" hereto (hereinafter called the "Licensed Material")
and the Licensee desires to obtain from the Licensor and the Licensor desires
to grant to the Licensee a license to use the Licensed Material;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the
mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. License
The Licensor hereby grants to the Licensee:
(a) a single exclusive world wide license to use the NavSEIS
software;
<PAGE>
(b) a single exclusive world wide license to use the Jupiter software
within the continuation of the NavSEIS business as presently carried on by the
Licensor, being the sale and support of the NS100 and NS200 products
(brochures of the Jupiter software and NS100 and NS200 products are attached
as Schedules "C", "D" and "E" respectively); and
(c) a single non-exclusive world wide license to use the Jupiter
software in all other businesses.
(the exclusive NavSEIS software license, the exclusive Jupiter software
license and the non-exclusive Jupiter software license are hereinafter
referred to as the "License").
2. Purpose
The rights granted by this License apply solely to the use by the
Licensee of the Licensed Material for the purposes of:
(a) supporting the continuance of the NavSEIS business as presently
carried on by the Licensor, being the sale and support of the NS100 and NS200
products;
(b) supporting the Jupiter software package; and
(c) enabling the Licensee to produce survey and navigation products
within the seismic exploration industry.
3. Consideration
In consideration for the rights granted in this Agreement, the
Licensee agrees to pay the Licensor a royalty fee annually on the first
through fifth anniversaries of the date hereof, equal to six (6%) percent of
the net book value of the NavSEIS and Jupiter Software Deferred Development
Costs of the Licensor depreciated on a twenty-five (25%) percent declining
balance basis. The annual royalty fees are as follows:
March 31, 1999 $33,181.00
March 31, 2000 $24,886.00
March 31, 2001 $18,664.00
March 31, 2002 $13,998.00
March 31, 2003 $10,498.00
<PAGE>
Interest on overdue payments shall accrue at the rate of one and one
quarter (1.25%) percent per month, compounded annually.
4. Term
The term of this Agreement shall commence on the date hereof, and
shall be for a period of five (5) years unless terminated in the manner as
hereinafter set forth. In the event of the termination of this Agreement in
accordance with the provisions hereinafter set forth, the Licensee shall
return to the Licensor the Licensed Materials and all documentation or any
other materials related thereto, and shall cease to use them.
5. Termination
The rights conferred by this Agreement are subject to the ongoing
compliance by the Licensee with the provisions of this Agreement. In the
event that any of the provisions are not met by the Licensee other than the
obligation to make an annual royalty fee payment and pay any interest accrued
thereon, then the Licensor may give notice to the Licensee of the apparent
breach. A breach of any of the terms of this Agreement will be understood to
be a material breach. If such apparent breach is not remedied within thirty
(30) days of said notice the Licensor at its option may terminate or withdraw
some or all rights conferred hereunder and shall require the immediate
delivery up by the Licensee of any copies of the Licensed Material used in
contravention of this Agreement. The Licensor shall have the right to cancel
the entire Agreement.
6. Remedies
The Licensor's remedies in the event of a default or breach of any
terms hereof by the Licensee shall not be limited to the termination described
above and in no way shall the Licensor's right to pursue all other remedies
available, including, but not limited to, equitable relief by way of
injunction or orders for accounting, damages for conversion, punitive and
exemplary damages nor shall such actions terminate any of the Licensee's
obligations to the Licensor. The Licensee shall return all Licensed Material
on termination of this Agreement.
<PAGE>
7. Title
The Licensee agrees that the Licensed Material is, and shall remain
at all times, the property of the Licensor. The Licensee shall have no right,
title or interest therein or thereto except as expressly set forth in this
Agreement. Alterations, improvements or modifications to the Licensed
Material of any sort shall remain the property of the party making such
alteration, improvement or modification.
8. License Authority
The Licensor warrants that it possesses the legal right to grant the
Licensee the License as set forth herein.
9. Warranty
There are no other warranties express or implied except as otherwise
expressed herein.
10. Support
The Licensor shall not be obligated to provide the Licensee with
support for, or assistance with the use of the Licensed Material under this
Agreement.
11. Infringement Notice
The Licensee shall give prompt written notice to the Licensor of any
apparent infringement of the Licensor's copyright in the Licensed Materials,
which may come to the Licensee's notice during the term. The Licensee,
however, shall have no right to initiate proceedings for infringement of such
copyright, but shall provide all reasonable support to the Licensee upon
request if required.
12. Confidentiality
The Licensee shall exercise reasonable commercial care and in any
event, at least the same degree of care and discretion with respect to the
Licensed Material as it exercises in protecting its own confidential
information. The Licensee shall not disclose, or otherwise make available,
without the prior written consent of the Licensor, the Licensed Material or
any copies of it to third parties. The Licensee shall not copy or reproduce
the Licensed Material except to the extent necessary to perform its
obligations under this Agreement. This paragraph shall survive the
<PAGE>
termination of this Agreement.
13. Limitation of Liability
In no event shall the Licensor be liable for any damages, loss of
data or profits, or for any incidental or consequential damages, resulting
from the use of the Licensed Material even if advised of the possibility of
such damages. The Licensee's right to recover damages caused by the
Licensor's fault or negligence shall be limited to the consideration actually
paid by the Licensee for the Licensed Material. This limitation of the
Licensor's liability shall apply regardless of the form of action whether in
contract or tort.
14. Accountability
The Licensee shall maintain a record of the location of Licensed
Material and any copies or portions thereof and such record shall be available
for inspection by representatives of the Licensor upon request.
15. Notice
Any notice required to be given to either party shall be in writing
and shall be sufficiently given if delivered, or if sent by prepaid registered
mail or if sent by facsimile to the respective addresses given below, or to
such other address as shall be designated by written notice to the other
party.
Licensor: Position Inc.
6815E - 40th Street S.E.
Calgary, Alberta, Canada
T2C 2W7
Facsimile: 1-403-720-0044
Attention: President
Licensee: c/o Carscallen Lockwood Cormie
1500, 407-2nd Street S.W.
Calgary, Alberta, Canada
T2P 2Y3
Facsimile: 403-262-2952
Attention: G. Kenneth Little
<PAGE>
16. Alberta Law
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta and the applicable laws of Canada. The
parties agree to attorn to the courts of the Province of Alberta.
17. Entire Agreement
This Agreement contains the entire agreement between the parties and
supersedes all prior written or oral agreements with respect to the subject
matter hereof.
18. Modifications
Any modifications to this Agreement must be in writing and signed by
both parties.
19. Assignment
This Agreement shall be assigned by the Licensee to a third party
within ninety (90) days of the date hereof, upon the prior written consent of
the Licensor, such consent not to be unreasonably withheld. Notwithstanding
paragraphs 5 and 6 hereof, failure to complete an assignment within the ninety
(90) day period will result in the immediate termination of this Agreement and
the obligation of the Licensee to forthwith return all Licensed Material to
the Licensor. This Agreement shall survive any assignment by the Licensor or
the Licensee or their successors.
20. Purchase of Licensed Material
Provided the Licensee is not in default of any term hereunder, the
Licensee shall, at any time during the term hereof be entitled to purchase the
Licensed Material for the following amounts:
Date Purchase Price
Prior to March 31, 1999 $553,027.00
Between April 1, 1999 and
March 31, 2000 $414,770.00
Between April 1, 2000 and
March 31, 2001 $311,077.00
Between April 1, 2001 and
March 31, 2002 $233,308.00
<PAGE>
Between April 1, 2002 and
March 30, 2003 $174,981.00
Provided the Licensed Material has not previously been purchased
pursuant to this paragraph 20, and provided this Agreement has not previously
terminated pursuant to paragraph 5, the Licensee shall, on March 31, 2003,
purchase the Licensed Material for One Hundred and Seventy-Four Thousand Nine
Hundred and Eighty-One ($174,981.00) Dollars.
21. Security
As security for the royalty fees and any accrued interest thereon
payable pursuant to paragraph 3 above and payment for the purchase of the
Licensed Material pursuant to paragraph 20 above, the Licensee agrees to place
into escrow, on or before April 14, 1998, pursuant to the Escrow Agreement
attached hereto as Schedule "B", one hundred thousand (100,000) shares in the
capital stock of the Licensor.
22. Non-Competition
The Licensee hereby agrees that it will not, without the prior
written approval of the Licensor, during the term of this Agreement, however
caused, either as a corporation, individual, or as a partner or partners or
joint venturer or joint venturers or as employees, agents, shareholders,
investors, officers, directors or otherwise in conjunction with any other
firm, association, syndicate, company or corporation, or in any other manner
whatsoever directly or indirectly carry on, be engaged in, be interested in or
be otherwise concerned with, or permit their names or any parts thereof or
their employees to be used or employed by any such person or persons, firm,
association, syndicate, company or corporation, carrying on, engaged in,
interested in or concerned with the business which involves the use of the
Licensed Material other than for the purposes set out in paragraph 2 hereof,
without regard for geographical area.
23. Severability
The provisions of this Agreement are severable, and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such invalidity or
unenforceability shall not, in any way, affect the validity or enforceability
of the remaining provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date set forth above.
POSITION INC.
Per:
JFM GEOMATICS LTD.
Per:
MICA GEOMATICS LTD.
Per:
CONVERTIBLE DEBENTURE
THE OFFERING OF THESE SECURITIES MAY ONLY LAWFULLY BE OFFERED FOR SALE OUTSIDE
OF CANADA AND AS SUCH NO CANADIAN SECURITIES COMMISSION OR SIMILAR AUTHORITY
IN CANADA IS REQUIRED TO, NOR HAS IN ANY WAY PASSED UPON THE MERITS OF THE
SECURITIES OFFERED HEREUNDER AND ANY REPRESENTATION TO THE CONTRARY IS IN
OFFENCE.
THE SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS
(THE "STATE ACTS"), AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT
UPON THE ISSUANCE TO THE CORPORATION OF A FAVORABLE OPINION OF ITS COUNSEL OR
SUBMISSION TO THE CORPORATION OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL FOR THE CORPORATION, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATION OF THE ACT AND THE STATE ACTS.
POSITION INC.
A Canadian Corporation
July ___, 1998
NO. 101
POSITION INC., a Canadian corporation (the "Corporation"), is indebted and,
for value received, promises to pay to the order of _____________________ on
July __, 1999 (the "Due Date"), upon presentation of this Debenture, USD TWO
HUNDRED TWENTY THOUSAND DOLLARS (USD$220,000) (the "Principal Amount).
<PAGE>
1. Conversion.
1.1. The Holder of this Debenture shall have the right, at such Holder's
option, at any time, to convert all, or any part, of this Debenture into such
number of fully paid and nonassessable Common Shares of the Corporation as
shall be provided as follows.
At any time after 90 days from Issue Date at the lower of USD$1.00 per share
or 65% of the Market Price (as defined below) but not less than USD $0.50 per
share.
The Market Price as used above shall be defined as the average of
the closing bid prices of common stock of the corporation on the Alberta Stock
Exchange for the 10 trading days preceding the Holder's Conversion
Notice Date.
The rate of exchange used in establishing the Canadian dollar equivalent of
U.S. dollars cited in this Debenture shall be that exchange rate last quoted
by the Bank of America for the trading day immediately preceding the
Holder's Conversion Notice Date defined here.
1.2. The Holder of this Debenture may exercise the conversion right provided
in this Section 1 by giving written notice (the "Conversion Notice") to the
Corporation of the exercise of such right and stating the name or names in
which the stock certificate or stock certificates for the Common Shares are to
be issued and the address to which such certificates shall be delivered. The
Conversion Notice shall be accompanied by the Debenture. The number of Common
Shares that shall be issuable upon conversion of the Debenture shall equal one
multiplied by the Conversion Ratio as defined and determined as set forth
above and in accordance with Section 2 in effect on the date the Conversion
Notice is given; provided, however, that in the event that this Debenture
shall have been partially redeemed, Common Shares shall be issued pro rata,
rounded to the nearest whole share.
1.3. Conversion shall be deemed to have been effected on the date the
Conversion Notice is given (the "Conversion Date"). Within 10 business days
after receipt of the Conversion Notice, the Corporation shall issue and
deliver by hand against a signed receipt therefor or by Canadian registered
mail, return receipt requested, to the address designated by the Holder of
this Debenture in the Conversion Notice, a stock certificate or stock
certificates of the Corporation representing the number of Common Shares to
which such Holder is entitled.
<PAGE>
2. Conversion Ratio.
2.1. On the date hereof, the Conversion Ratio shall equal one, provided,
however, that the Conversion Ratio shall be subject to adjustment in
accordance with and at the times provided in this Section 2.
2.2. If the Corporation shall pay a dividend in shares of its Common Shares,
subdivide (split) its outstanding Common Shares, combine (reverse split) its
outstanding Common Shares, issue by reclassification of its Common Shares any
shares or other securities of the Corporation, or distribute to Holders of its
Common Shares any securities of the Corporation or of another entity, the
number of Common Shares or other securities the Holder hereof is entitled to
receive through conversion pursuant to this Debenture immediately prior
thereto shall be adjusted so that the Holder shall be entitled to receive upon
or subsequent to conversion the number of Common Shares or other securities
which he or she would have been entitled to receive after the happening of
any of the events described above had this Debenture been converted immediately
prior to the happening of such event, and the conversion price per share shall
be correspondingly adjusted; provided, however, that no adjustment in the
number of shares and/or the conversion price shall be required unless such
adjustment would require an increase or decrease of at least one percent (1%)
in such number and/or price; and provided further, however, that any
adjustments which by reason of this Section 2.2 are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.
An adjustment made pursuant to this Section 2.2. shall become effective
immediately after the record date in the case of the stock dividend or other
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification. If the
Corporation is consolidated or merged with or into another corporation or if
all or substantially all of its assets are conveyed to another corporation
this Debenture shall thereafter be convertible for the kind and number of
shares of stock or other securities or property, if any, receivable upon such
consolidation, merger or conveyance by a Holder of the number
of Common Shares of the Corporation which could have been subscribed on
the conversion of this Debenture immediately prior to such consolidation,
merger or conveyance; and, in any such case, appropriate adjustment (as
determined by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests
thereafter of the Holder of this Debenture to the end that the provisions set
forth herein (including provisions with respect to changes in and other
adjustments of the number of Common Shares the Holder of this Debenture is
<PAGE>
entitled to through conversion) shall thereafter by applicable, as nearly as
possible, in relation to any Common Shares or other securities or other
property thereafter deliverable upon the conversion of this Debenture.
2.3. Notice of Adjustment. Whenever the Conversion Ratio shall be adjusted as
provided in Section 2 hereof, the Corporation shall prepare and send to the
Holder of this Debenture a statement, signed by the chief financial officer of
the Corporation, showing in detail the facts requiring such adjustment and
the Conversion Ratio that shall be in effect after such adjustment.
2.4. Notice of Adjustment Events. In the event the Corporation shall propose
to take any action of the types described in Section 2 hereof, the Corporation
shall give notice to the Holder of this Debenture, which notice shall specify
the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall be given on or prior to
the earlier of five (5) business days prior to the record date or the date which
such action shall be taken. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such
notice) on the Conversion Ratio and the number, kind or class of shares or
other securities or property which shall be deliverable or purchasable upon
the occurrence of such action or deliverable upon conversion of this
Debenture. Failure to give notice in accordance with this Section 2.4 shall
not render such action ultra vires, illegal or invalid.
2.5. Taxes. The Corporation shall pay all documentary, stamp or other
transactional taxes and charges attributable to the issuance or delivery of
Common Shares of the Corporation upon conversion; provided, however, that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the record Holder of
this Debenture.
2.6. Reservation of Shares. The Corporation shall at all times reserve and
keep available, free from preemptive rights, unissued or treasury Common
Shares sufficient to effect the conversion of this Debenture.
2.7. Limitation. Notwithstanding the foregoing provisions of this Section 2,
in no event shall the Conversion Ratio exceed USD$1.20 to 1.
<PAGE>
3. Warrants.
Pursuant to the execution of the Purchase Agreement attached hereto as
Attachment 1 and distributed herewith, Holder will receive for the Convertible
Debenture subscribed for, a two (2) year Warrant to purchase two hundred
thousand (200,000) Common Shares of the Corporation at USD$1.00 per share,
subject to the following Warrant Call provisions:
(i) In the event that the closing bid price of the Corporation's Common
Shares on the Alberta Stock Exchange for the twenty (20) consecutive trading
days prior to the Warrant Call Date has been USD$1.50 or greater, the
Corporation may call the Warrants for redemption at USD$0.10 per share.
(ii) Thereafter, the Holders shall have ten (10) trading days to exercise the
Warrants or accept their redemption.
4. Default.
4.1. The entire unpaid and unredeemed balance of the Principal Amount on this
Debenture shall, at the election of the Holder, be and become immediately due
and payable upon the occurrence of any of the following events (a "Default
Event"):
(a) The non-payment by the Corporation when due of principal or of any other
payment as provided in this Debenture or with respect to any other Debenture
issued by the Corporation.
(b) If the Corporation (i) applies for or consents to the appointment of, or
if there shall be a taking of possession by, a receiver, custodian, trustee or
liquidator for the Corporation or any of its property; (ii) becomes generally
unable to pay its debts as they become due; (iii) makes a general assignment
for the benefit of creditors or becomes insolvent; (iv) files or is served
with any petition for relief under the Bankruptcy and Insolvency Act [Canada]
or any similar federal or state statute; (v) has any judgment entered against
it in excess of USD$1,000,000 in any one instance or in the aggregate during
any consecutive 12 month period or has any attachment or levy made to or
against any of its property or assets; (vi) defaults with respect to any
evidence of indebtedness or liability for borrowed money, or any such
indebtedness shall not be paid as and when due and payable; or (vii) has
assessed or imposed against it, or if there shall exist, any general or
specific lien for any federal, state or local taxes or charges against any of
its property or assets.
<PAGE>
(c) Any failure by the Corporation to issue and deliver Common Shares as
provided herein upon conversion of this Debenture.
4.2. Each right, power or remedy of the Holder hereof upon the occurrence of
any Default Event as provided for in this Debenture or now or hereafter existing
at law or in equity or by statute shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this
Debenture or now or hereafter existing at law or in equity or by statute, and
the exercise or beginning of the exercise by the Holder or transferee hereof
Of any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Holder hereof of any or all such other
rights, powers or remedies.
5. Failure to Act and Waiver.
No failure or delay by the Holder hereof to insist upon the strict performance
of any term of this Debenture or to exercise any right, power or remedy
consequent upon a default hereunder shall constitute a waiver of any such term
or of any such breach, or preclude the Holder hereof from exercising any such
right, power or remedy at any later time or times. By accepting payment after
the due date of any amount payable under this Debenture, the Holder hereof
shall not be deemed to waive the right either to require payment when due of
all other amounts payable under this Debenture, or to declare a default for
failure to effect such payment of any such other amount.
The failure of the Holder of this Debenture to give notice of any failure or
breach of the Corporation under this Debenture shall not constitute a waiver
of any right or remedy in respect of such continuing failure or breach or any
subsequent failure or breach.
6. Consent to Jurisdiction.
The Holder hereby agrees and consents that any action, suit or proceeding
arising out of this Debenture may be brought in any appropriate court in the
Province of Alberta, or in any other court having jurisdiction over the
subject matter, all at the sole election of the Corporation, and by the
issuance and execution of this Debenture the Holder irrevocably consents to
the jurisdiction of such court.
<PAGE>
7. Transfer.
This Debenture shall be transferred on the books of the Corporation only by
the registered Holder hereof or by his/her attorney duly authorized in writing
or by delivery to the Corporation of a duly executed Assignment substantially
in the form attached hereto as Attachment 2. The Corporation shall be entitled
to treat any Holder of record of the Debenture as the Holder in fact thereof
and shall not be bound to recognize any equitable or other claim to or
interest in this Debenture in the name of any other person, whether or not it
shall have express or other notice thereof, save as expressly provided by the
Laws of Alberta, Province of Canada.
8. Notices.
All notices and communications under this Debenture shall be in writing and
shall be either delivered in person or accompanied by a signed receipt
therefor or mailed first-class Canadian registered mail, return receipt
requested, postage prepaid, and addressed as follows: if to the Corporation,
to Position, Inc., 6815 E 40th Street, S.E., Calgary, Alberta, Canada T2C2W7
and, if to the Holder of this Debenture, to the address of such Holder as it
appears in the books of the Corporation. Any notice of communication shall be
deemed given and received as of the date of such delivery or mailing.
9. Governing Law.
This Debenture shall be governed by and construed and enforced in accordance
with the laws of the Province of Alberta, or, where applicable, the laws of
Canada.
IN WITNESS WHEREOF, the Corporation has caused this Debenture to be duly
executed under its corporate seal.
POSITION INC.
By: (SEAL)
PAUL KOWALENKO,
President
<PAGE>
Attachment 1
WARRANT PURCHASE AGREEMENT
POSITION INC.
July ___, 1998
Investor
________________________
________________________
________________________
Dear :
Position Inc., a Canadian corporation (the "Corporation"), hereby agrees with
you as follows:
1. Subject to and concurrent with the closing of a private convertible
debenture offering by the Corporation of up to USD$600,000, and pursuant to
your purchase of a USD$200,000 Convertible Debenture (which event is called
the "Closing"), the Corporation will sell and deliver to you a Warrant in the
form of Exhibit A hereto, to purchase up to two hundred thousand (200,000)
Common Shares of the Corporation (the "Warrant") at USD$1.00 per share.
2. The Corporation covenants that all Common Shares that may be issued upon
the exercise of the Warrant will, upon issuance, be validly issued, fully paid
and nonassessable and free from all taxes, liens and charges with respect to
the issuance thereof. The Corporation further covenants that during the
period within which the Warrant may be exercised, the Corporation will at all
times have authorized and reserved a sufficient number of Common Shares to
permit the exercise of the Warrant.
3. Neither the Warrant nor your right under this Agreement shall be
transferable for a period of twelve months after the Closing, except to a
transferee under (i), (ii) or (iii) below, and thereafter to any of the
following:
(i) a successor by merger or consolidation,
(ii) a purchaser of substantially all of your assets, and shareholders of
you or of your successor in interest, or
<PAGE>
(iii) one or more underwriters for the purpose of immediately exercising
the Warrant and making a public distribution of the underlying shares.
The provisions of this Section 3 shall be binding upon any transferee of the
Warrant.
4. (a) The provision of this Section 4 shall be binding upon any transferee of
the Warrant and upon each holder of Common Shares or other Corporation
securities issued upon exercise of the Warrant until such Common Shares shall
have been sold to the public pursuant to either an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
or an exemption from registration established to the satisfaction of the
Corporation. You and each transferee will cause any proposed transferee of
the Common Shares to agree to take and hold the Common Shares subject to the
provisions of this Section 4. As used in this Section 4, the term "Common
Shares" includes the Corporation's Common Shares or other securities issued in
respect of the Warrant pursuant to any stock split, stock dividend,
recapitalization or otherwise; and the term "Warrant" includes any warrant or
warrants issued in exchange for the original Warrant.
(b) Prior to any proposed transfer of the Warrant or of the Common Shares, the
holder thereof shall give written notice to the Corporation stating such
holder's intention to effect such transfer and describing the circumstances
of the proposed transfer in sufficient detail, accompanied by either (i) an
opinion of counsel reasonably satisfactory to the Corporation to the effect
that the proposed transfer may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the staff of the Securities
and Exchange Commission to the effect that the staff will not recommend that
enforcement action be taken if the proposed transfer is effected without
registration. Subject to evidence of compliance with any applicable state
securities or "blue sky" law or laws, the Corporation shall promptly notify
the holder in writing that such holder may proceed with its transfer as
described, and, if the transfer is of Common Shares, shall instruct its
transfer agent to remove any stop-transfer restrictions against the Common
Shares when transferred as proposed.
(c) If the Corporation at any time after the Warrant first becomes exercisable
and prior to June 30, 2000 proposes to register any of its securities, either
for its own account or the account of security holders, other than a
registration on Forms S-8 or S-14, or any registration on a form which does
not permit secondary sales, the Corporation shall, each such time, give
written notice of such intention to each holder of Warrants or Common Shares
("Holder"), and, upon written request of any Holder received by the
<PAGE>
Corporation within twenty (20) days after the Corporation has given such
notice, include in such registration (and all related qualifications under
state securities laws) all Common Shares (whether issued or issuable)
specified in such written request. If the registration involves any
underwriting, the Corporation shall so advise the Holders in the notice, and
the right of each Holder to have its Common Shares included in the
registration shall be conditioned upon such Holder's Common Shares being
included in the underwriting arrangements with underwriters (selected by the
Corporation) on the same terms as other persons selling Common Shares or
other Corporation securities to the underwriters. Notwithstanding the foregoing,
if the underwriters determine that marketing factors require a limitation of the
number of Common Shares to be underwritten, the number of Common Shares to be
registered for the account of all Holders may be limited in proportion to
limitations imposed on other holders of Common Shares or other Corporation
securities seeking to have their securities included in the registration
pursuant to registration rights similar to those conferred upon Holders by
this paragraph (c); provided, however, that priority may be given to
securities to be sold for the account of the Corporation. The allocation
shall be made in proportion, as nearly as practicable, to the respective
number of Common Shares requested to be included in such registration by each
person selling Common Shares or other Corporation securities to the
underwriters, including Holders. Any Holder disapproving of the terms of the
underwriting may withdraw therefrom by written notice to the Corporation, and
such Holder's Common Shares shall be withdrawn from registration.
(d) All expenses of registration and qualification incurred in connection with
a registration under paragraph (c) of this Section 4 shall be borne by the
Corporation, except that each Holder whose Common Shares are being registered
shall bear the fees and expenses of its own counsel, if any, and the
underwriting commission or discount applicable to its Common Shares being
sold. The Corporation will keep the Holders participating in a registration
advised of the status of the registration and will furnish such number of
preliminary and final prospectuses as such Holders may reasonably request; and
such Holders will furnish to the Corporation such information regarding such
Holders as may be required in connection with the registration.
(e) The following provisions shall apply to any registration effected
pursuant to paragraph (c) of this Section 4:
<PAGE>
(i) The Corporation shall indemnify and hold harmless such Holder and each
underwriter of the Common Shares so registered or qualified (including any
broker or dealer through whom such securities may be sold) and each person, if
any, who controls any such Holder or any such underwriter within the meaning
of the Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint and several, to which they or any of them may
become subject under the Securities Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse
each Holder and each of the underwriters and each such controlling person, if
any, for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement, any preliminary prospectus or the final prospectus (or the
registration statement or prospectus as from time to time amended or
supplemented by the Corporation) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such untrue statement or omission was made in reliance
upon and in conformity with information furnished in writing to the
Corporation in connection therewith by such Holder or underwriter expressly
for use therein.
Promptly after receipt by any Holder or any underwriter or any person
controlling such Holder or such underwriter of notice of the commencement of
any action in respect of which indemnity may be sought against the Corporation,
such Holder or such underwriter, as the case may be, will notify the Corporation
<PAGE>
in writing of the commencement thereof, and, subject to the provisions herein
after stated, the Corporation shall assume the defense of such action
(including the employment of counsel, who shall be counsel satisfactory to
such Holder or such underwriter or such person, as the case may be, and the
payment of legal expenses) insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the
Corporation. Any Holder or any underwriter or any such controlling person
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the Corporation unless the employment of such
counsel has been specifically authorized by the Corporation, which
authorization shall be given whenever the party seeking indemnity has been
advised by its counsel that one or more legal defenses may be available to it
that are not available to the Corporation or that for other reasons separate
representation may be necessary, to avoid a conflict. The Corporation shall
<PAGE>
not be liable to indemnify any person for any settlement of any such action
effected without the consent of the Corporation.
(ii) Any Holder will indemnify and hold harmless the Corporation, each of its
directors and each of its officers who have signed the registration statement
and each person, if any, who controls the Corporation within the meaning of
the Securities Act from and against any and all losses, claims, damages,
expenses of liabilities, joint and several, to which they are or any of them
may become subject under the Securities Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse
the Corporation and each such director, officer or controlling person for any
legal and other expenses reasonably incurred by any of them in connection with
investigating or defending any actions, whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, in any
preliminary prospectus or in the final prospectus (or the registration
statement or prospectus as from time to time amended or supplemented) or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity with information
furnished in writing to the Corporation in connection therewith by such Holder
expressly for use therein. Promptly after receipt of notice of the
commencement of any action in respect of which indemnity may be sought
against any Holder, the Corporation will notify such Holder in writing of the
commencement thereof, and such Holder shall, subject to the provisions
hereinafter stated, assume the defense of such action (including the
employment of counsel, who shall be counsel satisfactory to the Corporation,
and the payment of legal expenses) insofar as such action shall relate to an
alleged liability in respect of which indemnity may be sought against such
Holder. The Corporation and each such director, officer or controlling person
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of such Holder unless the employment of such
counsel has been specifically authorized by such Holder, which authorization
shall be given whenever separate representation may be necessary to avoid a
conflict. No Holder shall be liable to indemnify any person or any settlement
of any such action effected without the consent of such Holder.
<PAGE>
(iii) The indemnity provisions of this paragraph (e) shall be in addition to
any liability the indemnitor may otherwise have.
If the foregoing correctly sets forth our understanding, please sign below.
Very truly yours,
POSITION INC.
By_______________________
PAUL KOWALENKO,
President
Accepted as of the
date written above:
JULY , 1998
__________________________
Investor
<PAGE>
WARRANT No.____
EXHIBIT A
To Attachment 1
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE COMMON
SHARES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED.
TRANSFER OF THIS WARRANT IS ALSO RESTRICTED BY AN AGREEMENT DATED JULY 1,
1998. A COPY OF WHICH IS AVAILABLE FROM THE ISSUER.
WARRANT TO PURCHASE COMMON SHARES IN
POSITION INC.
Exercisable Commencing
July _________, 1998
Void After
________________, 2000
THIS CERTIFIES that, for value received, _________________
__________________________________, or registered assigns, is entitled,
subject to the terms and conditions set forth in this Warrant, to purchase
from POSITION INC., a Canadian corporation (the "Corporation"), up to two
hundred thousand, (200,000), fully paid and nonassessable common shares of the
Corporation (the "Common Shares"), at any time commencing July _____, 1998,
at one and no/100 Dollars (USD$1.00) per share, subject to adjustment as
provided in Section 5 below. This Warrant is issued pursuant to a Warrant
Purchase Agreement between ___________________________ and the Corporation,
dated July _______, 1998 and is subject to all the terms thereof, including
the limitations on transferability set forth in Sections 4 and 5 thereof.
1. This Warrant may be exercised by the holder hereof, in whole or in part
(but not as to a fractional share), by the presentation and surrender of this
Warrant with the form of Election to Purchase duly executed, at the principal
office of the Corporation (or at such other address as the Corporation may
designate by notice in writing to the holder hereof at the address of such
holder appearing on the books of the Corporation), and upon payment to the
Corporation of the purchase price by certified or bank cashier's check. The
Common Shares so purchased shall be deemed to be issued to the holder hereof
as the record owner of such Common Shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for
such shares. Certificates for the Common Shares so purchased shall be
delivered or mailed to the holder promptly after this Warrant has been
surrendered or has been exercised in full, a new Warrant identical in form by
representing the number of Common Shares with respect to which this Warrant
shall not then have been exercised shall also be issued to the holder hereof.
2. Nothing contained herein shall be construed to confer upon the holder of
this Warrant, as such, any of the rights of a shareholder of the Corporation.
3. The Corporation shall not issue certificates representing fractions of
Common Shares upon the exercise of this Warrant, but shall make a cash payment
for any fractional share based on the market price of the Common Shares on
the date of exercise, which shall be the closing sale price on the principal
exchange on which the Common Shares is traded; or if not traded on any
exchange, then the representative closing bid price in the over-the-counter
market. All calculations under this Section 3 and under Section 5 shall be
made to the nearest USD cent or shares, as the case may be.
<PAGE>
4. Subject to the limitations on transfer set forth in Sections 4 and 5 of the
Warrant Purchase Agreement, this Warrant is exchangeable, upon its surrender
by the holder at the office of the Corporation referred to in Section 1
above, for new warrants (containing the same terms as this Warrant) each
representing the right to purchase such number of Common Shares as shall be
designated by such holder at the time of such surrender (but not exceeding in
the aggregate the remaining number of Common Shares which may be purchased
hereunder).
Upon receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of this Warrant and upon delivery of a bond of
indemnity satisfactory to the Corporation (or, in the case of mutilation, upon
surrender of this Warrant), the Corporation will issue to the holder a
replacement warrant (containing the same terms as this Warrant). As used
herein, "Warrant" shall include all new warrants issued in exchange for or
replacement of this Warrant.
5. If the Corporation shall pay a dividend in Common Shares, subdivide (split)
its outstanding Common Shares, combine (reverse split) its outstanding Common
Shares, issue by reclassification of its Common Shares any shares or other
securities of the Corporation, or distribute to holders of its Common Shares
any securities of the Corporation or of another entity, the number of Common
Shares or other securities the holder hereof is entitled to purchase pursuant
to this Warrant immediately prior thereto shall be adjusted so that the holder
shall be entitled to receive upon exercise the number of Common Shares or
other securities which he or she would have owned or would have been entitled
to receive after the happening of any of the events described above had this
Warrant been exercised immediately prior to the happening of such event, and
the exercise price per share shall be correspondingly adjusted; provided,
however, that no adjustment in the number of shares and/or the exercise price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in such number and/or price; and provided
further, however, that any adjustments which by reason of this Section 5 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. An adjustment made pursuant to this Section 5 shall
become effective immediately after the record date in the case of the stock
dividend or other distribution and shall become effective immediately after
the effective date in the case of a subdivision, combination or
reclassification. If the Corporation is consolidated or merged with or into
another corporation or if all or substantially all of its assets are conveyed
to another corporation this Warrant shall thereafter be exercisable for the
purchase of the kind and number of shares of stock or other securities or
property, if any, receivable upon such consolidation, merger or conveyance by
<PAGE>
a holder of the number of Common Shares of the Corporation which
could have been purchased on the exercise of this Warrant immediately
prior to such consolidation, merger or conveyance; and, in any such case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth herein (including provisions with respect to changes
in and other adjustments of the number of Common Shares the holder of this
Warrant is entitled to purchase) shall thereafter by applicable, as nearly as
possible, in relation to any Common Shares or other securities or other
property thereafter deliverable upon the exercise of this Warrant. Upon any
adjustment of the number of Common Shares or other securities the holder of
this Warrant is entitled to purchase, and of any change in exercise price per
share, then in each such case the Corporation shall give written notice
thereof to the then registered holder of this Warrant at the address of such
holder as shown on the books of the Corporation, which notice shall state such
change and set forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
6. If at any time:
(a) The Corporation shall declare a dividend or other distribution on its
Common Shares payable otherwise than in cash at the same rate as the
immediately preceding regular dividend or in Common Stock;
(b) The Corporation shall authorize the granting to the holders of its Common
Stock of rights to subscribe for or purchase any shares of capital stock of
any class or of any other rights; or
(c) There shall be any plan or agreement of reorganization, or
reclassification of the Common Shares of the Corporation, or consolidation or
merger of the Corporation with, or sale of all or substantially all of its
assets to, another corporation; then
the Company shall give the registered holder of this Warrant at the address of
such holder as shown on the books of the Company, at least ten (10) days prior
to the applicable record date or dates, a written notice summarizing such
action or event and stating the record date or dates for any such dividend or
rights (or if a record is not to be taken, the date or dates as of which the
holders of Common Shares of record to be entitled to such dividends or rights
are to be determined), the date on which any such reorganization,
reclassification, consolidation, merger, sale of assets, dissolution,
liquidation or winding up is expected to become effective, and the date or
<PAGE>
dates as of which it is expected the holders of Common Shares or record shall
be entitled to effect any exchange of their Common Shares for securities of
other property deliverable upon any such reorganization, reclassification,
consolidation, merger, sale of assets, dissolution, liquidation or winding up.
In Witness Whereof, the Corporation has caused this Warrant to be signed by
its duly authorized officers on the 1st day of July, 1998.
POSITION INC. HOLDER
By_______________________ By_______________________
PAUL KOWALENKO,
President
Accepted as of the
date written above:
JULY ,1998
Attachment 2
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns to
______________, the one year Convertible Debenture of POSITION INC.,
No.
and hereby irrevocably appoints , Attorney, to transfer said
debenture on the books of the within named corporation, with full power of
substitution in the premises.
WITNESS my hand and seal this _____ day of July, 1998.
(SEAL)
WITNESS:
All amounts are in U.S. dollars, including investment, debenture payoff
and adjustments.
The Company's registered and records office is at 1500, 407 - 2nd Street SW,
Calgary, Alberta T2P 2Y3. The Company's principal office is located at
6815E - 40th Street S.E., Calgary, Alberta T2C 2W7. The Company and its
sole subsidiary have approximately 30 full-time and 2 part-time employees.
U.S. Subsidiary Position Inc. USA ("Position USA"), a wholly-owned subsidiary,
was incorporated as a private company by certificate of incorporation under
the laws of the State of Texas on October 28, 1996. The registered and records
office is located at 2500 Wilcrest, Suite 670, Houston, Texas 77042. The
principal office is located at 16155 Park Row, Suite 190, Houston, Texas
77084. Position USA currently has no employees at this time.
CONSENT OF COUNSEL
I hereby consent to the use of my name as legal counsel in the Form
10SB12G Registration Statement filed pursuant to Section 12 of the
Securities Exchange Act of 1934 by Position Inc.
MARK T. THATCHER, P.C.
/s/ Mark T. Thatcher
By:___________________
MARK T. THATCHER, ESQ.
Newport, RI
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001044284
<NAME> POSITION INC.
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1998
<PERIOD-START> OCT-01-1996 OCT-01-1997
<PERIOD-END> SEP-30-1997 JUN-30-1998
<EXCHANGE-RATE> 1.40 1.50
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 2,220,431 686,827
<ALLOWANCES> 0 0
<INVENTORY> 697,996 614,601
<CURRENT-ASSETS> 2,918,427 1,301,428
<PP&E> 924,421 876,561
<DEPRECIATION> (225,203) (339,600)
<TOTAL-ASSETS> 4,962,987 4,144,390
<CURRENT-LIABILITIES> 1,015,767 1,626,017
<BONDS> 0 0
0 0
0 0
<COMMON> 5,948,040 6,174,443
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 4,962,987 4,144,390
<SALES> 1,729,046 2,109,855
<TOTAL-REVENUES> 1,729,046 2,109,855
<CGS> 965,704 1,595,306
<TOTAL-COSTS> 2,434,002 2,537,372
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 181,242 (14,717)
<INCOME-PRETAX> (1,850,640) (2,008,106)
<INCOME-TAX> 0 0
<PAGE>
<INCOME-CONTINUING> (1,850,640) (2,008,106)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,850,640) (2,008,106)
<EPS-PRIMARY> (0.244) (0.197)
<EPS-DILUTED> (0.244) (0.197)
</TABLE>
