<PAGE> 1
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SMARTIRE SYSTEMS INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
================================================================================
<PAGE> 2
SMARTIRE SYSTEMS INC.
Suite #150, 13151 Vanier Place
Richmond, British Columbia, Canada V6V 2J1
NOTICE OF ANNUAL AND EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS
On Tuesday, December 5, 2000, SmarTire Systems Inc. (the "Company") will hold
its 2000 Annual and Extraordinary General Meeting of Shareholders (the
"Meeting") at the offices of Clark, Wilson, 7th Floor Boardroom, 885 West
Georgia Street, Vancouver, British Columbia, Canada. The Meeting will begin at
9:00 a.m., Vancouver time.
At the Meeting, the Shareholders will be asked:
1. To receive and consider the Report of the Directors to the Shareholders;
2. To receive and consider the financial statements of the Company together
with the auditor's report thereon for the fiscal year ended July 31,
2000;
3. To appoint the auditor for the Company to hold office until the next
annual general meeting of the Company;
4. To authorize the directors to fix the remuneration to be paid to the
auditors;
5. To consider and, if thought fit, to approve an ordinary resolution to set
the number of directors at six (6);
6. To elect directors to hold office until the next annual general meeting
of the Company;
7. To consider, and if thought fit, to approve a special resolution pursuant
to section 230 of the Company Act (British Columbia) that:
(a) the authorized capital of the Company be altered by increasing the
number of Common Shares without par value by 181,251 Common
Shares, so that the authorized capital of the Company shall
consist of 200,020,000 shares divided into:
(i) 200,000,000 Common Shares without par value; and
(ii) 20,000 Preferred Shares with a par value of $1,000.00 each;
and
(b) the second paragraph of the Memorandum of the Company shall be
altered accordingly.
<PAGE> 3
ii
8. To consider and, if thought fit, to approve a special resolution that the
existing Articles of the Company be cancelled, and that the form of the
Articles attached as Exhibit "B" to the accompanying Proxy Statement and
Information Circular be adopted as the Articles of the Company, in
substitution for, and to the exclusion of, the existing Articles of the
Company.
9. To consider and, if thought fit, approve an ordinary resolution to adopt
a formal incentive compensation plan (the "1999 Incentive Compensation
Plan") providing for the granting to eligible employees, directors,
officers and consultants of the Company or any Related Entity (as defined
in the 1999 Incentive Compensation Plan), such incentive awards as the
Board of Directors or a committee of the Board of Directors appointed to
administer the 1999 Incentive Compensation Plan may from time to time
approve, provided that:
(a) the awards may consist of:
(i) Common Shares or cash, or a combination of Common Shares,
cash or other securities, earned in whole or in part upon
the attainment of performance criteria that may from time
to time be established by the Board of Directors or by a
committee of the Board of Directors, or
(ii) stock options, stock appreciation rights, restricted stock
and/or certain other rights and benefits; and
(b) any stock options granted under the 1999 Incentive Compensation
Plan shall be subject to the provisions of the Company's 1998
Stock Incentive Plans and any subsequent stock incentive plans
that are approved by the Shareholders.
10. To consider and, if thought fit, approve an ordinary resolution to adopt
a formal stock incentive plan (the "2000 Stock Incentive Plan") providing
for the granting to eligible employees, directors, officers and
consultants of the Company or any Related Entity (as defined in the 2000
Stock Incentive Plan), such incentive awards as the Board of Directors or
a committee of the Board of Directors appointed to administer the 2000
Stock Incentive Plan may from time to time approve, provided that:
(a) the awards may consist of:
(i) Common Shares or cash, or a combination of Common Shares,
cash or other securities, earned in whole or in part upon
the attainment of performance criteria that may from time
to time be established by the Board of Directors or by a
committee of the Board of Directors, or
(ii) stock options, stock appreciation rights, restricted stock
and/or certain other rights and benefits; and
<PAGE> 4
iii
(b) the maximum number of common shares of the Company that will be
issuable pursuant to all awards granted under the 2000 Stock
Incentive Plan will be 800,000.
11. To consider and, if thought fit, approve an ordinary resolution to adopt
a formal stock incentive plan (the "2000 US Stock Incentive Plan")
providing for the granting to eligible employees, directors, officers and
consultants of the Company or any Related Entity (as defined in the 2000
US Stock Incentive Plan) who are resident in the United States and/or
subject to taxation in the United States, such incentive awards as the
Board of Directors or a committee of the Board of Directors appointed to
administer the 2000 US Stock Incentive Plan may from time to time
approve, provided that:
(a) the awards may consist of:
(i) Common Shares or cash, or a combination of Common Shares,
cash or other securities, earned in whole or in part upon
the attainment of performance criteria that may from time
to time be established by the Board of Directors or by a
committee of the Board of Directors, or
(ii) stock options, stock appreciation rights, restricted stock
and/or certain other rights and benefits; and
(b) the maximum number of common shares of the Company that will be
issuable pursuant to all awards granted under the 2000 US Stock
Incentive Plan will be 200,000.
Your Board of Directors recommends that you vote in favor of the proposals
outlined in this Proxy Statement and Information Circular.
At the Meeting, the Company will also report on its 2000 business results and
other matters of interest to Shareholders.
A Proxy Statement and Information Circular and Proxy Form accompany this Notice
of Meeting. These documents provide additional information relating to the
matters to be dealt with at the Meeting and form part of this Notice of Meeting.
The share transfer books of the Company will not be closed, but the Board of
Directors has fixed October 27, 2000 as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting and at any
adjournment or postponement thereof. Each registered Shareholder at the close of
business on that date is entitled to such notice and to vote at the Meeting in
the circumstances set out in the accompanying Proxy Statement and Information
Circular.
If you are unable to attend the Meeting in person, please complete, sign and
date the enclosed Proxy Form and return the same in the enclosed return envelope
provided
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iv
for that purpose. If you receive more than one Proxy Form because you own shares
registered in different names or addresses, each Proxy Form should be completed
and returned. The completed form of proxy must be received by Pacific Corporate
Trust Company not later than 48 hours prior to the commencement of the Meeting
(or if adjourned or postponed, any reconvening thereof), at Suite 830, 625 Howe
Street, Vancouver, British Columbia, V6C 3B8, or by fax at (604) 689-8144.
However, the Chairman of the Meeting has the discretion to accept proxies filed
less than 48 hours prior to the commencement of the Meeting (or, if adjourned or
postponed, any reconvening thereof).
DATED at Richmond, British Columbia, this 27th day of October, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT V. RUDMAN
--------------------------------
ROBERT V. RUDMAN,
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
PLEASE VOTE.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE
ENVELOPE PROVIDED.
<PAGE> 6
SMARTIRE SYSTEMS INC.
#150, 13151 VANIER PLACE,
RICHMOND, BRITISH COLUMBIA, CANADA V6V 2J1
PROXY STATEMENT AND INFORMATION CIRCULAR
IN CONNECTION WITH THE ANNUAL AND
EXTRAORDINARY GENERAL MEETING TO BE
HELD ON DECEMBER 5, 2000
(As at September 30, 2000 except as otherwise indicated)
MANAGEMENT SOLICITATION
This Proxy Statement and Information Circular is furnished to the members (the
"Shareholders") by the Board of Directors of SmarTire Systems Inc. (the
"Company") in connection with the solicitation by the Board of Directors of
proxies to be voted at the Annual and Extraordinary General Meeting (the
"Meeting") of the Shareholders to be held at 9:00 a.m. (Vancouver time) on
Tuesday, December 5, 2000, at the offices of Clark, Wilson, 7th Floor Board
Room, 885 West Georgia Street, Vancouver, British Columbia, Canada, or at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual and Extraordinary General Meeting of Shareholders
(the "Notice of Meeting").
The solicitation will be conducted by mail and may be supplemented by telephone
or other personal contact to be made without special compensation by regular
officers and employees of the Company. The Company does not reimburse
Shareholders, nominees or agents for the cost incurred in obtaining from their
principal authorization to execute forms of proxy; except that the Company has
requested brokers and nominees who hold stock in their respective names to
furnish this proxy material to their customers, and the Company will reimburse
such brokers and nominees for their related out of pocket expenses. No
solicitation will be made by specifically engaged employees or soliciting
agents. The cost of solicitation will be borne by the Company.
References in this Proxy Statement and Information Circular to "member" or
"Shareholder" or "Shareholders" are references to the holder or holders of
record of shares of common stock without par value of the Company (the "Common
Shares").
This Proxy Statement and Information Circular and the accompanying Proxy Form
are being delivered to Canadian and United States intermediaries holding Common
Shares on behalf of another person or corporation, and are being mailed on or
about November 1, 2000 to all registered Shareholders as of the close of
business on October 27, 2000 (the "Record Date").
<PAGE> 7
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The principal executive offices of the Company are located at Suite #150, 13151
Vanier Place, Richmond, British Columbia, Canada, V6V 2J1.
All references in this Proxy Statement and Information Circular to dollars or $
are to Canadian dollars, unless otherwise specified.
CURRENCY EXCHANGE RATES
On October 2, 2000, the noon rate of exchange quoted by the Federal Reserve Bank
of New York was $1.51 Canadian dollar per one United States dollar.
The following table reflects the rate of exchange quoted by the Federal Reserve
Bank of New York for Canadian dollars per one United States dollar in effect at
the end of the following periods and the average, high and low rates of exchange
during such periods.
<TABLE>
<CAPTION>
Average Close High Low
------- ----- ---- ---
<S> <C> <C> <C> <C>
Fiscal Year Ended 7/31/00 1.47 1.49 1.51 1.44
Fiscal Year Ended 7/31/99 1.51 1.51 1.58 1.45
Fiscal Year Ended 7/31/98 1.43 1.51 1.51 1.37
Fiscal Year Ended 7/31/97 1.37 1.38 1.40 1.33
Fiscal Year Ended 7/31/96 1.35 1.37 1.38 1.33
Fiscal Year Ended 7/31/95 1.38 1.37 1.42 1.34
</TABLE>
VOTING AND REVOCABILITY OF PROXIES
The authorized capital of the Company consists of: 199,818,749 Common Shares
without par value, and 20,000 Preferred Shares with a par value of $1,000 per
share. As of October 2, 2000, there were 14,506,297 issued and outstanding
Common Shares and no issued or outstanding Preferred Shares. The record date for
determining the names of Shareholders entitled to receive the Notice of Meeting
and to vote at the Meeting is the close of business on October 27, 2000.
Holders of Common Shares are entitled to vote at the Meeting. A Shareholder is
entitled to one vote for each Common Share that such Shareholder holds on the
Record Date on the proposals to be acted upon at the Meeting and any other
matter to come before the Meeting.
Shareholders personally present, being not less than two and who hold or
represent by proxy in the aggregate not less than one-tenth of the issued
capital of the Company entitled to vote, constitute a quorum. Abstentions are
considered present for purposes of determining whether the quorum requirement is
met. All proposals, other than a special resolution, require the affirmative
vote by a simple majority of the votes cast in person or by proxy at the
Meeting.
The persons named as proxyholders (the "designated persons") in the enclosed
form of proxy were designated by the Directors of the Company. A SHAREHOLDER HAS
THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
<PAGE> 8
-3-
SHAREHOLDER) (WHICH MAY BE A CORPORATION) TO ATTEND AND ACT FOR AND ON BEHALF OF
THAT SHAREHOLDER AT THE MEETING, OTHER THAN THE DESIGNATED PERSONS IN THE
ENCLOSED FORM OF PROXY. TO EXERCISE THIS RIGHT, THE SHAREHOLDER MAY DO SO BY
STRIKING OUT THE PRINTED NAMES AND INSERTING THE NAME OF SUCH OTHER PERSON AND,
IF DESIRED, AN ALTERNATE TO SUCH PERSON IN THE BLANK SPACE PROVIDED IN THE FORM
OF PROXY.
In order to be voted, the completed form of proxy must be received by Pacific
Corporate Trust Company not later than 48 hours prior to the commencement of the
Meeting (or if adjourned or postponed, any reconvening thereof), at Suite 830,
625 Howe Street, Vancouver, British Columbia, V6C 3B8, or by fax at (604)
689-8144. However, the Chairman of the Meeting has the discretion to accept
proxies filed less than 48 hours prior to the commencement of the Meeting (or if
adjourned or postponed, any reconvening thereof).
A proxy may not be valid unless it is dated and signed by the Shareholder who is
giving it or by that Shareholder's attorney-in-fact duly authorized by that
Shareholder in writing or, in the case of a corporation, dated and executed by
any duly authorized officer of, or attorney-in-fact for, the corporation. If a
form of proxy is executed by an attorney-in-fact for an individual Shareholder
or joint Shareholders or by an officer or attorney-in-fact for a corporate
Shareholder, the instrument so empowering the officer or attorney-in-fact, as
the case may be, or a notarial copy thereof, should accompany the form of proxy.
A Shareholder who has given a proxy may revoke it at any time, before it is
exercised, by an instrument in writing (a) executed by that Shareholder or by
that Shareholder's attorney-in-fact authorized in writing or, where that
Shareholder is a corporation, by a duly authorized officer of, or
attorney-in-fact for, the corporation; and (b) delivered either (i) to the
registered office of the Company at Suite 800 - 885 West Georgia Street,
Vancouver, British Columbia, V6C 3H1 (Attention: Bernard Pinsky) at any time up
to and including the last business day preceding the day of the Meeting or, if
adjourned or postponed, any reconvening thereof, or (ii) to the Chairman of the
Meeting prior to the vote on matters covered by the proxy on the day of the
Meeting or, if adjourned or postponed, any reconvening thereof; or in any other
manner provided by law. Also, a proxy will automatically be revoked by either
(i) attendance at the Meeting and participation in a poll (ballot) by a
Shareholder or (ii) submission of a subsequent proxy in accordance with the
foregoing procedures. A revocation of a proxy does not affect any matter on
which a vote has been taken prior to the revocation.
IN THE ABSENCE OF ANY INSTRUCTIONS, THE DESIGNATED PERSONS OR OTHER PROXY AGENT
NAMED ON THE PROXY FORM WILL CAST THE SHAREHOLDER'S VOTES ON ANY POLL (BALLOT)
FOR THE APPROVAL OF ALL THE MATTERS IN THE ITEMS SET OUT IN THE FORM OF PROXY
AND IN FAVOR OF EACH OF THE NOMINEES NAMED THEREIN FOR ELECTION AS DIRECTORS.
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The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to other matters which may properly come before the
Meeting, including any amendments or variations to any matters identified in the
Notice of Meeting and with respect to other matters which may properly come
before the Meeting. At the date of this Proxy Statement and Information
Circular, management of the Company knew of no such amendments, variations, or
other matters to come before the Meeting.
In the case of abstentions from or withholding of the voting of shares on any
matter, the shares which are the subject of the abstention or withholding
("non-voted shares") will be counted for determination of a quorum, but will not
be counted as affirmative or negative on the matter to be voted upon.
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement and
Information Circular in connection with the solicitation of proxies and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company. The delivery of this Proxy Statement and
Information Circular shall not create, under any circumstances, any implication
that there has been no change in the information set forth herein since the date
of this Proxy Statement and Information Circular. This Proxy Statement and
Information Circular does not constitute the solicitation of a proxy by anyone
in any jurisdiction in which such solicitation is not authorized or in which the
person making such solicitation is not qualified to do so or to anyone to whom
it is unlawful to make such offer or solicitation.
<PAGE> 10
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PROPOSAL 1
APPOINTMENT OF AUDITOR
Unless otherwise instructed, the proxies given pursuant to this solicitation
will be voted for the appointment of KPMG LLP, Chartered Accountants, of
Vancouver, British Columbia, as the auditor of the Company to hold office for
the ensuing year. Shares represented by proxies which are marked "Withhold" with
respect to the appointment of the auditor will be counted for determination of a
quorum, but will not be counted as either an affirmative vote for or a negative
vote against such appointment.
KPMG LLP were first appointed auditor of the Company on April 29, 1994.
Representatives of KPMG LLP are expected to be present at the Meeting but not
expected to make a statement. However, they are expected to be available to
respond to appropriate questions.
PROPOSAL 2
AUTHORIZATION FOR BOARD OF DIRECTORS TO FIX AUDITOR
REMUNERATION
Under the Company Act (British Columbia), the remuneration of the auditor of the
Company must be set by ordinary resolution of the Shareholders or, if the
Shareholders so resolve, by the Board of Directors. In order to provide the
Company with the necessary flexibility to effectively manage the engagement of
the auditor, it is important that the Board of Directors have the authority to
negotiate and fix the remuneration to the paid to the auditor in connection with
the services to be provided to the Company. Accordingly, the following ordinary
resolution will be presented for approval at the Meeting:
"BE IT RESOLVED THAT:
(a) the Board of Directors be and is hereby authorized to fix the
remuneration to be paid to the auditor, as appointed by ordinary
resolution of the Shareholders, in connection with the services to
be provided to the Company by such auditor; and
(b) the Board of Directors be and is hereby authorized to delegate to
any one senior officer of the Company the authority to negotiate
and enter into an agreement with the Company's auditor with
respect to the services to be provided by it to the Company, and
the remuneration to be paid to the auditor for such services, on
such terms and conditions as the senior officer deems fair and
reasonable."
PROPOSAL 3
DETERMINATION OF NUMBER OF DIRECTORS
Under the Company's Articles, the Company may have not less than three (3) and
not more than twenty (20) Directors. Unless the number of Directors is fixed by
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ordinary resolution of the Shareholders, the number of Directors may be
determined within this range by resolution of the Board of Directors. By
Shareholders' resolution adopted at the last annual general meeting of the
Company, the number of Directors was set at seven (7). There are currently six
(6) members of the Board of Directors, as one of the Directors elected at the
last annual general meeting has resigned. Management proposes that the number of
Directors be set at six (6). Accordingly, the following ordinary resolution will
be presented for approval by the Shareholders at the Meeting:
"BE IT RESOLVED THAT the number of Directors be and is hereby set at six (6)."
PROPOSAL 4
ELECTION OF DIRECTORS
The directors of the Company are elected at each annual general meeting and hold
office until the next annual general meeting or until their successors are
appointed. In the absence of instructions to the contrary, the enclosed proxy
will be voted for all of the six current Directors, each of whom management
proposes to nominate. Shares represented by proxies which are marked "Withhold"
with respect to the election of any nominee will be counted for determination of
a quorum, but will not be counted as either an affirmative vote for such nominee
or a negative vote against the nominee.
Advance notice of the Meeting inviting nominations for directors of the Company
was published in The Province newspaper in Vancouver, British Columbia, on
October 9, 2000 in accordance with Section 111 of the Company Act (British
Columbia), and delivered to the British Columbia Securities Commission on
October 2, 2000 in accordance with National Policy No. 41 of the Canadian
Securities Administrators. The following information regarding the Company's
Directors is relevant to your consideration of the nominees proposed by
management:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
NAME, COUNTRY OF PRINCIPAL OCCUPATION OR EMPLOYMENT AGE AS AT DATE ON WHICH
ORDINARY RESIDENCE AND AND, IF NOT AN ELECTED DIRECTOR, SEPTEMBER 30, THE NOMINEE
POSITION HELD WITH THE OCCUPATION DURING THE PAST FIVE YEARS 2000 BECAME A
COMPANY DIRECTOR OF THE
COMPANY
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LAWRENCE BECERRA * Principal and founder of West Sussex Trading, 48 March 30/98
United Kingdom Inc.
DIRECTOR
------------------------------------------------------------------------------------------------------------------------
JOHN BOLEGOH Technical Support Manager, SmarTire Systems 56 Dec. 2/93
Canada Inc.
TECHNICAL SUPPORT
MANAGER and
DIRECTOR
------------------------------------------------------------------------------------------------------------------------
KEVIN CARLSON Chief Financial Officer, General Manager and 39 Dec 17/98
Canada Corporate Secretary, SmarTire Systems Inc.
CHIEF FINANCIAL
OFFICER, GENERAL
MANAGER, CORPORATE
SECRETARY and
DIRECTOR
------------------------------------------------------------------------------------------------------------------------
BERNARD PINSKY * Lawyer and partner at Clark, Wilson. 46 Aug. 19/98
Canada
DIRECTOR
------------------------------------------------------------------------------------------------------------------------
</TABLE>
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-7-
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
NAME, COUNTRY OF PRINCIPAL OCCUPATION OR EMPLOYMENT AGE AS AT DATE ON WHICH
ORDINARY RESIDENCE AND AND, IF NOT AN ELECTED DIRECTOR, SEPTEMBER 30, THE NOMINEE
POSITION HELD WITH THE OCCUPATION DURING THE PAST FIVE YEARS 2000 BECAME A
COMPANY DIRECTOR OF THE
COMPANY
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ROBERT RUDMAN * President, Chairman and Chief Executive Officer, 53 Sept. 22/93
Canada SmarTire Systems Inc.
PRESIDENT, CHAIRMAN,
CHIEF EXECUTIVE
OFFICER and DIRECTOR
------------------------------------------------------------------------------------------------------------------------
DANA STONEROOK Vice President, Customer Development 43 June 4/99
United States TRW Automotive Electronics
DIRECTOR
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Member of the Audit Committee.
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OF DIRECTORS, EXECUTIVE OFFICER AND
SIGNIFICANT EMPLOYEES
The present and principal occupations of the Company's directors and executive
officers during the last five years are set forth below:
IAN BATEMAN:
Mr. Bateman is the Managing Director for SmarTire (Europe) Limited. He is
a U.K. resident and has extensive sales, marketing and senior managerial
experience in a variety of facets of European automotive industries. From
1966 to 1973 he was a manager with Mid Bucks Automotive Limited. During
1973 to 1979 Mr. Bateman was a manager with Renault U.K. Limited, and was
instrumental in the formation of a direct sales company in the U.K. with
a sales budget of pound sterling 100 million per year. Between 1979 and
1991 he operated his own marketing company which expanded to supply every
European car manufacturer/importer, with the exception of just three,
with an overall turnover of pound sterling 10 million per year. From 1991
and prior to joining SmarTire (Europe) Limited, Mr. Bateman carried out
independent consulting services, most importantly with Otter Controls
Limited, which was implementing a marketing program for a tire-monitoring
system.
LAWRENCE BECERRA:
Mr. Becerra has an extensive background in international finance. Since
1996, he has been the principal and founder of West Sussex Trading, Inc.
which is involved in corporate finance activities. Between 1992 and 1996
Mr. Becerra was the Senior Proprietary Trader promoted from the position
of Manager of European Money Market Trading for Goldman Sachs
International in London, England. Between 1987 and 1992 Mr. Becerra was
the Managing Director for Czarnikow Financial Futures. Between 1984 and
1987, he held the position of Senior Trader with TransMarket Group, Inc.
Between 1976 and 1984, Mr. Becerra worked for Continental Bank in London
and ended his tenure as the Executive Director representing all trading
activities for the company. He attended Middlebury College in Middlebury,
<PAGE> 13
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Vermont between 1970 and 1974 and Hackley School in Tarrytown, New York
between 1968 and 1970.
JOHN BOLEGOH:
Mr. Bolegoh has an extensive background in tire product engineering,
including twenty years with Michelin Technical Services Canada Limited in
positions of increasing responsibility. Mr. Bolegoh joined the Company in
1991. His responsibilities include defining necessary product
capabilities and designs for entering various markets; establishing
contacts to promote awareness of the Company's technologies; locating and
exploring business possibilities with potential distributors; and
providing customer relations, problem solving, training and sales
assistance. Mr. Bolegoh specialized in mechanical technology at the
Hamilton Institute of Technology in Hamilton, Ontario.
KEVIN CARLSON:
Mr. Carlson joined the Company as Chief Financial Officer in November
1998. Mr. Carlson is responsible for all of the Company's financial and
related activities, including Finance, Treasury, Accounting, Taxation,
Legal, Management Information Systems and Administration. Effective April
1, 2000 Mr. Carlson assumed the additional responsibilities of General
Manager and is responsible for all operating activities of the Company's
Richmond office. Prior to joining the Company, Mr. Carlson was Chief
Financial Officer of ID Biomedical Corporation, a publicly traded
biotechnology company. Previously, he was Chief Financial Officer for
three other publicly traded companies. Mr. Carlson spent eight years with
KPMG in Calgary, Alberta. In addition to his Chartered Accountancy
designation, Mr. Carlson holds a Bachelor of Commerce Degree from the
University of Calgary.
SHAWN LAMMERS:
Mr. Lammers is the Vice President, Engineering. Mr. Lammers is a
professional engineer, with a Bachelor of Applied Science degree from the
University of British Columbia, specializing in computer engineering. He
has developed software for MS-DOS, Windows, UNIX Workstations and Amiga
platforms. Mr. Lammers has been with the Company since its inception and
is responsible for the development of the patented remote sensing
technology utilized in SmarTire's products. He has been the chief
engineer in respect to the design, development and production of the
Company's passenger car TMS, the commercial vehicle TMS and the
industrial equipment TMS.
BERNARD PINSKY:
Mr. Pinsky is a partner practicing corporate and securities law at Clark,
Wilson, one of Vancouver's most established and respected law firms. Mr.
Pinsky was called to the British Columbia Bar in 1980, and was admitted
to
<PAGE> 14
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practice law in California in 1999. He has advised a variety of public
and private companies on legal matters related to acquisitions, mergers,
takeovers, initial public offerings, secondary financings, public company
disclosure requirements and stock exchange practice. Mr. Pinsky has been
corporate and securities counsel for the Company since 1993.
ROBERT RUDMAN:
Mr. Rudman is a Chartered Accountant with 15 years of experience
assisting public companies, especially on the CDNX. Mr. Rudman joined the
Company in March 1993 as the Chief Financial Officer after serving as an
independent financial consultant for several months. He was appointed
Chief Executive Officer of the Company on January 19, 1996, and served as
President from January 19, 1996 to June 3, 1999, when he was appointed
Chairman of the Board. Mr. Rudman was reappointed President of the
Company effective April 1, 2000. Prior to joining the Company, Mr. Rudman
was manager of a California based sales contract financing firm.
Previously, he was a partner in a consulting firm providing professional
assistance to publicly traded companies. Mr. Rudman became a Chartered
Accountant in 1974 and worked with Laventhol & Horwath and Price
Waterhouse & Co. in Winnipeg, Manitoba. In addition to his Chartered
Accountancy designation, Mr. Rudman holds a Bachelor of Arts degree and
graduate business diploma from Lakehead University in Thunder Bay,
Ontario.
DANA STONEROOK:
Mr. Stonerook has been Vice President, Customer Development, TRW
Automotive Electronics since January 1999. The group, a unit of TRW Inc.,
is a leading producer of electronic safety, security and convenience
systems for the global automotive electronics market. Mr. Stonerook has
an extensive background in international customer relations, electrical
engineering and program management. Mr. Stonerook was working for Eagle
Monitor Systems, Inc. as manager of design development when TRW Inc.
acquired the company in 1981. He has held a number of posts of increasing
responsibility within TRW since that time. Mr. Stonerook was named Vice
President, Sales, North and South America, for TRW Automotive Electronics
Group in September 1995. He was appointed Vice President, Sales and
Marketing, Automotive Electronics, North America, for the group in April
1996 and held the position until his present assignment. Mr. Stonerook
holds a Bachelor of Science degree in electrical engineering from DeVry
Institute of Technology, Chicago.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held four formal meetings during the year
ended July 31, 2000. All other proceedings of the Board of Directors were
conducted by resolutions consented to in writing by all the directors and filed
with the minutes of the proceedings of the directors. Such resolutions consented
to in writing
<PAGE> 15
-10-
by all the directors are, according to the Company Act (British Columbia) and
the Articles of the Company, as valid and effective as if they had been passed
at a meeting of the directors duly called and held.
Pursuant to the requirements of the Company Act (British Columbia), the Company
also has an Audit Committee of its Board of Directors presently consisting of
Lawrence Becerra, Bernard Pinsky and Robert Rudman. The Company has adopted an
Audit Committee Charter with sets forth as a Statement of Policy that the Audit
Committee shall provide assistance to the Company's directors in fulfilling
their responsibility to the shareholders, potential shareholders, and investment
community relating to corporate internal controls and accounting, internal and
financial reporting practices of the Company, and the quality and integrity of
the financial reports of the Company. It further provides that in so doing, it
is the responsibility of the Audit Committee to maintain free and open means of
communication between the directors, the independent auditors, the internal
auditors, and the financial management of the Company. During fiscal 2000, there
was one formal meeting of the Audit Committee. Other business of the Audit
Committee was conducted by resolutions consented to in writing by all the
members and filed with the minutes of the proceedings of the Audit Committee.
The Company has a Compensation Committee made up of Kevin Carlson, William
Cronin (Director, SmarTire USA, Inc.) and Lawrence Becerra. The function of the
Compensation Committee is to investigate and recommend to the directors
appropriate levels and types of compensation for directors, officers and
employees of the Company. During fiscal 2000, there were several meetings held
by this Committee.
The Company does not have a standing Nominating Committee.
During 2000, each incumbent director attended at least 75% of the aggregate of
(i) the total number of meetings of the Board of Directors held during the
period for which he was a director and (ii) the total number of meetings held by
all committees of the Board of Directors during the period on which he served.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following tables set forth specified information with respect to the
beneficial ownership of the Company's common stock as of September 30, 2000 by:
- each person or affiliated group which, to the knowledge of the
Company, beneficially owns five percent (5%) or more of the
outstanding common stock;
- each of the Company's directors,
- each of the Named Executive Officers (as hereinafter defined); and
- all of the Company's executive officers and Directors as a group.
<PAGE> 16
-11-
Shares and percentages beneficially owned are based upon 14,506,297 issued and
outstanding shares of common stock on September 30, 2000, together with options
and warrants that are exercisable for common stock within 60 days from September
30, 2000 for each Shareholder. Under the rules of the United States Securities
and Exchange Commission, beneficial ownership includes shares over which the
named shareholder exercises voting control and or investment power. Shares of
common stock subject to options or warrants that are currently exercisable or
will become exercisable within sixty days from September 30, 2000 are deemed
outstanding for computing the respective percentage ownership of each person
holding the option or warrant, but are not deemed outstanding for purposes of
computing the respective ownership percentage of any other person. Unless
otherwise indicated in the footnotes below, the Company believes that the
persons and entities named in the tables have sole voting and investment power
with respect to all shares beneficially owned, subject to applicable community
property laws.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
BENEFICIAL OWNERS OF FIVE PERCENT (5%) OR MORE OF
THE COMPANY'S OUTSTANDING COMMON STOCK
--------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
--------------------------------------------------------------------------------------
<S> <C> <C>
Simon Archdale(1) 2,340,000 16.1%
--------------------------------------------------------------------------------------
TRW Inc.(2) 900,000 6.2%
--------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Archdale's address is Chalet Trois Nicholas, Courtavet, Crans
Montana, Valais, Switzerland.
(2) TRW Inc.'s address is 1900 Richmond Road, Cleveland, Ohio 44124, USA.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK BY
DIRECTORS AND NAMED EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
--------------------------------------------------------------------------------
Directors
--------------------------------------------------------------------------------
<S> <C> <C>
Lawrence Becerra (1) 162,303 1.12%
--------------------------------------------------------------------------------
John Bolegoh (2) 91,604 0.63%
--------------------------------------------------------------------------------
Kevin Carlson (3) 42,570 0.29%
--------------------------------------------------------------------------------
Bernard Pinsky (4) 40,000 0.28%
--------------------------------------------------------------------------------
Robert Rudman (5) 207,024 1.43%
--------------------------------------------------------------------------------
Dana Stonerook nil nil
--------------------------------------------------------------------------------
Named Executive Officers who are not Directors or Nominees
--------------------------------------------------------------------------------
Ian Bateman (6) 41,500 0.29%
--------------------------------------------------------------------------------
Shawn Lammers (7) 35,019 0.24%
--------------------------------------------------------------------------------
Directors and Executive Officers, as a Group
--------------------------------------------------------------------------------
Total Directors/
Executive Officers
(8 persons) 620,020 4.27%
</TABLE>
(1) Mr. Becerra has incentive stock options for the right to purchase up to
an aggregate of 55,000 Common Shares and a warrant for the right to
purchase up to an aggregate of 28,803 Common Shares. The options and
warrants are immediately exercisable.
(2) Includes 47,080 Common Shares owned by Mr. Bolegoh's wife and children.
Mrs. Bolegoh has sole voting and dispositive power with respect to her
shares, and Mr. Bolegoh disclaims beneficial ownership of such shares.
Mr. Bolegoh has incentive stock options for the right to purchase up to
an aggregate of 12,500 Common Shares. All options are immediately
exercisable.
<PAGE> 17
-12-
(3) Mr. Carlson has incentive stock options for the right to purchase an
aggregate of 110,000 Common Shares. The options vest over time and
currently 32,000 options are immediately exercisable.
(4) Mr. Pinsky has incentive stock options for the right to purchase an
aggregate of 40,000 Common Shares. The options are immediately
exercisable.
(5) Mr. Rudman has incentive stock options for the right to purchase an
aggregate of 175,000 Common Shares. The options vest over time, and
currently 161,000 options are immediately exercisable.
(6) Mr. Bateman has incentive stock options for the right to purchase an
aggregate of 87,500 Common Shares. The options vest over time, and
currently 41,500 options are immediately exercisable.
(7) Mr. Lammers has incentive stock options for the right to purchase an
aggregate of 87,500 Common Shares. The options vest over time, and
currently 33,500 options are immediately exercisable.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The services of Robert Rudman, Director, President, Chairman and Chief Executive
Officer of the Company, are provided to the Company pursuant to a Management
Agreement dated August 1, 1999. See "Management Agreements and Termination of
Employment and Change in Control Arrangements."
The services of Kevin Carlson, Director, Chief Financial Officer, General
Manager and Corporate Secretary, are provided to the Company pursuant to a
Management Agreement dated August 1, 1999. See "Management Agreements and
Termination of Employment and Change in Control Arrangements."
The services of Shawn Lammers, Vice President of Engineering, are provided to
the Company pursuant to a Management Agreement dated August 1, 1999. See
"Management Agreements and Termination of Employment and Change in Control
Arrangements."
The services of Ian Bateman, Managing Director of SmarTire (Europe) Limited, are
provided to the Company pursuant to a Management Agreement dated August 1, 1999.
See "Management Agreements and Termination of Employment and Change in Control
Arrangements."
The services of Bernard Pinsky, Director, are provided through the law firm of
Clark, Wilson of which Mr. Pinsky is a partner. Clark, Wilson renders accounts
to the Company for Mr. Pinsky's time expended. During the year ended July 31,
2000 the Company paid $149,485 to Clark, Wilson for legal services.
Mr. Becerra is a principal of West Sussex Trading Inc. During the year ended
July 31, 2000 the Company paid $470,191 for consulting services and financing
fees on the private sale of its common stock and issued 86,409 share purchase
warrants at an exercise price of US$2.00, expiring at dates ranging from October
15, 2002 to March 31, 2003, for financing services to West Sussex Trading Inc.
SUMMARY OF EXECUTIVE COMPENSATION
Particulars of compensation awarded to, earned by or paid to:
(a) the Company's chief executive officer (the "CEO");
(b) each of the Company's four most highly compensated executive
<PAGE> 18
-13-
officers who were serving as executive officers at the end of the
most recently completed financial year and whose total salary and
bonus exceeds CDN$100,000 per year; or
(c) any additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as an executive officer of the Company at the end of the
most recently completed financial year;
(all such persons are referred to as the "Named Executive Officers") are set out
in the summary compensation table below. Except as indicated, all dollar amounts
set forth below with respect to the applicable year ended July 31, are expressed
in Canadian dollars.
During 2000, six (6) individuals served as executive officers of the Company at
various times: Robert Rudman, Mark Desmarais, Kevin Carlson, Shawn Lammers, Gary
Schlachter, and Ian Bateman. All except Mr. Lammers qualify as "Named Executive
Officers" as defined above.
<PAGE> 19
-14-
<TABLE>
<CAPTION>
=====================================================================================
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------
ANNUAL COMPENSATION
-------------------------------------------------------------------------------------
NAME AND PRINCIPAL YEAR SALARY BONUS OTHER ANNUAL
POSITION COMPENSATION
(1)
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert V. Rudman 2000 $273,573 Nil Nil
President, Chairman 1999 $247,301 $90,000 Nil
and Chief Executive 1998 $161,058 Nil $41,000 (3)
Officer
-------------------------------------------------------------------------------------
Gary Schlachter 2000 $53,516 Nil Nil
Executive Vice-President 1999 $142,695 Nil Nil
Sales and Marketing, 1998 $118,250 $28,600 Nil
SmarTire USA Inc.
-------------------------------------------------------------------------------------
Mark Desmarais 2000 $168,080 Nil Nil
President and Chief 1999 $81,244 $66,093 (6) Nil
Operating Officer,
President and CEO of
SmarTire USA Inc.
-------------------------------------------------------------------------------------
Ian Bateman (7) 2000 $158,287 Nil Nil
Managing Director SmarTire 1999 $135,351 $37,032 Nil
(Europe) Limited
-------------------------------------------------------------------------------------
Kevin Carlson (8) 2000 $150,461 Nil Nil
Chief Financial Officer,
General Manager, Corporate
Secretary and Director
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
=================================================================================================
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION (1)
-------------------------------------------------------------------------------------------------
AWARDS PAYOUTS
------------------------------ -------
NAME AND PRINCIPAL SECURITIES RESTRICTED LTIP ALL OTHER
POSITION UNDERLYING SHARES OR PAYOUTS COMPENSATION
OPTIONS/SARS RESTRICTED
GRANTED SHARE UNITS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert V. Rudman 17,500 Nil Nil $65,851 (2)
President, Chairman Nil Nil Nil Nil
and Chief Executive 220,000 Nil Nil Nil
Officer
-------------------------------------------------------------------------------------------------
Gary Schlachter Nil Nil Nil $80,908 (4)
Executive Vice-President Nil Nil Nil Nil
Sales and Marketing, Nil Nil Nil Nil
SmarTire USA Inc.
-------------------------------------------------------------------------------------------------
Mark Desmarais 50,000 Nil Nil $368,562 (5)
President and Chief 75,000 Nil Nil $66,667 (6)
Operating Officer,
President and CEO of
SmarTire USA Inc.
-------------------------------------------------------------------------------------------------
Ian Bateman (7) 57,500 Nil Nil Nil
Managing Director SmarTire 10,000 Nil Nil Nil
(Europe) Limited
------------------------------------------------------------------------------------------------
Kevin Carlson (8) 60,000 Nil Nil $22,680
Chief Financial Officer,
General Manager, Corporate
Secretary and Director
------------------------------------------------------------------------------------------------
</TABLE>
(1) The value of perquisites and other personal benefits, securities and
property for the Named Executive Officers that do not exceed the lesser
of $50,000 or 10% of the total of the annual salary and bonus is not
reported herein.
(2) Amount relates to accumulated vacation pay paid to Mr. Rudman.
(3) Amount relates to advisory fees paid to Mr. Rudman.
(4) Mr. Schlachter's employment was terminated effective December 24, 1999.
Pursuant to a separation agreement, Mr. Schlachter was paid US$50,000
($CDN73,620) and paid accumulated vacation pay of US$4,950 (CDN$7,288).
(5) Mr. Desmarais' employment was terminated effective March 31, 2000. The
Company reimbursed Mr. Desmarais US$48,643 (CDN$71,622) for relocation
costs and paid accumulated vacation pay of US$13,197 (CDN$19,431).
Pursuant to a separation agreement, Mr. Desmarais was paid US$188,474
(CDN$277,509).
(6) Mr. Desmarais commenced employment with the Company on March 29, 1999.
Mr. Desmarais received a signing bonus of US$25,000 (CDN$37,750) and
10,000 shares of the Company's common stock valued at US$28,343
(CDN$42,797). The Company also reimbursed Mr. Desmarais US$44,151
(CDN$66,667) for relocation costs.
(7) Mr. Bateman commenced employment with the Company on February 2, 1998.
(8) Mr. Carlson commenced employment with the Company on November 16, 1998.
Mr. Carlson was paid
<PAGE> 20
-15-
a signing bonus consisting of 10,000 shares of the Company's common stock
valued at $22,680.
The following table sets out the details of all stock options granted to the
Named Executive Officers during the most recently completed fiscal year:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
--------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE
========================================================================================================
<S> <C> <C> <C> <C>
Robert Rudman (1) 17,500 2.6% US$2.98 April 7, 2005
--------------------------------------------------------------------------------------------------------
Gary Schlachter(2) - - - -
--------------------------------------------------------------------------------------------------------
Mark Desmarais 50,000 7.4% US$2.98 Expired during
(1)(3) 2000
--------------------------------------------------------------------------------------------------------
Ian Bateman (1) 57,500 8.5% US$2.98 December 1, 2004
to April 7, 2005
--------------------------------------------------------------------------------------------------------
Kevin Carlson (1) 60,000 8.9% US$2.98 December 1, 2004
to April 7, 2005
--------------------------------------------------------------------------------------------------------
</TABLE>
(1) Average price of US$2.98 over term of options.
(2) Mr. Schlachter's employment was terminated effective December 24, 1999.
(3) Mr. Desmarais' employment was terminated effective March 31, 2000.
The following table sets out the details of all stock options exercised during
the most recently completed fiscal year by the Named Executive Officers:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
----------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT FY- OPTIONS/SARS AT FY-END
END (#) ($) (1)
SHARES AGGREGATE
ACQUIRED ON VALUE EXERCISABLE /
NAME EXERCISE (#) REALIZED UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
----------------------------------------------------------------------------------------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert Rudman Nil Nil 161,000 14,000 Nil Nil
Gary Schlachter(2) Nil Nil Nil Nil Nil Nil
Mark Desmarais(3) Nil Nil Nil Nil Nil Nil
Ian Bateman Nil Nil 41,500 46,000 Nil Nil
Kevin Carlson Nil Nil 32,000 78,000 Nil Nil
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The closing price of the Company's common stock on July 31, 2000 was
US$1.44 per share (CDN$2.14).
(2) Mr. Schlachter's employment was terminated effective December 24, 1999.
(3) Mr. Desmarais' employment was terminated effective March 31, 2000.
<PAGE> 21
-16-
There were no options held by the Named Executive Officers that were re-priced
during the most recently completed fiscal year.
MANAGEMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
No management functions of the Company are performed to any substantial degree
by a person other than the directors or senior officers of the Company.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Robert Rudman, regarding his position with the
Company. The management agreement calls for payment of a base salary of
CDN$273,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
The agreement with Mr. Rudman requires the Company to pay a termination
allowance in the event of the termination of Mr. Rudman's employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Kevin Carlson, regarding his position with the
Company. The management agreement calls for payment of a base salary of
CDN$140,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
Effective April 1, 2000 Mr. Carlson's salary was increased to CDN$170,000 per
annum due to the assumption of General Manager responsibilities.
The agreement with Mr. Carlson requires the Company to pay a termination
allowance in the event of the termination of Mr. Carlson's employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Ian Bateman, regarding his position with the Company.
The management agreement calls for payment of a base salary of pound sterling
67,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
The agreement with Mr. Bateman requires the Company to pay a termination
allowance in the event of the termination of Mr. Bateman's employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Effective August 1, 1999, the Board of Directors of the Company approved a new
management agreement with Shawn Lammers, regarding his position with the
Company. The management agreement calls for payment of a base salary of
<PAGE> 22
-17-
CDN$120,000 per annum subject to increase as from time to time plus incentive
compensation as determined by the Company's incentive compensation plan.
The agreement with Mr. Lammers requires the Company to pay a termination
allowance in the event of the termination of Mr. Lammers' employment by the
Company except for just cause. The termination allowance is equal to the annual
salary.
Other than as discussed above, the Company has no plans or arrangements in
respect of remuneration received or that may be received by Named Executive
Officers of the Company in fiscal 2000 to compensate such officers in the event
of termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control, where
the value of such compensation exceeds $100,000 per Named Executive Officer.
OTHER COMPENSATION PLANS APPLICABLE TO DIRECTORS AND EXECUTIVE OFFICERS
In November 1999, the Company adopted a formal incentive compensation plan (the
"EVA Plan") based upon an Economic Value Added ("EVA(TM)") model developed by
Stern, Stewart & Co., a global consulting firm. EVA essentially consists of
after-tax operating profits after accounting for the cost of capital employed to
create such profits. The EVA Plan establishes an incentive pool equal to 10% of
EVA improvement over the prior year plus 10% of positive EVA (if achieved) for
the year for which incentive awards are being considered. The first incentive
pool will be based on the audited consolidated financial statements of the
Company for the financial year ended July 31, 2000. There are no incentive
awards for fiscal 2000 based on the audited consolidated financial statements.
Incentive awards for directors, executive directors and employees will be
determined with reference to the incentive pool at the discretion of the Board
of Directors, in consultation of the Compensation Committee. Incentive awards
equal to not more than one-third of the amount of the incentive pool will be
distributed to eligible participants in each of three years. If EVA
deteriorates, adjustments will be made to the to the incentive pool.
Directors and executive officers have received from time to time incentive stock
options to purchase Common Shares as awarded by the Board of Directors in
consultation with the Compensation Committee.
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at meetings of the
Board of Directors. The Board of Directors may award special remuneration to any
director undertaking any special services on behalf of the Company other than
services ordinarily required of a director. Other than indicated below, no
director received and/or accrued any compensation for his services as a
director, including committee participation and/or special assignments.
There are no arrangements or plans in which the Company provides pension,
retirement or similar benefits for directors or executive officers.
<PAGE> 23
-18-
The Company has adopted two formal stock incentive plans (collectively, the
"Stock Incentive Plans") which were approved by the Shareholders at the 1998
Annual General Meeting of the Company. One of the Stock Incentive Plans (the
"1998 US Stock Incentive Plan") provides for Awards to Eligible Employees of the
Company or of any Related Entity who are resident in the United States and/or
subject to taxation in the United States; the other (the "1998 Stock Incentive
Plan") provides for Awards to all other Eligible Employees of the Company of any
Related Entity.
To date, the Company has granted to directors, officers, employees and
consultants incentive stock options to purchase Common Shares subject to and in
accordance with the prevailing policies of the stock exchange on which the
Company's shares were then listed. Options are granted based on the assessment
by the Company's Board of Directors and/or Compensation Committee of the
optionee's past and present contribution to the success of the Company. The
Company's Common Shares are presently listed for trading on the Nasdaq Small Cap
Market. These options are not transferable and are exercisable from the date
granted until the earliest of (i) such number of years (up to ten years) from
the date of the grant, (ii) 30 days after the option holder leaves his position
with the Company, and (iii) such number of days following the death of the
optionee as is specified in each optionee's option agreement.
Other than the EVA Plan, the management agreements, the advisory agreements and
the 1998 Stock Incentive Plans discussed herein, the Company presently has no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to the Company's directors or executive officers.
As discussed under the heading "Particulars of Other Matters to be Acted Upon",
the Shareholder approval will be sought at the Meeting for the adoption of an
incentive compensation plan designed to facilitate the objectives of the EVA
Plan, as well as two additional Stock Incentive Plans, one for eligible
participants subject to taxation in the United States and the other for all
other eligible participants.
SECTION 16(a) REPORTING
Since the Company is a "foreign private issuer", its insiders are exempt from
the reporting requirements of Section 16(a) of the United States Securities
Exchange Act of 1934, as amended (the "1934 Act"). Among other things, Section
16(a) of the 1934 Act requires certain "reporting persons" of any issuer with
any class of equity securities registered under Section 12 of the 1934 Act to
file with the United States Securities and Exchange Commission reports of
ownership and changes in ownership of securities of the registered class.
Reporting persons consist of directors, executive officers and beneficial owners
of more than 10% of the securities of the registered class. The Company is aware
that certain persons who would be subject to such reporting requirements, but
for the fact that the Company is a "foreign private issuer", have voluntarily
filed reports under Section 16(a) of the 1934 Act during the year ended July 31,
2000. However, the Company is not in a position to comment on the completeness
of such filings.
<PAGE> 24
-19-
INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
As at the end of the most recently completed fiscal year, no directors,
executive officers or senior officers were indebted to the Company.
PROPOSAL 5
INCREASE IN AUTHORIZED CAPITAL
By resolutions adopted as of June 3, 1999, the Board of Directors authorized the
Company to cancel a total of 181,251 Common Shares which were then held in
escrow pursuant to two escrow agreements required under the policies of the
British Columbia Securities Commission. Such Common Shares were surrendered to
the Company for cancellation in accordance with the terms of the escrow
agreements, without any return of capital or other payment to the holders of the
escrowed Common Shares. Pursuant to section 232(1)(c) of the Company Act
(British Columbia), the authorized capital of the Company was diminished by the
181,251 Common Shares so cancelled. As a result, the authorized capital of the
Company currently consists of 199,838,749 shares divided into:
(a) 199,818,749 Common Shares without par value; and
(b) 20,000 Preferred Shares with a par value of $1,000.00 each.
In order to restore the authorized capital of the Company to the level that
existed immediately prior to the reduction of authorized capital to reflect the
surrender and cancellation of the 181,251 escrowed Common Shares, the
Shareholders will be asked to pass a special resolution (as evidenced by a
majority of not less than 3/4 of the votes cast at the Meeting) pursuant to
section 230 of the Company Act (British Columbia), as follows:
"BE IT RESOLVED, AS A SPECIAL RESOLUTION, THAT:
(a) the authorized capital of the Company be altered by increasing the
number of Common Shares without par value by 181,251 Common
Shares, so that the authorized capital of the Company consists of
200,020,000 shares divided into:
(i) 200,000,000 Common Shares without par value; and
(ii) 20,000 Preferred Shares with a par value of $1,000.00 each;
(b) the second paragraph of the Memorandum of the Company shall be
altered accordingly; and
(c) any director or senior officer of the Company be and is hereby
authorized to take such steps as may be necessary or advisable to
give effect to this special resolution, including the filing of a
certified
<PAGE> 25
-20-
copy of this special resolution with the Registrar of Companies
under the Company Act (British Columbia)."
The form of the Memorandum of the Company proposed to be filed with the
Registrar of Companies, assuming the adoption of the foregoing special
resolution of the Shareholders, is attached as Exhibit "A".
PROPOSAL 6
CANCELLATION AND SUBSTITUTION OF ARTICLES
Shareholder approval as evidenced by a majority of not less than 3/4 of the
votes cast at the Meeting will be sought to adopt a special resolution to
replace the existing Articles of the Company with updated Articles which are
more appropriate for a public company. Accordingly, the following special
resolution will be presented for approval at the Meeting:
"RESOLVED, AS A SPECIAL RESOLUTION, THAT:
(a) the existing Articles of the Company be cancelled and the form of
the Articles attached hereto as Exhibit `B' be adopted as the
Articles of the Company, in substitution for, and to the exclusion
of, the existing Articles of the Company; and
(b) any director or senior officer of the Company be and is hereby
authorized to take such steps as may be necessary or advisable to
give effect to this special resolution, including the filing of a
certified copy of this special resolution with the Registrar of
Companies under the Company Act (British Columbia).
The existing Special Rights and Restrictions attaching to the Preferred shares
of the Company, none of which are outstanding, will be incorporated into and
form part of the Articles so substituted for the existing Articles of the
Company.
PROPOSAL 7
APPROVAL OF 1999 INCENTIVE COMPENSATION PLAN
The Shareholders will be asked to pass an ordinary resolution, as evidenced by a
majority of the votes cast at the Meeting, approving a formal incentive
compensation plan (the "1999 Incentive Compensation Plan") for adoption by the
Company.
The purpose of the 1999 Incentive Compensation Plan is to advance the interests
of the Company by encouraging "Eligible Employees" to acquire shares of the
Company, thereby increasing their proprietary interest in the Company,
encouraging them to remain associated with the Company and furnishing them with
additional incentive to advance the interests of the Company in the conduct of
their affairs. "Eligible Employees" means employees, directors, officers and
consultants of (a) the Company or (b) any of the following entities (each, a
"Related Entity"): (i) any corporation which holds a majority of the voting
shares of the Company (a "Parent"),
<PAGE> 26
-21-
(ii) any corporation which qualifies as a subsidiary of the Company under
British Columbia corporate law (a "Subsidiary"), or (iii) any business,
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
The 1999 Incentive Compensation Plan is intended to provide greater flexibility
to management to facilitate the objectives of the EVA Plan discussed above,
while complementing the Company's existing Stock Incentive Plans and any
subsequent stock incentive plans that may be approved by the Shareholders of the
Company (including the 2000 Stock Incentive Plans referred to below).
The 1999 Incentive Compensation Plan will provide for the granting to Eligible
Employees of such incentive awards (each, an "Award") as the administrator of
the 1999 Incentive Compensation Plan (the "Administrator") may from time to time
approve. The highlights of the 1999 Incentive Compensation Plan are as follows:
(a) the Administrator will be the Board of Directors of the Company or
a committee of the Board of Directors appointed to act in such
capacity;
(b) subject to applicable laws, including the rules of any applicable
stock exchange or national market system, the Administrator will
be authorized to award any type of Award to an Eligible Employee
(a "Grantee") that is not inconsistent with the provisions of the
1999 Incentive Compensation Plan, and that by its terms involves
or may involve the issuance of:
(i) Common Shares of the Company (including "Performance
Shares" which may be earned in whole or in part upon
attainment of performance criteria established by the
Administrator),
(ii) a stock option (an "Option") entitling the Grantee to
purchase Common Shares of the Company,
(iii) a stock appreciation right (an "SAR") entitling the Grantee
to acquire such number of common shares of the Company or
such cash compensation as will be determined by reference
to any appreciation in the value of the Company's Common
Shares in accordance with terms to be established by the
Administrator,
(iv) any right similar to an SAR, with a fixed or variable price
related to the fair market value of the Company's Common
Shares and with an exercise or conversion privilege related
to the passage of time, the occurrence of one or more
events, or the satisfaction of performance criteria or
other conditions,
<PAGE> 27
-22-
(v) restricted stock issuable for such consideration (if any)
and subject to such restrictions on transfer, rights of
first refusal, repurchase provisions, forfeiture
provisions, and other terms and conditions to be
established by the Administrator,
(vii) "Performance Units" which may be earned in whole or in part
upon attainment of performance criteria established by the
Administrator and which may be settled in cash, Common
Shares or other securities, or a combination of cash,
Common Shares or other securities, as established by the
Administrator,
(viii) any other security with the value derived from the value of
the Company's Common Shares, or
(ix) any combination of the foregoing;
(c) the 1999 Incentive Compensation Plan does not specify a maximum
number of Common Shares of the Company that will be issuable
pursuant to all Awards granted under the 1999 Incentive
Compensation Plan, but all Options granted under the 1999
Incentive Compensation Plan shall be subject to the provisions of
the Company's existing Stock Incentive Plans and any subsequent
stock incentive plans that may be approved by the Shareholders of
the Company;
(d) each Award will be subject to a separate Award Agreement to be
executed by the Company and the Grantee, which shall specify the
term of the Award;
(e) Awards will be transferable to the extent provided in the relevant
Award Agreements;
(f) in the event of termination of the Grantee as an Eligible Employee
for cause or upon his or her voluntary resignation, any unvested
benefits under the 1999 Incentive Compensation Plan will expire;
(g) if a Grantee ceases to be an Eligible Employee by reason of
retirement, death or disability, or by action by the Company other
than for cause, unvested benefits under the 1999 Incentive
Compensation Plan will be earned in accordance with the vesting
schedule in the relevant Award Agreement;
(h) the Administrator may issue Awards in settlement, assumption or
substitution for outstanding awards or obligations to grant future
awards in connection with the Company or a Related Entity
acquiring another entity, an interest in another entity or an
additional interest in a Related Entity, whether by merger, stock
purchase, asset purchase or other form of transaction;
<PAGE> 28
-23-
(i) the Board of Directors of the Company may at any time amend,
suspend or terminate the 1999 Incentive Compensation Plan, subject
to such shareholder approval as may be required by applicable
laws, including the rules of an applicable stock exchange or
national market system, provided that:
(i) no Award may be granted during any suspension of the 1999
Incentive Compensation Plan or after termination of the
1999 Incentive Compensation Plan; and
(ii) any amendment, suspension or termination of the 1999
Incentive Compensation Plan will not affect Awards already
granted, and such Awards will remain in full force and
effect as if the 1999 Incentive Compensation Plan had not
been amended, suspended or terminated, unless mutually
agreed otherwise between the Grantee and the Administrator,
which agreement will have to be in writing and signed by
the Grantee and the Company; and
(j) the 1999 Incentive Compensation Plan provides by its terms that it
was to become effective as of August 1, 1999 and that it is to
continue in effect until November 30, 2002 (subject to earlier
termination). However, no Awards have been granted under the 1999
Incentive Compensation Plan in light of the fact that the Rules of
the National Association of Securities Dealers Inc. require the
1999 Incentive Compensation Plan to be approved by the
Shareholders.
A copy of the 1999 Incentive Compensation Plan is attached as Exhibit "C".
PROPOSAL 8
APPROVAL OF 2000 STOCK INCENTIVE PLAN
NON-UNITED STATES RESIDENTS
The Shareholders will be asked to pass an ordinary resolution, as evidenced by a
majority of the votes cast at the Meeting, approving a formal stock incentive
plan (the "2000 Stock Incentive Plan") for adoption by the Company.
The purpose of the 2000 Stock Incentive Plan will be to advance the interests of
the Company by encouraging "Eligible Employees" to acquire shares of the
Company, thereby increasing their proprietary interest in the Company,
encouraging them to remain associated with the Company and furnishing them with
additional incentive to advance the interests of the Company in the conduct of
their affairs. "Eligible Employees" means employees, directors and consultants
of (a) the Company or (b) any of the following entities (each, a "Related
Entity"): (i) any corporation which holds a majority of the voting shares of the
Company (a "Parent"), (ii) any corporation which qualifies as a subsidiary of
the Company under British Columbia corporate law (a "Subsidiary"), or (iii) any
business, corporation, partnership, limited liability
<PAGE> 29
-24-
company or other entity in which the Company, a Parent or a Subsidiary holds a
substantial ownership interest, directly or indirectly.
The 2000 Stock Incentive Plan will provide for the granting to Eligible
Employees of such incentive awards (each, an "Award") as the administrator of
the 2000 Stock Incentive Plan (the "Administrator") may from time to time
approve. The highlights of the 2000 Stock Incentive Plan are as follows:
(a) the Administrator will be the Board of Directors of the Company or
a committee of the Board of Directors appointed to act in such
capacity;
(b) subject to applicable laws, including the rules of any applicable
stock exchange or national market system, the Administrator will
be authorized to award any type of Award to an Eligible Employee
(a "Grantee") that is not inconsistent with the provisions of the
2000 Stock Incentive Plan, and that by its terms involves or may
involve the issuance of:
(i) Common Shares of the Company (including "Performance
Shares" which may be earned in whole or in part upon
attainment of performance criteria established by the
Administrator),
(ii) a stock option (an "Option") entitling the Grantee to
purchase Common Shares of the Company,
(iii) a stock appreciation right (an "SAR") entitling the Grantee
to acquire such number of common shares of the Company or
such cash compensation as will be determined by reference
to any appreciation in the value of the Company's Common
Shares in accordance with terms to be established by the
Administrator,
(iv) any right similar to an SAR, with a fixed or variable price
related to the Fair Market Value (as defined in the 2000
Stock Incentive Plan - see below) of the Company's Common
Shares and with an exercise or conversion privilege related
to the passage of time, the occurrence of one or more
events, or the satisfaction of performance criteria or
other conditions,
(v) restricted stock issuable for such consideration (if any)
and subject to such restrictions on transfer, rights of
first refusal, repurchase provisions, forfeiture
provisions, and other terms and conditions to be
established by the Administrator,
(vii) "Performance Units" which may be earned in whole or in part
upon attainment of performance criteria established by the
Administrator and which may be settled in cash, Common
<PAGE> 30
-25-
Shares or other securities, or a combination of cash,
Common Shares or other securities, as established by the
Administrator,
(viii) any other security with the value derived from the value of
the Company's Common Shares, or
(ix) any combination of the foregoing;
(c) the maximum number of Common Shares of the Company that will be
issuable pursuant to all Awards granted under the 2000 Stock
Incentive Plan will be 800,000 shares;
(d) no insider of the Company will be eligible to receive an Award
where:
(i) the insider is not a Director or senior officer of the
Company and the Award is an Option that would otherwise be
granted to the insider as a consultant of the Company, or
(ii) any Award, together with all of the Company's other
previously established or proposed Awards could result at
any time in: (A) the number of Common Shares reserved for
issuance pursuant to Options granted to insiders exceeding
10% of the outstanding issue of the Company's Common
Shares, or (B) the issuance to insiders, within a one year
period, of a number of shares exceeding 10% of the
outstanding issue of the Company's Common Shares;
provided, however, that this restriction on the eligibility of
insiders to receive an Award will cease to apply if it is no
longer required under any applicable laws, including the rules of
an applicable stock exchange or a national market system;
(e) the maximum number of Common Shares with respect to which Options
and SARs may be granted to any employee in any fiscal year of the
Company will be five percent (5%) of the outstanding Common
Shares, subject to adjustment in certain circumstances;
(f) each Award will be subject to a separate Award Agreement to be
executed by the Company and the Grantee, which shall specify the
term of the Award;
(g) the exercise or purchase price, if any, of an Award will be
determined by the Administrator in compliance with applicable
laws, including the rules of an applicable stock exchange or
national market system;
(h) the term of an Option will be no more than ten years;
<PAGE> 31
-26-
(i) if the exercise price or any tax required to be withheld in
respect of an Option is satisfied by the Company or the Grantee's
employer withholding shares otherwise deliverable to the Grantee,
the Administrator may issue the Grantee an additional Option,
subject to terms identical to the Award Agreement under which the
Option was exercised, but at an exercise price as determined by
the Administrator in accordance with the 2000 Stock Incentive
Plan;
(j) an Option may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by
the laws of descent or distribution, and may be exercised during
the lifetime of the Grantee only by the Grantee;
(k) other Awards will be transferable to the extent provided in the
relevant Award Agreements;
(l) subject to applicable laws, including the rules of an applicable
stock exchange or national market system, an Award Agreement may
permit a Grantee to exercise an Award for a specified period
following termination of the Grantee as an Eligible Employee, in
which event the Award will terminate to the extent it is not
exercised on the last day of the specified period or the last day
of the original term of the Award, whichever occurs first;
(m) the Administrator may at any time offer to buy out a previously
granted Award for a payment in cash or Common Shares of the
Company;
(n) the Administrator may issue Awards in settlement, assumption or
substitution for outstanding awards or obligations to grant future
awards in connection with the Company or a Related Entity
acquiring another entity, an interest in another entity or an
additional interest in a Related Entity, whether by merger, stock
purchase, asset purchase or other form of transaction;
(o) the number of Common Shares issuable under the 2000 Stock
Incentive Plan, including the number of shares issuable under any
outstanding Awards, is subject to adjustment in certain
circumstances, including certain changes in the Company's share
capital;
(p) subject to applicable laws, including the rules of an applicable
stock exchange or national market system, the consideration to be
paid for the shares to be issued upon exercise or purchase of an
Award, including the method of payment, will be determined by the
Administrator (and, in the case of an Option, will be determined
at the time of grant); provided that, in addition to any other
types of consideration the Administrator may determine, the
Administrator will be authorized to accept as consideration for
the shares:
<PAGE> 32
-27-
(i) cash;
(ii) check;
(iii) surrender of shares of the Company or delivery of a
properly executed form of attestation of ownership of
shares of the Company as the Administrator may require
(including withholding of shares otherwise deliverable upon
exercise of the Award) which have a fair market value on
the date of surrender or attestation equal to the aggregate
exercise price of the shares as to which the Award will be
exercised (but only to the extent that such exercise of the
Award would not result in an accounting compensation charge
with respect to the shares used to pay the exercise price
unless otherwise determined by the Administrator); or
(iv) any combination of the foregoing methods of payment;
(q) the Board of Directors of the Company may at any time amend,
suspend or terminate the 2000 Stock Incentive Plan, subject to
such shareholder approval as may be required by applicable laws,
including the rules of an applicable stock exchange or national
market system, provided that:
(i) no Award may be granted during any suspension of the 2000
Stock Incentive Plan or after termination of the 2000 Stock
Incentive Plan; and
(ii) any amendment, suspension or termination of the 2000 Stock
Incentive Plan will not affect Awards already granted, and
such Awards will remain in full force and effect as if the
2000 Stock Incentive Plan had not been amended, suspended
or terminated, unless mutually agreed otherwise between the
Grantee and the Administrator, which agreement will have to
be in writing and signed by the Grantee and the Company;
and
(r) "Fair Market Value" is defined to mean the value of the Company's
shares of Common Stock determined as of any date as follows:
(i) where a public market exists for the Company's Common
Shares, the Fair Market Value shall be (A) the closing
price for a share of the Company for the last market
trading day prior to the time of the determination (or, if
no closing price was reported on that date, on the last
trading date on which a closing price was reported) on the
stock exchange determined by the Administrator to be the
primary market for the Company's Common Shares or the
Nasdaq National Market, whichever is applicable, or (B) if
the Company's Common Shares are not traded on any such
<PAGE> 33
-28-
exchange or national market system, the average of the
closing bid and asked prices of a share of the Company on
the Nasdaq Small Cap Market for the day prior to the time
of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were
reported), in each case, as reported in The Wall Street
Journal or such other source as the Administrator deems
reliable; or
(ii) in the absence of an established market for the Company's
Common Shares of the type described above, the Fair Market
Value shall be determined by the Administrator in good
faith.
A copy of the 2000 Stock Incentive Plan is attached as Exhibit "D".
PROPOSAL 9
APPROVAL OF 2000 STOCK INCENTIVE PLAN
UNITED STATES RESIDENTS
The Shareholders will be asked to pass an ordinary resolution, as evidenced by a
majority of the votes cast at the Meeting, approving an additional formal stock
incentive plan (the "2000 US Stock Incentive Plan" and together with the 2000
Stock Incentive Plan, the "Stock Incentive Plans") for adoption by the Company.
The purpose of the 2000 US Stock Incentive Plan will be to advance the interests
of the Company by encouraging Eligible Employees who are resident in the United
States and/or subject to taxation in the United States to acquire shares of the
Company, thereby increasing their proprietary interest in the Company,
encouraging them to remain associated with the Company and furnishing them with
additional incentive to advance the interests of the Company in the conduct of
their affairs.
The 2000 US Stock Incentive Plan will provide for the granting to the Eligible
Employees of such Awards as the Administrator (being the Board of Directors of
the Company or a committee of the Board of Directors appointed to act in such
capacity) may from time to time approve.
The 2000 US Stock Incentive Plan is modeled on the 2000 Stock Incentive Plan,
and the foregoing discussion of the 2000 Stock Incentive Plan is generally
applicable in respect of the 2000 US Stock Incentive Plan, except that:
(a) the maximum number of Common Shares of the Company that will be
issuable pursuant to all awards granted under the 2000 US Stock
Incentive Plan will be 200,000 shares;
(b) "Parent" means a "parent corporation" as defined in section 424(e)
of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), and "Subsidiary" means a "subsidiary corporation" as
defined in section 424(f) of the Code;
<PAGE> 34
-29-
(c) under the 2000 US Stock Incentive Plan, Options may be granted as
either incentive stock options under section 422 of the Code and
the regulations thereunder (the "Incentive Stock Options") or
non-incentive stock options under section 18 of the Code (the
"Non-Qualified Stock Options");
(d) the specific provisions under the 2000 US Stock Incentive Plan
which apply to Incentive Stock Options include the following:
(i) if granted to a Grantee who at the time of the grant owns
stock representing more than ten percent of the voting
power of all classes of the Company or any Parent or
Subsidiary, an Incentive Stock Option will be limited to a
maximum term of five years, and will be subject to an
exercise price per share which may not be less than 110% of
the fair market value of the Company's Common Shares on the
date of the grant;
(ii) an Incentive Stock Option granted to any other Grantee may
be granted for a term not exceeding ten years at an
exercise price per share which may not be less than the
fair market value of the Company's Common Shares on the
date of the grant;
(iii) if the aggregate fair market value of Common Shares subject
to Incentive Stock Options which become exercisable for the
first time by a Grantee (under all plans of the Company or
any Parent or Subsidiary) exceeds US$100,000 during any
calendar year, the Incentive Stock Options to which such
excess value is attributable will be treated as
Non-Qualified Stock Options; and
(iv) any Incentive Stock Option which is not exercised following
the Grantee's termination as an Eligible Employee within
the time permitted by law will automatically convert to a
Non-Qualified Stock Option and will thereafter be
exercisable for the period specified under the relevant
Award Agreement;
(e) Non-Qualified Stock Options may be granted for a term not
exceeding ten years, and unless otherwise determined by the
Administrator, the exercise price per share may not be less than
the Fair Market Value of the Company's Common Shares on the date
of the grant; and
(f) the 2000 US Stock Incentive Plan has specific provisions which
apply to grants of Awards intended to qualify as
"performance-based compensation", as defined under section 162(m)
of the Code, to any employees who are "covered employees" for the
purposes of section 162(m)(3) of the Code:
<PAGE> 35
-30-
(i) the exercise or purchase price per share, if any, of such
an Award may not be less than the fair market value of the
Company's Common Shares on the date of the grant; and
(ii) grants of such Awards may only be made by a committee (or a
subcommittee of a committee) which is comprised solely of
two or more directors eligible under the Code to serve on a
committee responsible for making Awards of performance
based compensation.
A copy of the 2000 US Stock Incentive Plan is attached as Exhibit "E".
INTEREST OF CERTAIN PERSONS AND OTHERS IN MATTERS TO BE ACTED UPON
Save and except the foregoing, or as disclosed elsewhere in this Proxy Statement
and Information Circular, since August 1, 1999, being the commencement of the
Company's last completed fiscal year, none of the following persons has any
material interest, direct or indirect, in any transaction or proposed
transaction which has materially affected or will materially affect the Company
or any of its subsidiaries:
(a) any director or senior officer of the Company;
(b) any proposed nominee for election as a director of the Company;
(c) any Shareholder holding, directly or indirectly, more than 10% of
the voting rights attached to all the shares of the Company; and
(d) any associate or affiliate of any of the foregoing persons.
AVAILABLE DOCUMENTS
A copy of each of the following documents is available on request from the
Corporate Secretary of the Company at the Company's principal executive office
at #150 - 13151 Vanier Place, Richmond, British Columbia, Canada, V6V 2J1,
telephone (604) 276-9884:
(1) the Company's latest Annual Report on Form 10-KSB required under
the United States Securities Exchange Act of 1934 which report is
also filed with the British Columbia Securities Commission and
serves as an annual information form pursuant to British Columbia
securities laws and policies;
(2) the comparative financial statements of the Company for the
Company's most recently completed fiscal year in respect of which
such financial statements have been issued together with the
accompanying report of the auditors and any interim financial
<PAGE> 36
-31-
statements of the Company required by law and issued subsequent to
such comparative financial statements; and
(3) the Information Circular of the Company dated as of November 15,
1999 in connection with the Annual General Meeting of Shareholders
held on January 14, 2000;
subject to (i) in the case of persons who are not securities holders of the
Company, the payment of a reasonable charge and (ii) in any event, that the
Company may require payment of a reasonable charge for exhibits to the annual
Report on Form 10-KSB.
APPROVAL OF THE BOARD OF DIRECTORS
The contents of this Proxy Statement and Information Circular have been approved
and the mailing thereof to the Shareholders of the Company has been authorized
by the Board of Directors of the Company.
ANNUAL REPORT
The Annual Report to the Shareholders of the Company for the fiscal year ended
July 31, 2000, is being mailed to the Shareholders concurrently herewith, but
such report is not incorporated into this Proxy Statement and Information
Circular and is not deemed to be part of the proxy solicitation materials.
TRANSACTIONS OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not aware of
any matters other than those set forth herein and in the Notice of Annual and
Extraordinary General Meeting of Shareholders that will come before the Meeting.
Should any other matters arise requiring the vote of Shareholders, it is
intended that proxies will be voted in respect thereto in accordance with the
best judgement of the person or persons voting the proxies.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL GENERAL MEETING
The Company must receive at its principal office before September 20, 2001, any
proposal which a Shareholder wishes to submit to the 2001 Annual Meeting of
Shareholders, if the proposal is to be considered by the Board of Directors for
inclusion in the proxy materials for that Annual Meeting.
The Shareholder's proposal will have to include (i) a brief description of the
matter and the reason for addressing the matter at the meeting; (ii) the
Shareholder's name and address, (iii) the number of shares of the Company's
common stock owned or controlled by the Shareholder, (iv) any material interest
of the Shareholder in the matter proposed, and (v) all other required
information under Regulation 14A under the Securities Exchange Act of 1934.
<PAGE> 37
-32-
The Board of Directors may, in its discretion, elect not to include the proposal
in the proxy materials, subject to such rights, if any, that the Shareholder may
have under the Company Act (British Columbia). In particular, the Board of
Directors acknowledges that, under the Company Act (British Columbia): (a) one
or more Shareholders holding in the aggregate not less than one-twentieth (1/20)
of the outstanding voting shares of the Company may requisition a general
meeting of Shareholders; and (b) subject to strict compliance by the
requisitioning Shareholder(s) with the applicable provisions of the Company Act
(British Columbia), the Company may be required at its expense to reproduce and
distribute as a separate part of management's proxy materials, a statement not
exceeding 1,000 words explaining the position of the requisitioning
Shareholder(s).
The Company will be required under the Company Act (British Columbia) to publish
an advance notice of the 2001 Annual General Meeting at least fifty-six (56)
days prior to that Annual General Meeting. In accordance with the Company Act
(British Columbia), the advance notice of the 2001 Annual General Meeting will
invite nominations for directors signed by Shareholders holding in the aggregate
not less than 10% of the outstanding voting shares of the Company. If any such
nomination is delivered to the Company's registered office at least thirty-five
(35) days before the date of the meeting, accompanied by the information as to
the nominee required to be furnished in the proxy statement, the Company will
include the nominee in the proxy materials for the 2001 Annual General Meeting.
Please return your proxy as soon as possible. Unless a quorum, consisting of at
least one tenth of the outstanding shares entitled to vote, is represented at
the meeting no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed envelope. Please act promptly to ensure that you will
be represented at this important Meeting.
DATED at Richmond, British Columbia this 27th day of October, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ ROBERT V. RUDMAN
-------------------------------------
ROBERT V. RUDMAN
PRESIDENT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE> 38
EXHIBIT "A"
ALTERED MEMORANDUM
(as altered by Special Resolution of the Shareholders passed on
December 5, 2000)
1. The name of the Company is "SMARTIRE SYSTEMS INC."
2. The authorized capital of the Company consists of Two Hundred Million and
Twenty-Thousand (200,020,000) shares divided into:
(a) Two Hundred Million (200,000,000) Common shares without par value,
and
(b) Twenty Thousand (20,000) Preferred shares with a par value of
$1,000 per share.
The said Preferred shares shall have attached thereto the Special Rights and
Restrictions as set forth in the Articles of the Company.
<PAGE> 39
EXHIBIT "B"
COMPANY ACT
ARTICLES
of
SMARTIRE SYSTEMS INC.
TABLE OF CONTENTS
<TABLE>
ARTICLE PAGE
<S> <C>
Part 1 - INTERPRETATION.......................................................................1
Part 2 - SHARES AND SHARE CERTIFICATES........................................................1
Part 3 - ISSUE OF SHARES......................................................................2
Part 4 - TRANSFER OF SHARES...................................................................2
Part 5 - TRANSMISSION OF SHARES...............................................................3
Part 6 - SHARE REGISTERS......................................................................3
Part 7 - PURCHASE AND REDEMPTION OF SHARES....................................................3
Part 8 - BORROWING POWERS.....................................................................4
Part 9 - GENERAL MEETINGS.....................................................................4
Part 10 - PROCEEDINGS AT GENERAL MEETINGS.....................................................5
Part 11 - VOTES OF MEMBERS....................................................................6
Part 12 - DIRECTORS...........................................................................7
Part 13 - ELECTION, APPOINTMENT AND RETIREMENT OF DIRECTORS...................................7
Part 14 - PROCEEDINGS OF DIRECTORS............................................................8
Part 15 - THE SEAL............................................................................9
Part 16 - OFFICERS............................................................................9
Part 17 - INDEMNIFICATION AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES.................9
Part 18 - DIVIDENDS AND RESERVE..............................................................10
Part 19 - ACCOUNTING RECORDS.................................................................10
Part 20 - NOTICES............................................................................11
Part 21 - RECORD DATES.......................................................................11
Part 22 - SPECIAL RIGHTS AND RESTRICTIONS....................................................11
</TABLE>
<PAGE> 40
1
COMPANY ACT
ARTICLES
of
SMARTIRE SYSTEMS INC.
(the "Company")
PART 1 - INTERPRETATION
1.1 In these Articles, unless the context otherwise requires:
(a) "Board of Directors", "Board" and "Directors" mean the director or
directors of the Company;
(b) "Company Act" means the Company Act of the Province of British
Columbia and any Act enacted in substitution therefor and all
amendments thereto and includes all regulations made pursuant
thereto;
(c) "Registered Address" means the address recorded in any register
maintained by the Company pursuant to the provisions of the
Company Act.
1.2 Expressions referring to writing include references to printing,
lithographing, typewriting, photography, facsimile transmission and other modes
of representing or reproducing words in a visible form.
1.3 Words importing the singular include the plural, and vice versa. Words
importing a male person include a female person and a corporation.
1.4 "Will" is to be construed as imperative.
1.5 The definitions contained in the Company Act apply to these Articles if no
inconsistency is created.
PART 2 - SHARES AND SHARE CERTIFICATES
2.1 Every share certificate issued by the Company will be in such form as the
Directors approve and will comply with the Company Act.
2.2 Any share certificate may be delivered to the holder by sending it by
prepaid registered mail to his Registered Address. Where a share is held by two
or more persons, delivery of the certificate for the share to the holder named
first in the register of members is sufficient delivery to all.
2.3 If a share certificate is worn out or defaced, the Directors may, upon
production of the certificate and upon such other terms as they may require,
order the certificate to be cancelled and issue a new certificate in its place.
2.4 If a share certificate is stolen, lost or destroyed, the Directors may, upon
proof to the satisfaction of the Directors and upon such indemnity as the
Directors may require being provided, issue a new certificate in its place.
2.5 Subject to the Company Act, the Company may treat a person whose name is
entered in the register of members as the absolute owner of any share and,
unless otherwise ordered by a Court of competent
<PAGE> 41
2
jurisdiction, the Company is not bound to recognize any equitable or other claim
to or interest in the share on the part of any other person.
PART 3 - ISSUE OF SHARES
3.1 The unissued shares of the Company and those acquired through a redemption,
purchase or other acquisition of its shares by the Company are under the control
of the Directors who may, subject to the rights of the members, issue, allot,
grant options on, or otherwise dispose of the shares to such persons, including
the Directors, and upon such terms and conditions as the Directors may determine
and the Company Act may prescribe.
3.2 Subject to the Company Act, the Directors may pay a commission or allow a
discount to any person in consideration of his subscribing or agreeing to
subscribe, whether absolutely or conditionally, for any shares in the Company or
procuring or agreeing to procure subscriptions, whether absolute or conditional,
for any shares in the Company. The Directors may also pay brokerage.
3.3 The Directors may determine the price or consideration for which shares
without par value are issued.
3.4 Subject to the Company Act, the Company may issue share purchase warrants
upon such terms and conditions as the Directors may determine. Share purchase
warrants may be issued alone or in conjunction with any other security issued or
created by the Company.
3.5 The Company may by special resolution alter its Memorandum to increase the
share capital of the Company.
PART 4 - TRANSFER OF SHARES
4.1 Subject to the restrictions set forth in these Articles, a member may
transfer any share by instrument in writing executed by or on behalf of the
member and delivered to the secretary or the transfer agent of the Company. The
instrument of transfer of any share will be either in the form provided on the
back of the Company's form of share certificate or in any other form which the
Directors may approve. If the Directors so require, each instrument of transfer
will be in respect of one class of shares only.
4.2 Where an instrument of transfer together with the share certificate and such
other evidence of title as the Directors may require is delivered to the
Company, the Directors will, subject to the restrictions set forth in these
Articles, cause the name of the transferee to be entered into the register of
members, but the transferor remains the holder of the share until the name of
the transferee is entered into the register of members.
4.3 The signature of a member or of his duly authorized attorney upon the
instrument of transfer constitutes authority to the Company to register the
shares specified in the instrument of transfer in the name of the person named
in the instrument of transfer as transferee or, if no person is named, in any
name designated in writing by the person depositing the share certificate and
the instrument of transfer with the secretary or the transfer agent of the
Company.
4.4 The Company and its Directors, officers and agents are not bound to inquire
into the title of a transferee and they are not liable to any person for
registering a transfer of shares.
4.5 The Directors may prescribe the sum to be paid to the Company to register
any transfer.
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PART 5 - TRANSMISSION OF SHARES
5.1 If a member dies and his share is not held by two or more persons, the legal
representative of the deceased will be the only person recognized by the Company
as having any title to or interest in the share.
5.2 If a member dies and his share is held by two or more persons, the surviving
holder or holders of the share and the legal representative of the deceased will
be the only persons recognized by the Company as having an interest, if any, in
the share.
5.3 Before recognizing any legal representative of a deceased member, the
Directors may require him to obtain a grant of Letters Probate or Letters of
Administration in the Province of British Columbia.
5.4 A person who is entitled to a share because of the death or bankruptcy of a
member, upon producing the evidence required by the Directors and the Company
Act, may be registered as holder of the share or may transfer the share but the
Directors will in either case have the same rights under Part 4 as they have in
the case of a share transfer before death or bankruptcy.
5.5 A person who is entitled to a share because of an order of a Court of
competent jurisdiction or because of a statute, upon producing such evidence as
the Directors may require, may be registered as the holder of the share.
5.6 The person entitled to a share by reason of the death or bankruptcy of a
member is entitled to the same dividends and other advantages as those to which
he would be entitled if he were the member, but he will not be entitled in
respect of it to vote or exercise any other rights conferred by membership in
respect of meetings of the Company until his name appears in the register of
members.
PART 6 - SHARE REGISTERS
6.1 The Company will keep or cause to be kept a register of members, a register
of allotments, and a register of transfers. The Company may keep or cause to be
kept a separate register in respect of each class of shares.
6.2 The Directors may appoint a Trust Company to keep the registers referred to
in Article 6.1 and, if a separate register is to be kept in respect of any class
of shares, the Directors may appoint the same or a different Trust Company to
keep the register in respect of any class of shares. The Directors may appoint
the same or a different Trust Company as the Company's transfer agent.
6.3 Subject to the Company Act, the Company may keep or cause to be kept one or
more branch registers of members at such place or places as the Directors may
determine.
PART 7 - PURCHASE AND REDEMPTION OF SHARES
7.1 Subject to the special rights and restrictions attached to shares, the
Company may, by a resolution of the Directors and in compliance with the Company
Act, purchase any of its shares upon the terms specified in the resolution or
may redeem any class of shares in accordance with the special rights and
restrictions attached thereto.
7.2 If the Company proposes to redeem some but not all of the shares of any
class, the Directors may, in their absolute discretion, and subject to the
rights and restrictions attached to the class of shares, decide the number of
and the manner in which the shares to be redeemed will be selected.
7.3 The Company may not vote any share that it has redeemed or purchased.
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PART 8 - BORROWING POWERS
8.1 The Directors may on behalf of the Company:
(a) borrow money upon such terms and conditions as they think fit;
(b) issue bonds, debentures, or other debt obligations either outright
or as security for any liability or obligation of the Company; and
(c) mortgage, pledge, charge, or give other security on the whole or
any part of the property, assets and undertaking of the Company,
present and future.
8.2 The Directors may authorize the issue of any debentures, bonds or other debt
obligations of the Company at a discount or premium and with such rights or
privileges as the Directors may determine at or before the time of issue.
8.3 The Company may keep one or more branch registers of its debentureholders
inside or outside the Province of British Columbia as the Directors may
determine.
PART 9 - GENERAL MEETINGS
9.1 Subject to the Company Act, the first annual general meeting will be held
within 15 months from the date of incorporation, and thereafter an annual
general meeting will be held once in every calendar year at the time (not being
more than 13 months after the holding of the last preceding annual general
meeting) and the place that is prescribed by the Directors. In default of the
meeting being held, the meeting may be convened by any one or more members in
accordance with the Company Act.
9.2 Notwithstanding Article 9.1, if the Company is not a reporting Company under
the Company Act, it is not necessary to hold a meeting if all the members
entitled to attend and vote at the meeting consent in writing to the business to
be transacted at the meeting.
9.3 The Directors may, at any time, convene a general meeting.
9.4 Notice of a general meeting will be sufficient if it specifies:
(a) the place, day and hour of the meeting;
(b) the general nature of any special business to be transacted at the
meeting; and
(c) that any documents to be considered with any special business will
be available for inspection by the members at a place designated
in the notice during business hours on any working day or days up
to the date of the meeting and at the meeting.
9.5 Accidental omission to give notice of a meeting to any member or the
non-receipt of notice of a meeting will not invalidate the proceedings at that
meeting.
9.6 The period of notice of a general meeting may be reduced or waived by
unanimous consent in writing of the members entitled to attend and vote at the
meeting.
9.7 All business conducted at a general meeting is deemed to be special with the
exception of electing directors, appointing and fixing the remuneration of the
auditors, and considering the financial statements and the reports of the
Directors and auditors.
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PART 10 - PROCEEDINGS AT GENERAL MEETINGS
10.1 No business will be transacted at any general meeting unless a quorum of
members entitled to vote is present at the time when the meeting convenes.
10.2 Members personally present or represented by proxy, being not less than two
(or, if the Company has only one member, one), and who hold or represent by
proxy in the aggregate not less than one-twentieth of the issued capital of the
Company entitled to vote, constitute a quorum.
10.3 If a quorum is not present within one-half hour from the time appointed for
a meeting, then the meeting, if convened upon the requisition of members, will
be dissolved. In any other case, the meeting will stand adjourned to the same
day in the next week, at the same hour and place. If at the adjourned meeting a
quorum is not present within one-half hour from the time appointed for the
meeting, the members present will constitute a quorum.
10.4 The chairman of the Board or, in his absence, the president of the Company
will preside as chairman at every meeting of the Company.
10.5 If, at any meeting:
(a) there is no chairman or president;
(b) the chairman or president is not present within five minutes after
the time appointed for holding the meeting; or
(c) the chairman or president is unwilling to act as chairman,
the members present may choose a chairman for the meeting.
10.6 The chairman may, with the consent of any meeting, and will, if so directed
by the meeting, adjourn the meeting from time to time and from place to place,
but no business will be transacted at any adjourned meeting other than the
business left unfinished at the meeting from which the adjournment took place.
When a meeting is adjourned to an unspecified time or place, not less than seven
days' notice of the adjourned meeting will be given, but it is not otherwise
necessary to give any notice of adjournment or of the business to be transacted
at an adjourned meeting.
10.7 Subject to the Company Act, every question submitted to a general meeting
will be decided on a show of hands unless, before or on the declaration of the
result of the show of hands, a poll is directed by the chairman or demanded by a
member or a proxy holder entitled to vote. A declaration by the chairman that,
on a show of hands, a resolution has been carried, or defeated, together with an
entry to that effect in the minute book of the Company is conclusive evidence of
the fact.
10.8 If a poll is demanded, it will be taken in such manner as the chairman
directs, and the result of the poll is effective from the time of the meeting at
which the poll is demanded. The demand for a poll may be withdrawn. Any poll
demanded on the election of the chairman of a meeting or on any question of
adjournment will be taken at the meeting without adjournment.
10.9 In the case of an equality of votes, the chairman of the meeting will not
have a second or casting vote.
10.10 The demand for a poll does not prevent the continuance of a meeting for
the transaction of any business other than the question on which the poll has
been demanded.
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10.11 Directors and senior officers of the Company and the solicitor for the
Company are entitled to attend at any and all general meetings of the Company.
PART 11 - VOTES OF MEMBERS
11.1 Subject to any rights or restrictions for the time being attached to any
class or classes of shares, on a show of hands every member present in person
has one vote, and on a poll every member, present in person or by proxy, has one
vote for each share he holds.
11.2 Subject to the rights or restrictions attached to any class of shares, any
corporation which is a member and which is not a subsidiary of the Company is
entitled to vote at any meeting of the Company and may appoint a person to act
as its representative at the meeting.
11.3 In the case of two or more registered holders of a share, the vote of the
senior who tenders a vote, whether in person or by proxy, will be accepted to
the exclusion of the votes of the others, and for this purpose seniority is
determined by the order in which their names stand in the register of members.
11.4 A member for whom a committee has been duly appointed may vote, whether on
a show of hands or on a poll, by his committee. A committee may appoint a proxy
holder.
11.5 On a poll, votes may be cast either personally or by proxy.
11.6 A proxy and any power of attorney or other authority under which it is
signed or a notarially certified copy of the power or authority will be
deposited at the place specified for that purpose in the notice of meeting or,
if no place is so specified, at the registered office of the Company before the
time for holding the meeting at which the person named in the proxy proposes to
vote, or such earlier time as the Directors may determine. In default the proxy
will not be treated as valid.
11.7 A proxy will be in writing under the hand of the appointor and, if the
appointor is a corporation, under the hand of an officer or attorney duly
authorized for that purpose. A proxy holder is not required to be a member.
11.8 A proxy will be in the following form or in any form the Directors approve:
The undersigned hereby appoints __________________________________________,
of __________________________________________________________________ or
_____________________________________________________________________, of
___________________________________________________________ (or failing him
_____________________________________________________________________, of
_______________________________________________________________) as proxy
holder for the undersigned to attend at and vote for and on behalf of the
undersigned at the (annual or extraordinary, as the case may be) general
meeting of the Company, to be held on the ________ day of ________________
and at any adjournment of that meeting.
Signed this ______ day of ____________, ____.
The form of and the authority conferred by a proxy will comply with the
Company Act.
11.9 A proxy may be revoked at any time before it is exercised.
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PART 12 - DIRECTORS
12.1 Unless the number of Directors is determined by ordinary resolution, the
number of Directors, including additional Directors, will be not less than one
(or, if the Company is a reporting company, not less than three), and not more
than 20.
12.2 A Director is not required to be a member.
12.3 The remuneration of the Directors may be fixed by the Board, subject to
such limitations as may be established by ordinary resolution, and may be in
addition to any remuneration they are otherwise entitled to receive.
12.4 It is the duty of a director to comply with the Company Act.
12.5 A director is entitled to be repaid reasonable expenses properly incurred
on the business of the Company. If a director is required to perform extra
services or is otherwise occupied on the Company's business, he is entitled to
receive remuneration to be fixed by the Board or, at the option of the
Directors, by the Company in general meeting, and the remuneration may be either
in addition to or in substitution for any other remuneration he is entitled to
receive.
PART 13 - ELECTION, APPOINTMENT AND RETIREMENT OF DIRECTORS
13.1 Subject to Article 13.3, at each annual general meeting of the Company all
Directors will retire from office effective at the termination of the meeting
(or, if the members consent in writing to the business required to be transacted
at the annual general meeting pursuant to Article 9.2, then on the effective
date of the resolution electing Directors) and directors will be elected to fill
the offices vacated.
13.2 A retiring director is eligible for re-election.
13.3 If, at a meeting at which an election of Directors ought to take place, the
places of retiring directors are not filled, the meeting will stand adjourned
until the same day in the next week, at the same time and place. If at the
adjourned meeting the places of the retiring directors are not filled, the
retiring directors, or such of them as have not had their places filled, will be
deemed to have been re-elected at the adjourned meeting.
13.4 Subject to Article 12.1, the Directors may, from time to time, appoint a
person or persons as an additional director or directors; provided that the
number of additional directors shall not at any time exceed 1/3 of the number of
directors elected or appointed at the last annual general meeting of the
Company.
13.5 A director may, with the approval of the Directors, appoint any person,
whether a member or a director of the Company or not, to serve as his alternate
director and as such to attend and vote in his place at meetings of Directors.
If the appointee is a director of the Company, he will be entitled to two votes,
one as a director and the other as an alternate director. If the appointing
director so directs, notices of meetings of Directors will be sent to the
alternate director and not to the appointing director.
13.6 An alternate director will vacate his office as an alternate director when
either:
13.7 The appointing director ceases to be a director; or
13.8 The appointing director removes the appointee from office as an alternate
director by notice in writing delivered to the secretary of the Company.
<PAGE> 47
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13.9 The Company may, by special resolution, remove any director before the
expiration of his period of office and may, by ordinary resolution, appoint
another person in his stead.
13.10 A casual vacancy that occurs among Directors may be filled for the
unexpired term by the remaining directors.
PART 14 - PROCEEDINGS OF DIRECTORS
14.1 The Directors may meet together for the conduct of business, and may
adjourn and otherwise regulate their meetings as they think fit.
14.2 Unless all directors waive their right to notice or otherwise agree, the
secretary or a director will give not less than twenty-four hours notice of any
meeting of Directors. Any director may requisition a meeting of Directors by
giving notice. In addition to notices sent out pursuant to Article 20.1 herein,
notice may be delivered to a director at his usual business address during
normal business hours (in which case, such notice will be deemed to have been
received upon delivery), or by e-mail to an e-mail address given by the Director
to the Company.
14.3 A majority of votes decides questions arising at any meeting of Directors.
In the case of an equality of votes, the chairman will not have a second or
casting vote.
14.4 The Directors may fix the quorum necessary for the conduct of their
business. If no quorum is fixed, it is a majority of the Board.
14.5 A director who is interested in any contract or transaction will be counted
in the quorum for a meeting of Directors but will disclose the nature and extent
of his interest at the meeting. Unless authorized by ordinary resolution, a
director cannot vote on a contract or transaction in which he is interested.
14.6 The Directors may continue to act if there is a vacancy in their number,
but, if the number of Directors is less than the quorum fixed pursuant to these
Articles, the continuing Directors may act only to fill the vacancies up to the
quorum fixed pursuant to these Articles, or to summon a general meeting of the
Company.
14.7 The Directors may elect a chairman for their meetings and determine the
period for which he is to hold office. If no chairman is elected, the president
will be chairman. If neither the chairman nor the president is present at any
meeting of Directors, the directors present may choose a chairman of the
meeting.
14.8 The Directors may delegate any of their powers to a committee or committees
consisting of such person or persons as they think fit. Any committee so formed
will, in the exercise of its delegated powers, conform to any regulations that
may be imposed by the Directors.
14.9 No act of the Board or a director is invalid because a defect in the
appointment or qualification of a director is discovered subsequently.
14.10 The Directors may, without calling a meeting, pass a resolution by
unanimous consent in writing.
14.11 Any consent resolutions or minutes to be signed by the Directors may be
signed in as many counterparts as may be necessary, each of which so signed
shall be deemed to be an original, and each signed copy sent by electronic
facsimile transmission shall be deemed to be an original, and such counterparts
together shall constitute one and the same instrument and shall be effective as
of the date of the consent resolution.
14.12 Where by radio, telephone or other means of audible voice transmission,
one or more directors are in communication with all directors present at a
meeting of directors in such a manner that each director present at such meeting
and each director so communicating can speak to and at all times hear what is
spoken by each of the
<PAGE> 48
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other directors who are either present at such meeting or so communicating
during such meeting, then and in such case all directors so communicating shall
be considered to be present at the meeting and shall be counted as present at
the meeting for the purposes of determining a quorum and voting as if they were
physically present at the meeting, and any resolution concurred in by such of
the directors present and counted as present at such meeting as are required to
vote in favour of such resolution at a meeting of directors to pass same shall
be deemed to be a resolution of the Board duly passed.
PART 15 - THE SEAL
15.1 The Directors may provide a seal for the Company. The seal of the Company
may be affixed to any instrument by, and any instrument may be executed on
behalf of the Company in the presence of, any two directors of the Company, or
as may be determined by resolution of the Directors.
15.2 The Directors may authorize for use without the Province of British
Columbia an official seal, which will be a facsimile of the common seal of the
Company with the addition on its face of the name of the Province, State or
Country where it is to be used.
PART 16 - OFFICERS
16.1 The Directors will appoint or elect a president and secretary of the
Company and may appoint or elect such other officer or officers of the Company
as in their discretion they think fit. The chairman of the board and the
president are required to be directors.
PART 17 - INDEMNIFICATION AND PROTECTION OF DIRECTORS, OFFICERS AND EMPLOYEES
17.1 Subject to the Company Act, a director or other officer of the Company is
not liable for:
(a) any act, receipt, neglect, or default of any other director or
officer;
(b) joining in any act for conformity;
(c) loss or damage arising from bankruptcy, insolvency or tortious
acts of any person with whom any monies, securities or effects are
deposited;
(d) loss or damage arising or happening to the Company through the
insufficiency or deficiency of any security in or upon which
assets of the Company may be invested;
(e) any loss occasioned by any error or oversight on his part; or
(f) any loss, damage or misfortune whatsoever happening in the
execution of the duties of his office or in relation thereto,
unless it happens through his own dishonesty.
17.2 Subject to the Company Act, the Company will indemnify each and every
director, secretary or assistant secretary and each and every former director,
secretary, or assistant secretary of the Company against all reasonable losses,
costs, charges and expenses properly incurred, including any amount paid to
settle an action or satisfy a judgment in a civil, criminal or administrative
action or proceeding by reason of his having been a director or secretary or
assistant secretary of the Company, if:
(a) he acted honestly and in good faith, with a view to the best
interests of the Company; and
<PAGE> 49
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(b) he had reasonable grounds for believing his conduct was
lawful.
The result of any action, suit or proceeding does not create a presumption that
the person did not act honestly and in good faith with a view to the best
interests of the Company, or that the person did not have reasonable grounds to
believe that his conduct was lawful. The Company will apply to a Court of
competent jurisdiction for all approvals of the Court which may be required to
make this Article effective and enforceable. Each director, secretary and
assistant secretary on being elected or appointed will be deemed to have
contracted with the Company on the terms of the indemnity contained in this
Article.
17.3 The Company may, if permitted by law, indemnify any person who serves or
has served as a director, officer, employee, or agent of the Company or of any
corporation of which the Company is a shareholder.
17.4 The Company may purchase and maintain insurance for the benefit of any
person who is or was serving as a director, officer, employee or agent of the
Company or of any corporation of which the Company is a shareholder against any
liability which may be incurred by him in that capacity.
PART 18 - DIVIDENDS AND RESERVE
18.1 The Directors may by resolution declare dividends, either with or without
notice, and pay the same out of any funds of the Company available for that
purpose.
18.2 Subject to special rights as to dividends attached to any shares, all
dividends will be declared and paid according to the number of shares held.
18.3 The Directors may, before declaring a dividend, set aside out of the
profits of the Company such moneys as they think proper as a reserve or reserves
which will be applicable for meeting contingencies or equalizing dividends, or
for any other purpose to which the profits of the Company may be properly
applied, and the moneys may, pending this application, either be employed in the
business of the Company or be invested as the Directors think fit.
18.4 No dividends bear interest against the Company.
18.5 The Directors may deduct from any dividend payable to a member all sums of
money presently owing by that member to the Company.
18.6 The transfer of shares does not, as against the Company, transfer the right
to any dividend declared thereon before the registration of the transfer.
18.7 The Directors may, with the approval of the members declare a dividend to
be paid wholly or in part by distribution of specific assets including without
limitation paid up shares or debentures of the Company and any other
corporation.
18.8 The Directors may settle any difficulty which may arise in regard to a
distribution as they think expedient, and in particular may issue fractional
certificates, may fix the value for the distribution of any specific assets and
may determine that cash payments will be made to any member upon the basis of
the value so fixed or that fractions of less than $1.00 will be disregarded in
order to adjust the rights of all parties.
PART 19 - ACCOUNTING RECORDS
19.1 The Directors will cause to be kept books of account, accounting records
and such other records as are necessary to comply with the provisions of
statutes applicable to the Company.
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19.2 The books and records will be kept at such place or places as the Directors
may think fit and will be open to inspection by the Directors.
PART 20 - NOTICES
20.1 Any notice may be given by the Company to any member or director either by
hand delivery to him at his Registered Address, by sending it by prepaid post to
him at his Registered Address or by electronic facsimile to a number given by a
member or director to the Company as his facsimile number.
20.2 A notice sent by prepaid post is deemed to be delivered to a person in
British Columbia 48 hours after sending, to a person in Canada other than
British Columbia 72 hours after sending, and to a person outside of Canada 168
hours after sending. A notice hand delivered or delivered by facsimile
transmission is deemed to be delivered 2 hours after delivery or transmission,
as the case may be.
20.3 If a share is held by two or more members, a notice sent to the holder
named first in the register of members is effectively given to all the holders
thereof.
20.4 A notice may be given by the Company to the person entitled to a share
because of the death or bankruptcy of a member by sending it by prepaid post or
electronic facsimile transmission or other means of electronic communication
capable of producing a printed copy addressed to the person by name, or by the
title of the representative of the deceased member or trustee of the bankrupt
member, or by any like description, at the address supplied for that purpose,
or, if no address is supplied, at the Registered Address of the member.
PART 21 - RECORD DATES
21.1 The Directors may fix a date (the "Record Date") within the period
permitted by the Company Act for the purpose of determining the identity of
persons entitled to receive notice of any meeting, to attend or vote at any
meeting, to receive a dividend, to exercise a right to purchase shares, or for
any other proper purpose. Only those persons whose names appear on the records
of the Company on the Record Date will be included for the purposes described in
determining the Record Date.
21.2 If no Record Date is fixed by the Directors for the determination of
members entitled to notice, or to vote, or of members entitled to receive
payment of a dividend or for any other purpose, the date on which notice of the
meeting is mailed or on which the resolution of the directors declaring the
dividend is adopted, respectively, is the record date for the determination.
PART 22 - SPECIAL RIGHTS AND RESTRICTIONS
22.1 The holders of the Preferred shares shall be entitled to receive notice of,
to attend and to vote at meetings of the Members of the Company.
22.2 The holders of the Preferred shares shall in each year, in the discretion
of the Directors, but always in preference and in priority to any payment of
dividends on the Common shares, be entitled, out of any or all profits or
surplus available for dividends, to fix preferential cumulative dividends at a
rate per annum as determined by the Directors on the amount paid up on the
Preferred shares. No dividends shall be declared or paid or set aside on the
Common shares in any fiscal year until all declared but unpaid dividends for
that fiscal year and all prior fiscal years on the Preferred shares have been
paid. The holders of the Preferred shares shall not be entitled to any dividend
other than or in excess of the fixed preferential cumulative dividends at the
rate per annum hereinbefore provided for.
22.3 Each issued and fully paid Preferred share may, at any time, for up to
three (3) years from the date of issue of the Preferred share, at the option of
the holder thereof, be converted into Common shares at a price per
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Common share as is determined by the directors and approved by the Company's
regulatory authorities (the "Conversion Rate"). The conversion privilege herein
provided for may be exercised by notice in writing given to the Company
accompanied by the certificates representing the Preferred shares in respect of
which the holder thereof desires to exercise such right of conversion and such
notice shall be signed by the person registered on the books of the Company as
the holder of the Preferred shares in respect of which such right is being
exercised or by his duly authorized agent and shall specify the number of
Preferred shares which the holder desires to have converted. The holder shall
also pay any governmental or other tax imposed in respect of such transaction.
Upon receipt of such notice and certificates the Company shall issue a
certificate representing fully paid Common shares upon the basis above described
and in accordance with the provisions hereof to the holder of the Preferred
shares represented by the certificates accompanying such notice and, if less
than all of the Preferred shares represented by any certificate are to be
converted, the holder shall be entitled to receive a new certificate for the
Preferred shares represented by the original certificate which are not to be
converted.
22.4 In case the Company shall:
(a) declare a dividend or make a distribution on its Common shares in
shares;
(b) subdivide its outstanding Common shares into a greater number of
shares; or
(c) consolidate its outstanding Common shares into a smaller number of
shares,
(any such event being herein called a "Common Share Reorganization"), the
Conversion Rate thereafter shall be proportionately adjusted so that conversion
of the Preferred shares, or any part thereof, after such time shall be entitled
to receive Common shares of equal value to the Common shares which it would have
owned or been entitled to receive had the Preference shares been converted
immediately prior to such Common Share Reorganization.
22.5 All shares resulting from any conversion of issued and fully paid Preferred
shares into Common shares shall be deemed to be fully paid and non-assessable,
and the Preferred shares so converted shall be restored to the status of
authorized but unissued Preferred shares. The Company shall not issue any Common
shares if after such issuance the number of authorized but unissued Common
shares would be insufficient to satisfy the conversion privileges in Article
22.3 hereof in the event that all the Preferred shares outstanding from time to
time were converted into Common shares in accordance with the provisions of such
Article.
22.6 In the event of any liquidation, dissolution, bankruptcy or winding up of
the Company, holders of Preferred shares shall be entitled to receive ratably
and in priority to any distribution to holders of Common shares the full paid up
capital value per share held by them plus the amount of all dividends declared
in such Preferred shares and unpaid, but there shall be no further participation
in the assets of the Company by the holders of Preferred shares; all assets
remaining after payment to the holders of Preferred shares as aforesaid will be
distributed ratably among the holders of the Common shares.
<PAGE> 52
1
INDEX TO ARTICLES
<TABLE>
<S> <C>
ACCOUNTING RECORDS....................................................... 19.1, 19.2
AUDITORS........................................................................ 9.7
BORROWING POWERS................................................................ 8.1
CAPITAL, INCREASE OF............................................................ 3.5
DEBENTURES...................................................................... 8.2
Register of......................................................... 8.3
DIRECTORS
Additional, Appointment of......................................... 13.4
Alternate, Appointment of.......................................... 13.5
Committees of...................................................... 14.8
Conflict of Interest............................................... 14.5
Delegation of Powers............................................... 14.8
Disqualification of................................................ 14.9
Election of................................................. 13.1 - 13.3
Indemnification of.................................... 12.5, 17.1 - 17.3
Insurance.......................................................... 17.4
Liability of....................................................... 17.1
Qualifications............................................... 12.2, 13.2
Number of.......................................................... 12.1
Proceedings Generally...................................... 14.1 - 14.10
Chairman.................................... 14.3, 14.7 16.1
Consent Resolution.................................... 14.10
Majority............................................... 14.3
Notice................................................. 14.2
Quorum................................................. 14.4
Meetings by telephone, etc............................ 14.11
Remuneration....................................................... 12.5
Resolution in Writing............................................. 14.10
Vacancy............................................................ 14.6
Validation of Acts................................................. 14.9
DIVIDENDS
Declaration of..................................................... 18.1
Deductions from.................................................... 18.5
Distributions of............................................. 18.2, 18.8
Interest........................................................... 18.4
Manner of Payment.................................................. 18.7
Reserves........................................................... 18.3
Transfer of Shares................................................. 18.6
</TABLE>
<PAGE> 53
2
<TABLE>
<S> <C>
GENERAL MEETINGS
Adjournment of..................................................... 10.6
Casting Vote....................................................... 10.9
Chairman at.................................................. 10.4, 10.5
Dates of............................................................ 9.1
Notice of......................................... 9.4 - 9.5, 10.3, 10.6
Poll.................................................. 10.7, 10.8, 10.10
Proceedings at............................................. 10.1 - 10.10
Proxies..................................................... 11.6 - 11.9
Form of................................................ 11.8
Quorum...................................................... 10.1 - 10.3
If no quorum........................................... 10.3
Requisition of...................................................... 9.1
Voting at.................................................. 10.7 - 10.10
..................................................11.1 - 11.7
Voting Rights............................................... 11.1 - 11.7
For Joint Holders...................................... 11.3
Waiver of............................................... 9.2
MEMBERS, NUMBER OF............................................................. 22.1
NOTICES................................................................. 20.1 - 20.4
OFFICERS....................................................................... 16.1
PREFERRED SHARES, SPECIAL RIGHTS AND RESTRICTIONS....................... 22.1 - 22.6
RECORD DATES................................................................... 21.1
SEAL.................................................................... 15.1 - 15.2
SHARE
Certificates........................................................ 2.1
Commission.......................................................... 3.2
Consideration for................................................... 3.3
Delivery of......................................................... 2.2
Form of............................................................. 2.1
Issue of....................................................... 3.1, 3.4
Offer to Public.................................................... 22.2
Register of................................................... 6.1 - 6.3
Redemption of................................................. 7.1 - 7.3
Rights and Restrictions.............................................. 22
Transfer of................................................... 4.1 - 4.5
Transmission of............................................... 5.1 - 5.6
</TABLE>
<PAGE> 54
EXHIBIT "C"
SMARTIRE SYSTEMS INC.
1999 INCENTIVE COMPENSATION PLAN
1. PURPOSE
The purpose of this 1999 Incentive Compensation Plan of SmarTire Systems Inc. is
to advance the interests of the Company (as herein defined) by encouraging
Eligible Employees (as herein defined) to acquire shares of the Company, thereby
increasing their proprietary interest in the Company, encouraging them to remain
associated with the Company and furnishing them with additional incentive to
advance the interests of the Company in the conduct of their affairs.
2. DEFINITIONS
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or a Committee of the Board duly
appointed by the Board as the Administrator hereof.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in the Securities Act.
(c) "Applicable Laws" means the legal requirements relating to the
administration of incentive compensation plans, if any, under
applicable provisions of federal securities laws, state corporate
and securities laws, the Securities Act, the rules of any
applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to
residents therein.
(d) "Award" means the grant of Performance Shares or other right or
benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant
of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such
termination is for `Cause' as such term is expressly defined in a
then-effective written agreement between the Grantee and the
Company or such Related Entity, or in the absence of such
then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's:
(i) refusal or failure to act in accordance with any specific,
lawful direction or order of the Company or a Related
Entity;
(ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability);
(iii) performance of any act or failure to perform any act in bad
faith and to the detriment of the Company or a Related
Entity;
(iv) dishonesty, intentional misconduct or material breach of
any agreement with the Company or a Related Entity; or
(v) commission of a crime involving dishonesty, breach of
trust, or physical or emotional harm to any person.
<PAGE> 55
(h) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition by the Company
or by a Company-sponsored employee benefit plan or by a
person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) of
beneficial ownership of securities possessing more than
fifty percent (50%) of the total combined voting power of
the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's
shareholders which a majority of the Continuing Directors
who are not Affiliates or Associates of the offeror do not
recommend such shareholders accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases,
by reason of one or more contested elections for Board
membership, to be comprised of individuals who are
Continuing Directors.
(i) "Committee" means any committee appointed by the Board to
administer the Plan.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means SmarTire Systems Inc., a British Columbia company.
(l) "Consultant" means any person (other than an Employee or solely
with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to
render consulting or advisory services to the Company or such
Related Entity.
(m) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less
than thirty-six (36) months and were elected or nominated for
election as Board members by at least a majority of the Board
members described in clause 2.(h)(ii) who were still in office at
the time such election or nomination was approved by the Board.
(n) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee or
Consultant is not interrupted or terminated. Continuous Service
shall not be considered interrupted in the case of (i) any
approved leave of absence, (ii) transfers between locations of the
Company or among the Company, any Related Entity, or any
successor, in any capacity of Employee, Director or Consultant, or
(iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of
Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal
leave. No such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by
statute or contract.
(o) "Corporate Transaction" means any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal
purpose of which is to change the jurisdiction in which the
Company is organized;
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<PAGE> 56
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including
the capital stock of the Company's subsidiary corporations)
in connection with the complete liquidation or dissolution
of the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a
person or persons different from those who held such
securities immediately prior to such merger.
(p) "Director" means a member of the Board or the board of directors
of any Related Entity.
(q) "Disability" means that a Grantee is unable to carry out the
responsibilities and functions of the position held by the Grantee
by reason of any medically determinable physical or mental
impairment. A Grantee will not be considered to have incurred a
Disability unless he or she furnishes proof of such impairment
sufficient to satisfy the Administrator in its discretion.
(r) "Eligible Employee" means any person who is an Employee or a
Consultant.
(s) "Employee" means any person, including an Officer or Director, who
is a full-time or part-time employee of the Company or any Related
Entity.
(t) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the average closing
price for a Share for the last seven (7) market trading
days prior to the time of the determination (or, if no
closing price was reported on those days, on the last seven
trading days on which a closing price was reported) on the
stock exchange determined by the Administrator to be the
primary market for the Common Stock or the NASDAQ National
Market, whichever is applicable or (B) if the Common Stock
is not traded on any such exchange or national market
system, the average of the closing bid and asked prices of
a Share on the NASDAQ Small Cap Market for the seven (7)
days prior to the time of the determination (or, if no such
prices were reported on those days, on the last seven days
on which such prices were reported), in each case, as
reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(ii) In the absence of an established market for the Common
Stock of the type described in 2.(t)(i), above, the Fair
Market Value thereof shall be determined by the
Administrator in good faith.
(u) "Grantee" means an Eligible Employee who receives an Award
pursuant to an Award Agreement under the Plan.
(v) "Insider" means:
(i) a Director or Senior Officer of the Company;
(ii) a Director or Senior Officer of a person that is itself an
Insider or Subsidiary of the Company;
(iii) a person that has:
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<PAGE> 57
A. direct or indirect beneficial ownership of,
B. control or direction over, or
C. a combination of direct or indirect beneficial
ownership of and control or direction over
securities of the Company carrying more than 10% of the
voting rights attached to all the Company's outstanding
voting securities, excluding, for the purpose of the
calculation of the percentage held, any securities held by
the person as underwriter in the course of a distribution,
or
(iv) the Company itself, if it has purchased, redeemed or
otherwise acquired any securities of its own issue, for so
long as it continues to hold those securities.
(w) "Officer" means a person who is an officer, including a Senior
Officer, of the Company or a Related Entity within the meaning
prescribed to under the Securities Act and the rules and
regulations promulgated thereunder.
(x) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(y) "Parent" means a "parent corporation", whether now or hereafter
existing, which holds a majority of the voting shares of the
Company.
(z) "Performance Shares" means Shares or an Award denominated in
Shares which may be earned in whole or in part upon attainment of
performance criteria established by the Administrator.
(aa) "Performance Units" means an Award which may be earned in whole or
in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other
securities or a combination of cash, Shares or other securities as
established by the Administrator.
(bb) "Plan" means this 1999 Incentive Compensation Plan as approved by
Board consent with effect from August 1, 1999.
(cc) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other
entity in which the Company, a Parent or a Subsidiary holds a
substantial ownership interest, directly or indirectly.
(dd) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such
restrictions on transfer, rights of first refusal, repurchase
provisions, forfeiture provisions, and other terms and conditions
as established by the Administrator.
(ee) "SAR" means a stock appreciation right entitling the Grantee to
Shares or cash compensation, as established by the Administrator,
measured by appreciation in the value of Common Stock.
(ff) "Securities Act" means the British Columbia Securities Act,
R.S.B.C. 1996, as amended.
(gg) "Senior Officer" means:
(i) the chair or vice chair of the Board, the president, a
vice-president, the secretary, the treasurer or the general
manager of the Company;
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<PAGE> 58
(ii) any individual who performs functions for a person similar
to those normally performed by an individual occupying any
office specified in paragraph 2.(gg)(i) above, and
(iii) the five (5) highest paid employees of the Company,
including any individual referred to in paragraph 2.(gg)(i)
or 2.(gg)(ii) and excluding a commissioned salesperson who
does not act in a managerial capacity.
(hh) "Share" means a share of the Common Stock.
(ii) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as determined by British Columbia corporate
law.
(jj) "Stock Incentive Plan" means the 1998 Stock Incentive Plan
(Non-U.S.) and 1998 Stock Incentive Plan (U.S.) and any subsequent
such plans approved by the shareholders of the Company.
(kk) "Related Entity Disposition" means the sale, distribution or other
disposition by the Company of all or substantially all of the
Company's interests in any Related Entity effected by a sale,
merger or consolidation or other transaction involving that
Related Entity or the sale of all or substantially all of the
assets of that Related Entity.
3. OPTIONS ISSUED UNDER THE PLAN
All Options issued under the Plan shall be subject to the provisions of the
Stock Incentive Plan.
4. ADMINISTRATION
(a) Plan Administrator
(i) Administration with Respect to Eligible Employees. With
respect to grants of Awards to Eligible Employees, the Plan
shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed
by the Board.
(ii) Administration Errors. In the event an Award is granted in
a manner inconsistent with the provisions of this
subsection 4.(a), such Award shall be presumptively valid
as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the
Board, the Administrator shall have the authority, in its
discretion:
(i) to select the Eligible Employees to whom Awards may be
granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Performance Shares or the amount
of other consideration to be covered by each Award granted
hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
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<PAGE> 59
(vi) to suspend the right of an Eligible Employee to receive an
Award for any reason that the Administrator considers in
the best interest of the Company;
(vii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable
foreign jurisdictions and to afford Grantees favourable
treatment under such laws; provided, however, that no Award
shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions
which are inconsistent with the provisions of the Plan; and
(viii) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be conclusive and
binding on all persons. However, the Board reserves the right to
override such decisions, determinations and interpretations of the
Administrator.
5. ELIGIBILITY
Awards may be granted to Eligible Employees. An Eligible Employee who has been
granted an Award may, if otherwise eligible, be granted additional Awards.
6. TERMS AND CONDITIONS OF AWARDS
(a) Type of Awards. The Administrator is authorized under the Plan to
award any type of arrangement to an Eligible Employee that is not
inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Performance Shares,
(ii) an Option, (iii) a SAR or similar right with a fixed or
variable price related to the Fair Market Value of the Shares and
with an exercise or conversion privilege related to the passage of
time, the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions, (iv) cash or (v) any
other security with the value derived from the value of the
Shares. Such Awards may include, without limitation, cash, Shares,
Options, SARs, Restricted Stock, Performance Units or Performance
Shares, and an Award may consist of one such security or benefit,
or two (2) or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
Agreement.
(c) Conditions of Award. Subject to the terms of the Plan and
Applicable Laws, the Administrator shall determine the provisions,
terms, and conditions of each Award including, but not limited to,
the Award vesting schedule, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the
Award, and satisfaction of any performance criteria. The
performance criteria established by the Administrator may be based
on any one of, or combination of, economic value added, market
value added, achievement of individual or corporate objectives, or
other measures of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a
payment or vesting corresponding to the degree of achievement as
specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may issue
Awards under the Plan in settlement, assumption or substitution
for, outstanding awards or obligations to grant future awards in
connection with the Company or a Related Entity acquiring another
entity, an interest in another entity or an additional interest
6
<PAGE> 60
in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.
(e) Deferral of Award Payment. The Administrator may establish one or
more programs under the Plan to permit selected Grantees the
opportunity to elect to defer receipt of consideration upon an
Award, satisfaction of performance criteria, or other event that
absent the election would entitle the Grantee to payment or
receipt of Shares or other consideration under an Award. The
Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other
consideration so deferred, and such other terms, conditions, rules
and procedures that the Administrator deems advisable for the
administration of any such deferral program.
(f) Award Exchange Programs. The Administrator may establish one or
more programs under the Plan to permit selected Grantees to
exchange an Award under the Plan for one or more other types of
Awards under the Plan on such terms and conditions as determined
by the Administrator from time to time.
(g) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing
particular forms of Awards to one or more classes of Grantees on
such terms and conditions as determined by the Administrator from
time to time.
(h) Term of Award. The term of each Award shall be the term stated in
the Award Agreement.
(i) Transferability of Awards. Awards shall be transferable to the
extent provided in the Award Agreement.
(j) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the
determination to grant such Award, or such other date as is
determined by the Administrator. Notice of the grant determination
shall be given to each Employee or Consultant to whom an Award is
so granted within a reasonable time after the date of such grant.
(k) Termination of Continuous Service. If Continuous Service is
terminated by the Company or a Related Party for Cause, or by a
Grantee voluntarily, any unvested benefits under the Plan will
expire. If Continuous Service is terminated by retirement, death
or Disability of a Grantee, or by the Company for other than
Cause, unvested benefits will be earned in accordance with the
vesting schedule in the Award Agreement.
7. CONDITIONS UPON ISSUANCE OF SHARES
(a) Shares shall not be issued pursuant to an Award unless such Award
and the issuance and delivery of such Shares pursuant thereto
shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to
such compliance.
(b) As a condition to an Award, the Company may require the person
receiving Performance Shares to represent and warrant at the time
of any such Award that the Shares are only for investment and
without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a
representation is required by any Applicable Laws.
7
<PAGE> 61
8. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY DISPOSITIONS
Except as may be provided in an Award Agreement the Administrator shall have the
authority, exercisable either in advance of any actual or anticipated Corporate
Transaction, Change in Control or Related Entity Disposition or at the time of
an actual Corporate Transaction, Change in Control or Related Entity Disposition
at the time of the grant of an Award under the Plan or any time while an Award
remains outstanding, to provide for the full automatic vesting of one or more
outstanding unvested Awards under the Plan and the release from restrictions on
transfer and repurchase or forfeiture rights of such Awards in connection with a
Corporate Transaction, Change in Control or Related Entity Disposition, on such
terms and conditions as the Administrator may specify. The Administrator also
shall have the authority to condition any such Award vesting or release from
such limitations upon the subsequent termination of the Continuous Service of
the Grantee within a specified period following the effective date of the
Corporate Transaction, Change in Control or Related Entity Disposition. The
Administrator may provide that any Awards so vested or released from such
limitations in connection with a Change in Control or Related Entity Disposition
shall remain fully vested or released until the termination of the Award.
Effective upon the consummation of a Corporate Transaction, all outstanding
Awards under the Plan shall terminate unless assumed by the successor company or
its parent.
9. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective as of August 1, 1999. It shall continue in
effect until November 30, 2002 unless sooner terminated.
10. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company
shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 10.(a), above) shall not
affect Awards already granted, and such Awards shall remain in
full force and effect as if the Plan had not been amended,
suspended or terminated, unless mutually agreed otherwise between
the Grantee and the Administrator, which agreement must be in
writing and signed by the Grantee and the Company.
11. NO EFFECT ON TERMS OF EMPLOYMENT/CONSULTING RELATIONSHIP
The Plan shall not confer upon any Grantee any right with respect to the
Grantee's Continuous Service, nor shall it interfere in any way with his or her
right or the Company's right to terminate the Grantee's Continuous Service at
any time, with or without Cause.
12. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS
Except as specifically provided in a retirement or other benefit plan of the
Company or a Related Entity, Awards shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of the
Company or a Related Entity, and shall not affect any benefits under any other
benefit plan of any kind or any benefit plan subsequently instituted under which
the availability or amount of benefits is related to level of compensation.
8
<PAGE> 62
13. GOVERNING LAW
The Plan shall be governed by the laws of the Province of British Columbia and
the laws of Canada applicable therein; provided, however, that any Award
Agreement may provide by its terms that it shall be governed by the laws of any
other jurisdiction as may be deemed appropriate by the parties thereto.
9
<PAGE> 63
EXHIBIT "D"
SMARTIRE SYSTEMS INC.
2000 STOCK INCENTIVE PLAN (NON-U.S.)
1. PURPOSE
The purpose of this 2000 Non-U.S. Stock Incentive Plan of SmarTire Systems Inc.
(the "Company") is to advance the interests of the Company by encouraging
Eligible Employees (as herein defined) to acquire shares of the Company, thereby
increasing their proprietary interest in the Company, encouraging them to remain
associated with the Company and furnish them with additional incentive in their
efforts of the Company in the conduct of their affairs.
This Plan is specifically designed for Eligible Employees of the Company who are
not residents of the United States and/or subject to taxation in the United
States, although Awards under this Plan may be issued to other Eligible
Employees.
2. DEFINITIONS
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or a Committee of the Board duly
appointed by the Board as the Administrator hereof;
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in the Securities Act.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable
provisions of federal securities laws, state corporate and
securities laws, the Securities Act, the rules of any applicable
stock exchange or national market system, and the rules of any
foreign jurisdiction applicable to Awards granted to residents
therein.
(d) "Award" means the grant of an Option, SAR, Restricted Stock or
other right or benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant
of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such
termination is for `Cause' as such term is expressly defined in a
then-effective written agreement between the Grantee and the
Company or such Related Entity, or in the absence of such
then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's:
<PAGE> 64
-2-
(i) refusal or failure to act in accordance with any specific,
lawful direction or order of the Company or a Related
Entity;
(ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability);
(iii) performance of any act or failure to perform any act in bad
faith and to the detriment of the Company or a Related
Entity;
(iv) dishonesty, intentional misconduct or material breach of
any agreement with the Company or a Related Entity; or
(v) commission of a crime involving dishonesty, breach of
trust, or physical or emotional harm to any person.
(h) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or
by a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Company) of beneficial ownership of securities possessing
more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's
shareholders which a majority of the Continuing Directors
who are not Affiliates or Associates of the offeror do not
recommend such shareholders accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases,
by reason of one or more contested elections for Board
membership, to be comprised of individuals who are
Continuing Directors.
(i) "Committee" means any committee appointed by the Board to
administer the Plan.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means SmarTire Systems Inc., a British Columbia company.
(l) "Consultant" means any person (other than an Employee or, solely
with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to
render consulting or advisory services to the Company or such
Related Entity.
(m) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less
than thirty-six (36) months and were elected or nominated for
election as Board members by at least a majority of the Board
members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.
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(n) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director
or Consultant, is not interrupted or terminated. Continuous
Service shall not be considered interrupted in the case of (i) any
approved leave of absence, (ii) transfers between locations of the
Company or among the Company, any Related Entity, or any
successor, in any capacity of Employee, Director or Consultant, or
(iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of
Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal
leave. For purposes of Options, no such leave may exceed ninety
(90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract.
(o) "Corporate Transaction" means any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal
purpose of which is to change the jurisdiction in which the
Company is organized;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including
the capital stock of the Company's subsidiary corporations)
in connection with the complete liquidation or dissolution
of the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a
person or persons different from those who held such
securities immediately prior to such merger.
(p) "Director" means a member of the Board or the board of directors
of any Related Entity.
(q) "Disability" means that a Grantee is unable to carry out the
responsibilities and functions of the position held by the Grantee
by reason of any medically determinable physical or mental
impairment. A Grantee will not be considered to have incurred a
Disability unless he or she furnishes proof of such impairment
sufficient to satisfy the Administrator in its discretion.
(r) "Eligible Employee" means any person who is an Officer, a
Director, an Employee or a Consultant.
(s) "Employee" means any person, including an Officer or Director, who
is a full-time or part-time employee of the Company or any Related
Entity.
(t) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the closing price for a
Share for the last market trading day prior to the time of
the determination (or, if no closing price was reported on
that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the
Administrator to be the primary market for the Common Stock
or the Nasdaq National Market, whichever is applicable or
(B) if the Common
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Stock is not traded on any such exchange or national
market system, the average of the closing bid and asked
prices of a Share on the Nasdaq Small Cap Market for the
day prior to the time of the determination (or, if no
such prices were reported on that date, on the last date
on which such prices were reported), in each case, as
reported in The Wall Street Journal or such other source
as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common
Stock of the type described in 2.(s)(i), above, the Fair
Market Value thereof shall be determined by the
Administrator in good faith.
(u) "Grantee" means an Eligible Employee who receives an Award
pursuant to an Award Agreement under the Plan.
(v) "Insider" means:
(i) a Director or Senior Officer of the Company;
(ii) a Director or Senior Officer of a person that is itself an
Insider or Subsidiary of the Company;
(iii) a person that has:
A. direct or indirect beneficial ownership of,
B. control or direction over, or
C. a combination of direct or indirect beneficial ownership
of and control or direction
over securities of the Company carrying more than 10% of
the voting rights attached to all the Company's
outstanding voting securities, excluding, for the purpose
of the calculation of the percentage held, any securities
held by the person as underwriter in the course of a
distribution, or
(iv) the Company itself, if it has purchased, redeemed or
otherwise acquired any securities of its own issue, for so
long as it continues to hold those securities.
(w) "Officer" means a person who is an officer, including a Senior
Officer, of the Company or a Related Entity within the meaning
prescribed to under the Securities Act and the rules and
regulations promulgated thereunder.
(x) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(y) "Parent" means a "parent corporation", whether now or hereafter
existing, which holds a majority of the voting shares of the
Company.
(z) "Performance Shares" means Shares or an Award denominated in
Shares which may be earned in whole or in part upon attainment of
performance criteria established by the Administrator.
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(aa) "Performance Units" means an Award which may be earned in whole or
in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other
securities or a combination of cash, Shares or other securities as
established by the Administrator.
(bb) "Plan" means this 2000 Stock Incentive Plan.
(cc) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other
entity in which the Company, a Parent or a Subsidiary holds a
substantial ownership interest, directly or indirectly.
(dd) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such
restrictions on transfer, rights of first refusal, repurchase
provisions, forfeiture provisions, and other terms and conditions
as established by the Administrator.
(ee) "SAR" means a stock appreciation right entitling the Grantee to
Shares or cash compensation, as established by the Administrator,
measured by appreciation in the value of Common Stock.
(ff) "Securities Act" means the British Columbia Securities Act,
R.S.B.C. 1996, as amended.
(gg) "Senior Officer" means:
(i) the chair or vice chair of the Board, the president, a
vice-president, the secretary, the treasurer or the general
manager of the Company;
(ii) any individual who performs functions for a person similar
to those normally performed by an individual occupying any
office specified in paragraph 2.(ff)(i) above, and
(iii) the five (5) highest paid employees of the Company,
including any individual referred to in paragraph 2.(ff)(i)
or 2.(ff)(ii) and excluding a commissioned salesperson who
does not act in a managerial capacity.
(hh) "Share" means a share of the Common Stock.
(ii) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as determined by British Columbia corporate
law.
(jj) "Related Entity Disposition" means the sale, distribution or other
disposition by the Company of all or substantially all of the
Company's interests in any Related Entity effected by a sale,
merger or consolidation or other transaction involving that
Related Entity or the sale of all or substantially all of the
assets of that Related Entity.
3. STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 10, below, the maximum aggregate number of
Shares which may be issued pursuant to all Awards (including Options) is Eight
Hundred Thousand (800,000) Shares. The Shares to be issued pursuant to Awards
may be authorized, but unissued, or reacquired Common Stock.
<PAGE> 68
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Any Shares covered by an Award (or portion of an Award) which is forfeited or
cancelled, expires or is settled in cash, shall be deemed not to have been
issued for purposes of determining the maximum aggregate number of Shares which
may be issued under the Plan. Shares that actually have been issued under the
Plan pursuant to an Award shall not be returned to the Plan and shall not become
available for future issuance under the Plan, except that if Shares are
forfeited or repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
No Insider of the Company is eligible to receive an Award where:
(a) Insiders are not Directors or Senior Officers of the Company and
receiving Options as Consultants of the Company;
(b) any Award, together with all of the Company's other previously
established or proposed Awards could result at any time in:
(i) the number of Shares reserved for issuance pursuant to
Options granted to Insiders exceeding 10% of the
outstanding issue of Common Stock; or
(ii) the issuance to Insiders, within a one year period of a
number of Shares exceeding 10% of the outstanding issue of
the Common Stock;
provided, however, that this restriction on the eligibility of Insiders to
receive an Award will cease to apply if it is no longer required under any
Applicable Laws.
4. ADMINISTRATION
(a) Plan Administrator
(i) Administration with Respect to Eligible Employees. With
respect to grants of Awards to Eligible Employees, the Plan
shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed
by the Board.
(ii) Administration Errors. In the event an Award is granted in
a manner inconsistent with the provisions of this
subsection 4.(a), such Award shall be presumptively valid
as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the
Board, the Administrator shall have the authority, in its
discretion:
(i) to select the Eligible Employees to whom Awards may be
granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted
hereunder;
<PAGE> 69
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(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under
the Plan, including a reduction in the exercise price (or
base amount on which appreciation is measured) of any Award
to reflect a reduction in the Fair Market Value of the
Common Stock since the grant date of the Award, provided
that any amendment that would adversely affect the
Grantee's rights under an outstanding Award shall not be
made without the Grantee's written consent;
(vii) the Administrator shall have the right to suspend the right
of a holder to exercise all or part of a stock option for
any reason that the Administrator considers in the best
interest of the Company;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable
foreign jurisdictions and to afford Grantees favourable
treatment under such laws; provided, however, that no Award
shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions
which are inconsistent with the provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. ELIGIBILITY
Options and Awards other than Options may be granted to Eligible Employees. An
Eligible Employee who has been granted an Award may, if otherwise eligible, be
granted additional Awards.
6. TERMS AND CONDITIONS OF AWARDS
(a) Type of Awards. The Administrator is authorized under the
Plan to award any type of arrangement to an Eligible
Employee that is not inconsistent with the provisions of
the Plan and that by its terms involves or might involve
the issuance of (i) Shares, (ii) an Option, (iii) a SAR or
similar right with a fixed or variable price related to the
Fair Market Value of the Shares and with an exercise or
conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of
performance criteria or other conditions, or (iv) any other
security with the value derived from the value of the
Shares. Such awards include, without limitation, Options,
SARs, sales or bonuses of Restricted Stock, Performance
Units or Performance Shares, and an Award may consist of
one such security or benefit, or two (2) or more of them in
any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the
Award Agreement.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and
conditions of each Award including, but not limited to, the
Award vesting schedule, repurchase provisions, rights of
first refusal, forfeiture
<PAGE> 70
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provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance
criteria. The performance criteria established by the
Administrator may be based on any one of, or combination
of, increase in share price, earnings per share, total
shareholder return, return on equity, return on assets,
return on investment, net operating income, cash flow,
revenue, economic value added, personal management
objectives, or other measures of performance selected by
the Administrator. Partial achievement of the specified
criteria may result in a payment or vesting
corresponding to the degree of achievement as specified
in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may
issue Awards under the Plan in settlement, assumption or
substitution for, outstanding awards or obligations to
grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in
another entity or an additional interest in a Related
Entity whether by merger, stock purchase, asset purchase or
other form of transaction.
(e) Deferral of Award Payment. The Administrator may establish
one or more programs under the Plan to permit selected
Grantees the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the
election would entitle the Grantee to payment or receipt of
Shares or other consideration under an Award. The
Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of,
and accrual of interest or other earnings, if any, on
amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any
such deferral program.
(f) Award Exchange Programs. The Administrator may establish
one or more programs under the Plan to permit selected
Grantees to exchange an Award under the Plan for one or
more other types of Awards under the Plan on such terms and
conditions as determined by the Administrator from time to
time.
(g) Separate Programs. The Administrator may establish one or
more separate programs under the Plan for the purpose of
issuing particular forms of Awards to one or more classes
of Grantees on such terms and conditions as determined by
the Administrator from time to time.
(h) Individual Option and SAR Limit. The maximum number of
Shares with respect to which Options and SARs may be
granted to any Employee in any fiscal year of the Company
shall be five percent (5%) of the outstanding Shares. The
foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization
pursuant to Section 10, below.
(i) Early Exercise. The Award Agreement may, but need not,
include a provision whereby the Grantee may elect at any
time while an Eligible Employee to exercise any part or all
of the Award prior to full vesting of the Award. Any
unvested Shares received pursuant to such exercise may be
subject to a repurchase right in favour of the Company or a
Related Entity or to any other restriction the
Administrator determines to be appropriate.
(j) Term of Award. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the
term of an Option shall be no more than ten (10) years from
the date of grant thereof.
<PAGE> 71
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(k) Transferability of Awards. Options may not be sold,
pledged, assigned, hypothecated, transferred, or disposed
of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the
lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of
the Grantee's Option in the event of the Grantee's death on
a beneficiary designation form provided by the
Administrator. Other Awards shall be transferable to the
extent provided in the Award Agreement.
(l) Time of Granting Awards. The date of grant of an Award
shall for all purposes be the date on which the
Administrator makes the determination to grant such Award,
or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Award is so
granted within a reasonable time after the date of such
grant.
7. AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION, TAXES AND RELOAD OPTIONS
(a) Exercise or Purchase Price. The exercise or purchase price, if
any, for an Award shall be as determined by the Administrator in
compliance with the Applicable Laws.
(b) Consideration. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an
Award including the method of payment, shall be determined by the
Administrator (and, in the case of an Option, shall be determined
at the time of grant). In addition to any other types of
consideration the Administrator may determine, the Administrator
is authorized to accept as consideration for Shares issued under
the Plan the following:
(i) cash;
(ii) check;
(iii) surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator
may require (including withholding of Shares otherwise
deliverable upon exercise of the Award) which have a Fair
Market Value on the date of surrender or attestation equal
to the aggregate exercise price of the Shares as to which
said Award shall be exercised (but only to the extent that
such exercise of the Award would not result in an
accounting compensation charge with respect to the Shares
used to pay the exercise price unless otherwise determined
by the Administrator); or
(iv) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee
or other person until such Grantee or other person has made
arrangements acceptable to the Administrator for the satisfaction
of any foreign, federal, state, or local income and employment tax
withholding obligations, including, without limitation,
obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Option. Upon
exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
<PAGE> 72
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(d) Reload Options. In the event the exercise price or tax withholding
of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the
Administrator may issue the Grantee an additional Option, with
terms identical to the Award Agreement under which the Option was
exercised, but at an exercise price as determined by the
Administrator in accordance with the Plan.
8. EXERCISE OF AWARD
(a) Procedure for Exercise; Rights as a Shareholder.
(i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the
Administrator under the terms of the Plan and specified in
the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in
accordance with the terms of the Award by the person
entitled to exercise the Award and full payment for the
Shares with respect to which the Award is received by the
Company. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder
shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award.
The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Award. No
adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock
certificate is issued, except as provided in the Award
Agreement or Section 10, below.
(b) Exercise of Award Following Termination of Continuous Service.
(i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be
exercised following the termination of a Grantee's
Continuous Service only to the extent provided in the Award
Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous
Service for a specified period, the Award shall terminate
to the extent not exercised on the last day of the
specified period or the last day of the original term of
the Award, whichever occurs first.
(c) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Award previously granted,
based on such terms and conditions as the Administrator shall
establish and communicate to the Grantee at the time that such
offer is made.
9. CONDITIONS UPON ISSUANCE OF SHARES
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of
such Shares pursuant thereto shall comply with all Applicable
Laws, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
<PAGE> 73
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(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant
at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any Applicable
Laws.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Subject to any required action by the shareholders of the Company, the number of
Shares covered by each outstanding Award, and the number of Shares which have
been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan, the exercise or purchase
price of each such outstanding Award, as well as any other terms that the
Administrator determines require adjustment shall be proportionately adjusted
for (i) any increase or decrease in the number of issued Shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, (ii) any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other reorganization transaction with respect to Common Stock; provided, however
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration. Such adjustment shall
be made by the Administrator and its determination shall be final, binding and
conclusive. Except as the Administrator determines, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason hereof shall be made
with respect to, the number or price of Shares subject to an Award.
11. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY DISPOSITIONS
Except as may be provided in an Award Agreement the Administrator shall have the
authority, exercisable either in advance of any actual or anticipated Corporate
Transaction, Change in Control or Related Entity Disposition or at the time of
an actual Corporate Transaction, Change in Control or Related Entity Disposition
and exercisable at the time of the grant of an Award under the Plan or any time
while an Award remains outstanding, to provide for the full automatic vesting
and exercisability of one or more outstanding unvested Awards under the Plan and
the release from restrictions on transfer and repurchase or forfeiture rights of
such Awards in connection with a Corporate Transaction, Change in Control or
Related Entity Disposition, on such terms and conditions as the Administrator
may specify. The Administrator also shall have the authority to condition any
such Award vesting and exercisability or release from such limitations upon the
subsequent termination of the Continuous Service of the Grantee within a
specified period following the effective date of the Corporate Transaction,
Change in Control or Related Entity Disposition. The Administrator may provide
that any Awards so vested or released from such limitations in connection with a
Change in Control or Related Entity Disposition, shall remain fully exercisable
until the expiration or sooner termination of the Award. Effective upon the
consummation of a Corporate Transaction, all outstanding Awards under the Plan
shall terminate unless assumed by the successor company or its parent.
12. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective upon the earlier to occur of its adoption by the
Board or its approval by the shareholders of the Company. It shall continue in
effect for a term of ten (10) years unless sooner terminated. Subject to Section
17, below, and Applicable Laws, Awards may be granted under the Plan upon its
becoming effective.
<PAGE> 74
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13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company
shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 13.(a), above) shall not
affect Awards already granted, and such Awards shall remain in
full force and effect as if the Plan had not been amended,
suspended or terminated, unless mutually agreed otherwise between
the Grantee and the Administrator, which agreement must be in
writing and signed by the Grantee and the Company.
14. RESERVATION OF SHARES
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
15. NO EFFECT ON TERMS OF EMPLOYMENT/CONSULTING RELATIONSHIP
The Plan shall not confer upon any Grantee any right with respect to the
Grantee's Continuous Service, nor shall it interfere in any way with his or her
right or the Company's right to terminate the Grantee's Continuous Service at
any time, with or without cause.
16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS
Except as specifically provided in a retirement or other benefit plan of the
Company or a Related Entity, Awards shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of the
Company or a Related Entity, and shall not affect any benefits under any other
benefit plan of any kind or any benefit plan subsequently instituted under which
the availability or amount of benefits is related to level of compensation.
17. SHAREHOLDER APPROVAL
The Plan shall be subject to the Plan's approval by the shareholders of the
Company within twelve (12) months from the date the Plan is adopted by the
Company's Board of Directors. Such shareholder approval shall be obtained in the
degree and manner required under Applicable Laws. The Administrator may grant
Awards under the Plan prior to approval by the shareholders, but until such
approval is obtained, no such Award shall be exercisable. In the event that
shareholder approval is not obtained within the twelve (12) month period
provided above, all Awards previously granted under the Plan shall be cancelled
and of no force or effect.
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18. GOVERNING LAW
The Plan shall be governed by the laws of the Province of British Columbia and
the laws of Canada applicable therein; provided, however, that any Award
Agreement may provide by its terms that it shall be governed by the laws of any
other jurisdiction as may be deemed appropriate by the parties thereto.
<PAGE> 76
EXHIBIT "E"
SMARTIRE SYSTEMS INC.
2000 STOCK INCENTIVE PLAN (U.S.)
1. PURPOSE
The purpose of this 2000 U.S. Stock Incentive Plan of SmarTire Systems Inc. (the
"Company") is to advance the interests of the Company by encouraging Eligible
Employees (as herein defined) to acquire shares of the Company, thereby
increasing their proprietary interest in the Company, encouraging them to remain
associated with the Company and furnish them with additional incentive in their
efforts of the Company in the conduct of their affairs.
This Plan is specifically designed for Eligible Employees of the Company who are
residents of the United States and/or subject to taxation in the United States,
although Awards under this Plan may be issued to other Eligible Employees.
2. DEFINITIONS
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or a Committee of the Board duly
appointed by the Board as the Administrator hereof;
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the
Exchange Act.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable
provisions of federal securities laws, state corporate and
securities laws, the Code, the rules of any applicable stock
exchange or national market system, and the rules of any foreign
jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Restricted Stock or
other right or benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the grant
of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, with respect to the termination by the Company or a
Related Entity of the Grantee's Continuous Service, that such
termination is for `Cause' as such term is expressly defined in a
then-effective written agreement between the Grantee and the
Company or such Related Entity, or in the absence of such
then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's:
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(i) refusal or failure to act in accordance with any specific,
lawful direction or order of the Company or a Related
Entity;
(ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability);
(iii) performance of any act or failure to perform any act in bad
faith and to the detriment of the Company or a Related
Entity;
(iv) dishonesty, intentional misconduct or material breach of
any agreement with the Company or a Related Entity; or
(v) commission of a crime involving dishonesty, breach of
trust, or physical or emotional harm to any person.
(h) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or
by a person that directly or indirectly controls, is
controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act) of securities possessing
more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's
shareholders which a majority of the Continuing Directors
who are not Affiliates or Associates of the offeror do not
recommend such shareholders accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the
Board members (rounded up to the next whole number) ceases,
by reason of one or more contested elections for Board
membership, to be comprised of individuals who are
Continuing Directors.
(i) "Code" means the U.S. Internal Revenue Code of 1986, as amended.
(j) "Committee" means any committee appointed by the Board to
administer the Plan.
(k) "Common Stock" means the common stock of the Company.
(l) "Company" means SmarTire Systems Inc., a British Columbia company.
(m) "Consultant" means any person (other than an Employee or, solely
with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to
render consulting or advisory services to the Company or such
Related Entity.
(n) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less
than thirty-six (36) months and were elected or nominated for
election as Board members by at least a majority of the Board
members described in
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clause (i) who were still in office at the time such election or
nomination was approved by the Board.
(o) "Continuous Service" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director
or Consultant, is not interrupted or terminated. Continuous
Service shall not be considered interrupted in the case of (i) any
approved leave of absence, (ii) transfers between locations of the
Company or among the Company, any Related Entity, or any
successor, in any capacity of Employee, Director or Consultant, or
(iii) any change in status as long as the individual remains in
the service of the Company or a Related Entity in any capacity of
Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal
leave. For purposes of Options, no such leave may exceed ninety
(90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract.
(p) "Corporate Transaction" means any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal
purpose of which is to change the jurisdiction in which the
Company is organized;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including
the capital stock of the Company's subsidiary corporations)
in connection with the complete liquidation or dissolution
of the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a
person or persons different from those who held such
securities immediately prior to such merger.
(q) "Covered Employee" means an Employee who is a "covered employee"
under Section 162(m)(3) of the Code.
(r) "Director" means a member of the Board or the board of directors
of any Related Entity.
(s) "Disability" means that a Grantee is unable to carry out the
responsibilities and functions of the position held by the Grantee
by reason of any medically determinable physical or mental
impairment. A Grantee will not be considered to have incurred a
Disability unless he or she furnishes proof of such impairment
sufficient to satisfy the Administrator in its discretion.
(t) "Eligible Employee" means any person who is an Officer, a
Director, an Employee or a Consultant.
(u) "Employee" means any person, including an Officer or Director, who
is a full-time or part-time employee of the Company or any Related
Entity.
(v) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
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(w) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock,
the Fair Market Value shall be (A) the closing price for a
Share for the last market trading day prior to the time of
the determination (or, if no closing price was reported on
that date, on the last trading date on which a closing
price was reported) on the stock exchange determined by the
Administrator to be the primary market for the Common Stock
or the Nasdaq National Market, whichever is applicable or
(B) if the Common Stock is not traded on any such exchange
or national market system, the average of the closing bid
and asked prices of a Share on the Nasdaq Small Cap Market
for the day prior to the time of the determination (or, if
no such prices were reported on that date, on the last date
on which such prices were reported), in each case, as
reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(ii) In the absence of an established market for the Common
Stock of the type described in paragraph 2.(w)(i), above,
the Fair Market Value thereof shall be determined by the
Administrator in good faith.
(x) "Grantee" means an Eligible Employee who receives an Award
pursuant to an Award Agreement under the Plan.
(y) "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
(z) "Insider" means:
(i) a Director or Senior Officer of the Company;
(ii) a Director or Senior Officer of a person that is itself an
Insider or Subsidiary of the Company;
(iii) a person that has:
A. direct or indirect beneficial ownership of,
B. control or direction over, or
C. a combination of direct or indirect beneficial ownership
of and control or direction over
securities of the Company carrying more than 10% of the
voting rights attached to all the Company's outstanding
voting securities, excluding, for the purpose of the
calculation of the percentage held, any securities held by
the person as underwriter in the course of a distribution,
or
(iv) the Company itself, if it has purchased, redeemed or
otherwise acquired any securities of its own issue, for so
long as it continues to hold those securities.
(aa) "Non-Qualified Stock Option" means an Option which is not an
Incentive Stock Option.
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(bb) "Officer" means a person who is an officer, including a Senior
Officer, of the Company or a Related Entity within the meaning of
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(cc) "Option" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(dd) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(ee) "Performance - Based Compensation" means compensation qualifying
as "performance-based compensation" under Section 162(m) of the
Code.
(ff) "Performance Shares" means Shares or an Award denominated in
Shares which may be earned in whole or in part upon attainment of
performance criteria established by the Administrator.
(gg) "Performance Units" means an Award which may be earned in whole or
in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other
securities or a combination of cash, Shares or other securities as
established by the Administrator.
(hh) "Plan" means this 2000 Stock Incentive Plan.
(ii) "Related Entity" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other
entity in which the Company, a Parent or a Subsidiary holds a
substantial ownership interest, directly or indirectly.
(jj) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such
restrictions on transfer, rights of first refusal, repurchase
provisions, forfeiture provisions, and other terms and conditions
as established by the Administrator.
(kk) "SAR" means a stock appreciation right entitling the Grantee to
Shares or cash compensation, as established by the Administrator,
measured by appreciation in the value of Common Stock.
(ll) "Senior Officer" means:
(i) the chair or vice chair of the Board, the president, a
vice-president, the secretary, the treasurer or the general
manager of the Company;
(ii) any individual who performs functions for a person similar
to those normally performed by an individual occupying any
office specified in paragraph 2.(ll)(i) above, and
(iii) the five (5) highest paid employees of the Company,
including any individual referred to in paragraph 2.(ll)(i)
or 2.(ll)(ii) and excluding a commissioned salesperson who
does not act in a managerial capacity.
(mm) "Share" means a share of the Common Stock.
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(nn) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(oo) "Related Entity Disposition" means the sale, distribution or other
disposition by the Company of all or substantially all of the
Company's interests in any Related Entity effected by a sale,
merger or consolidation or other transaction involving that
Related Entity or the sale of all or substantially all of the
assets of that Related Entity.
3. STOCK SUBJECT TO THE PLAN
Subject to the provisions of Section 10, below, the maximum aggregate number of
Shares which may be issued pursuant to all Awards (including Options) is Two
Hundred Thousand (200,000) Shares. The Shares to be issued pursuant to Awards
may be authorized, but unissued, or reacquired Common Stock.
Any Shares covered by an Award (or portion of an Award) which is forfeited or
cancelled, expires or is settled in cash, shall be deemed not to have been
issued for purposes of determining the maximum aggregate number of Shares which
may be issued under the Plan. Shares that actually have been issued under the
Plan pursuant to an Award shall not be returned to the Plan and shall not become
available for future issuance under the Plan, except that if Shares are
forfeited or repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
No Insider of the Company is eligible to receive an Award where:
(a) Insiders are not Directors or Senior Officers of the Company and
receiving Options as Consultants of the Company;
(b) any Award, together with all of the Company's other previously
established or proposed Awards could result at any time in:
(i) the number of Shares reserved for issuance pursuant to
Options granted to Insiders exceeding 10% of the
outstanding issue of Common Stock; or
(ii) the issuance to Insiders, within a one year period of a
number of Shares exceeding 10% of the outstanding issue of
the Common Stock;
provided, however, that this restriction on the eligibility of Insiders to
receive an Award will cease to apply if it is no longer required under any
Applicable Laws.
4. ADMINISTRATION
(a) Plan Administrator
(i) Administration with Respect to Eligible Employees. With
respect to grants of Awards to Eligible Employees, the Plan
shall be administered by (A) the Board or (B) a Committee
designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed
by the Board.
(ii) Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any
Covered Employee intended to qualify as
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Performance-Based Compensation shall be made only by a
Committee (or subcommittee of a Committee) which is
comprised solely of two or more Directors eligible to serve
on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards
granted to Covered Employees, references to the
"Administrator" or to a "Committee" shall be deemed to be
references to such Committee or subcommittee.
(iii) Administration Errors. In the event an Award is granted in
a manner inconsistent with the provisions of this
subsection 4.(a), such Award shall be presumptively valid
as of its grant date to the extent permitted by the
Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the
Board, the Administrator shall have the authority, in its
discretion:
(i) to select the Eligible Employees to whom Awards may be
granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are granted
hereunder;
(iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted
hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Award granted
hereunder;
(vi) to amend the terms of any outstanding Award granted under
the Plan, including a reduction in the exercise price (or
base amount on which appreciation is measured) of any Award
to reflect a reduction in the Fair Market Value of the
Common Stock since the grant date of the Award, provided
that any amendment that would adversely affect the
Grantee's rights under an outstanding Award shall not be
made without the Grantee's written consent;
(vii) the Administrator shall have the right to suspend the right
of a holder to exercise all or part of a stock option for
any reason that the Administrator considers in the best
interest of the Company;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable
foreign jurisdictions and to afford Grantees favourable
treatment under such laws; provided, however, that no Award
shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions
which are inconsistent with the provisions of the Plan; and
(ix) to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be conclusive and
binding on all persons.
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5. ELIGIBILITY
Options and Awards other than Options may be granted to Eligible Employees. An
Eligible Employee who has been granted an Award may, if otherwise eligible, be
granted additional Awards.
6. TERMS AND CONDITIONS OF AWARDS
(a) Type of Awards. The Administrator is authorized under the Plan to
award any type of arrangement to an Eligible Employee that is not
inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an
Option, (iii) a SAR or similar right with a fixed or variable
price related to the Fair Market Value of the Shares and with an
exercise or conversion privilege related to the passage of time,
the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions, or (iv) any other
security with the value derived from the value of the Shares. Such
awards include, without limitation, Options, SARs, sales or
bonuses of Restricted Stock, Performance Units or Performance
Shares, and an Award may consist of one such security or benefit,
or two (2) or more of them in any combination or alternative.
(b) Designation of Award. Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be
designated as either an Incentive Stock Option or a Non-Qualified
Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of Shares subject to
Options designated as Incentive Stock Options which become
exercisable for the first time by a Grantee during any calendar
year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options, to the extent of the Shares
covered thereby in excess of the foregoing limitation, shall be
treated as Non-Qualified Stock Options. For this purpose, Options
shall be taken into account in the order in which they were
granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares
is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and
conditions of each Award including, but not limited to, the Award
vesting schedule, repurchase provisions, rights of first refusal,
forfeiture provisions, form of payment (cash, Shares, or other
consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The
performance criteria established by the Administrator may be based
on any one of, or combination of, increase in share price,
earnings per share, total shareholder return, return on equity,
return on assets, return on investment, net operating income, cash
flow, revenue, economic value added, personal management
objectives, or other measures of performance selected by the
Administrator. Partial achievement of the specified criteria may
result in a payment or vesting corresponding to the degree of
achievement as specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may issue
Awards under the Plan in settlement, assumption or substitution
for, outstanding awards or obligations to grant future awards in
connection with the Company or a Related Entity acquiring another
entity, an interest in another entity or an additional interest in
a Related Entity whether by merger, stock purchase, asset purchase
or other form of transaction.
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(e) Deferral of Award Payment. The Administrator may establish one or
more programs under the Plan to permit selected Grantees the
opportunity to elect to defer receipt of consideration upon
exercise of an Award, satisfaction of performance criteria, or
other event that absent the election would entitle the Grantee to
payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures,
the timing of such elections, the mechanisms for payments of, and
accrual of interest or other earnings, if any, on amounts, Shares
or other consideration so deferred, and such other terms,
conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(f) Award Exchange Programs. The Administrator may establish one or
more programs under the Plan to permit selected Grantees to
exchange an Award under the Plan for one or more other types of
Awards under the Plan on such terms and conditions as determined
by the Administrator from time to time.
(g) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing
particular forms of Awards to one or more classes of Grantees on
such terms and conditions as determined by the Administrator from
time to time.
(h) Individual Option and SAR Limit. The maximum number of Shares with
respect to which Options and SARs may be granted to any Employee
in any fiscal year of the Company shall be five percent (5%) of
the outstanding Shares. The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's
capitalization pursuant to Section 10, below.
(i) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an
Eligible Employee to exercise any part or all of the Award prior
to full vesting of the Award. Any unvested Shares received
pursuant to such exercise may be subject to a repurchase right in
favour of the Company or a Related Entity or to any other
restriction the Administrator determines to be appropriate.
(j) Term of Award. The term of each Award shall be the term stated in
the Award Agreement, provided, however, that the term of an Option
shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted
to a Grantee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Award
Agreement.
(k) Transferability of Awards. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Grantee, only by the
Grantee; provided, however, that the Grantee may designate a
beneficiary of the Grantee's Option in the event of the Grantee's
death on a beneficiary designation form provided by the
Administrator. Other Awards shall be transferable to the extent
provided in the Award Agreement.
(l) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the
determination to grant such Award, or such other date as is
determined by the Administrator. Notice of the grant determination
shall
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be given to each Employee, Director or Consultant to whom an Award
is so granted within a reasonable time after the date of such
grant.
7. AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION, TAXES AND RELOAD OPTIONS
(a) Exercise or Purchase Price. The exercise or purchase price, if
any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
A. granted to an Eligible Employee who, at the time of the
grant of such Option owns stock representing more than
ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be not less than one
hundred ten percent (110%) of the Fair Market Value per
Share on the date of grant; or
B. granted to any Eligible Employee other than an Eligible
Employee described in the preceding paragraph, the per
Share exercise price shall be not less than one hundred
percent (100%) of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the per Share
exercise price shall be not less than one hundred percent
(100%) of the Fair Market Value per Share on the date of
grant unless otherwise determined by the Administrator.
(iii) In the case of Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase
price, if any, shall be not less than one hundred percent
(100%) of the Fair Market Value per Share on the date of
grant.
(iv) In the case of other Awards, such price as is determined by
the Administrator.
(b) Consideration. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an
Award including the method of payment, shall be determined by the
Administrator (and, in the case of an Option, shall be determined
at the time of grant). In addition to any other types of
consideration the Administrator may determine, the Administrator
is authorized to accept as consideration for Shares issued under
the Plan the following:
(i) cash;
(ii) check;
(iii) surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator
may require (including withholding of Shares otherwise
deliverable upon exercise of the Award) which have a Fair
Market Value on the date of surrender or attestation equal
to the aggregate exercise price of the Shares as to which
said Award shall be exercised (but only to the extent that
such exercise of the Award would not result in an
accounting
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compensation charge with respect to the Shares used to pay
the exercise price unless otherwise determined by the
Administrator); or
(iv) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any Grantee
or other person until such Grantee or other person has made
arrangements acceptable to the Administrator for the satisfaction
of any foreign, federal, state, or local income and employment tax
withholding obligations, including, without limitation,
obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Option. Upon
exercise of an Award, the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax withholding
of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the
Administrator may issue the Grantee an additional Option, with
terms identical to the Award Agreement under which the Option was
exercised, but at an exercise price as determined by the
Administrator in accordance with the Plan.
8. EXERCISE OF AWARD
(a) Procedure for Exercise; Rights as a Shareholder.
(i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the
Administrator under the terms of the Plan and specified in
the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in
accordance with the terms of the Award by the person
entitled to exercise the Award and full payment for the
Shares with respect to which the Award is received by the
Company. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder
shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award.
The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Award. No
adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock
certificate is issued, except as provided in the Award
Agreement or Section 10, below.
(b) Exercise of Award Following Termination of Continuous Service.
(i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be
exercised following the termination of a Grantee's
Continuous Service only to the extent provided in the Award
Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous
Service for a specified period, the
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Award shall terminate to the extent not exercised on the
last day of the specified period or the last day of the
original term of the Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option to the
extent not exercised within the time permitted by law for
the exercise of Incentive Stock Options following the
termination of a Grantee's Continuous Service shall convert
automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent
exercisable by its terms for the period specified in the
Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Award previously granted,
based on such terms and conditions as the Administrator shall
establish and communicate to the Grantee at the time that such
offer is made.
9. CONDITIONS UPON ISSUANCE OF SHARES
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of
such Shares pursuant thereto shall comply with all Applicable
Laws, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant
at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any Applicable
Laws.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Subject to any required action by the shareholders of the Company, the number of
Shares covered by each outstanding Award, and the number of Shares which have
been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan, the exercise or purchase
price of each such outstanding Award, as well as any other terms that the
Administrator determines require adjustment shall be proportionately adjusted
for (i) any increase or decrease in the number of issued Shares resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, (ii) any other increase or decrease in the
number of issued Shares effected without receipt of consideration by the
Company, or (iii) as the Administrator may determine in its discretion, any
other reorganization transaction with respect to Common Stock to which Section
424(a) of the Code applies; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been effected without
receipt of consideration. Such adjustment shall be made by the Administrator and
its determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.
11. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY DISPOSITIONS
Except as may be provided in an Award Agreement:
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(a) The Administrator shall have the authority, exercisable either in
advance of any actual or anticipated Corporate Transaction, Change
in Control or Related Entity Disposition or at the time of an
actual Corporate Transaction, Change in Control or Related Entity
Disposition and exercisable at the time of the grant of an Award
under the Plan or any time while an Award remains outstanding, to
provide for the full automatic vesting and exercisability of one
or more outstanding unvested Awards under the Plan and the release
from restrictions on transfer and repurchase or forfeiture rights
of such Awards in connection with a Corporate Transaction, Change
in Control or Related Entity Disposition, on such terms and
conditions as the Administrator may specify. The Administrator
also shall have the authority to condition any such Award vesting
and exercisability or release from such limitations upon the
subsequent termination of the Continuous Service of the Grantee
within a specified period following the effective date of the
Corporate Transaction, Change in Control or Related Entity
Disposition. The Administrator may provide that any Awards so
vested or released from such limitations in connection with a
Change in Control or Related Entity Disposition, shall remain
fully exercisable until the expiration or sooner termination of
the Award. Effective upon the consummation of a Corporate
Transaction, all outstanding Awards under the Plan shall terminate
unless assumed by the successor company or its parent.
(b) The portion of any Option accelerated under this Section 11 in
connection with a Corporate Transaction, Change in Control or
Related Entity Disposition shall remain exercisable as an
Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not
exceeded. To the extent such dollar limitation is exceeded, the
accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.
12. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective upon the earlier to occur of its adoption by the
Board or its approval by the shareholders of the Company. It shall continue in
effect for a term of ten (10) years unless sooner terminated. Subject to Section
17, below, and Applicable Laws, Awards may be granted under the Plan upon its
becoming effective.
13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
(a) The Board may at any time amend, suspend or terminate the Plan. To
the extent necessary to comply with Applicable Laws, the Company
shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
(b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 13.(a), above) shall not
affect Awards already granted, and such Awards shall remain in
full force and effect as if the Plan had not been amended,
suspended or terminated, unless mutually agreed otherwise between
the Grantee and the Administrator, which agreement must be in
writing and signed by the Grantee and the Company.
<PAGE> 89
-14-
14. RESERVATION OF SHARES
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
15. NO EFFECT ON TERMS OF EMPLOYMENT/CONSULTING RELATIONSHIP
The Plan shall not confer upon any Grantee any right with respect to the
Grantee's Continuous Service, nor shall it interfere in any way with his or her
right or the Company's right to terminate the Grantee's Continuous Service at
any time, with or without cause.
16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS
Except as specifically provided in a retirement or other benefit plan of the
Company or a Related Entity, Awards shall not be deemed compensation for
purposes of computing benefits or contributions under any retirement plan of the
Company or a Related Entity, and shall not affect any benefits under any other
benefit plan of any kind or any benefit plan subsequently instituted under which
the availability or amount of benefits is related to level of compensation. The
Plan is not a "Retirement-Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
17. SHAREHOLDER APPROVAL
The Plan shall be subject to the Plan's approval by the shareholders of the
Company within twelve (12) months from the date the Plan is adopted by the
Company's Board of Directors. Such shareholder approval shall be obtained in the
degree and manner required under Applicable Laws. The Administrator may grant
Awards under the Plan prior to approval by the shareholders, but until such
approval is obtained, no such Award shall be exercisable. In the event that
shareholder approval is not obtained within the twelve (12) month period
provided above, all Awards previously granted under the Plan shall be cancelled
and of no force or effect.
18. GOVERNING LAW
The Plan shall be governed by the laws of the Province of British Columbia and
the laws of Canada applicable therein; provided, however, that any Award
Agreement may provide by its terms that it shall be governed by the laws of any
other jurisdiction as may be deemed appropriate by the parties thereto.
<PAGE> 90
PROXY
ANNUAL AND EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS OF SMARTIRE SYSTEMS
INC., TO BE HELD AT THE OFFICES OF CLARK, WILSON, SUITE 800 - 885 WEST GEORGIA
STREET, VANCOUVER, BC ON DECEMBER 5, 2000 AT 9:00 O'CLOCK IN THE FORENOON
THE UNDERSIGNED SHAREHOLDER OF THE COMPANY HEREBY APPOINTS, Robert Rudman, the
President and a Director of the Company, or failing this person, Kevin Carlson,
the Secretary and a Director of the Company, or in the place of the foregoing,
__________________________, (Print the Name) as proxyholder for and on behalf of
the Shareholder with the power of substitution to attend, act and vote for and
on behalf of the Shareholder in respect of all matters that may properly come
before the Meeting of the Shareholders of the Company and at every adjournment
thereof, to the same extent and with the same powers as if the undersigned
Shareholder were present at the said Meeting, or any adjournment thereof.
THE UNDERSIGNED SHAREHOLDER HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN TO ATTEND
AND VOTE AT SAID MEETING.
SIGN HERE: _______________________________________
PLEASE PRINT NAME: _______________________________________
DATE: _______________________________________
THIS PROXY MAY NOT BE VALID UNLESS IT IS SIGNED AND DATED.
SEE IMPORTANT INFORMATION & INSTRUCTIONS ON REVERSE.
RESOLUTIONS (For full details of each item, please see the enclosed Notice of
Meeting and Information Circular)
<TABLE>
<CAPTION>
For Against
<S> <C> <C>
1. To authorize the Directors to fix the remuneration to be paid to the ________ __________
auditor of the Company
2. To determine the number of Directors at six ________ __________
3. To approve a special resolution altering the authorized capital of the
Company by increasing the number of Common Shares without par value by
181,251 Common Shares ________ __________
4. To approve a special resolution that the existing Articles of the
Company be cancelled and that the form of Articles attached as Exhibit
"B" to the accompanying Proxy Statement and Information Circular be
adopted as the Articles of the Company ________ __________
5. To approve an ordinary resolution to adopt the 1999 Incentive
Compensation Plan ________ __________
6. To approve an ordinary resolution to adopt the 2000 Stock Incentive Plan ________ __________
7. To approve an ordinary resolution to adopt the 2000 US Stock Incentive
Plan ________ __________
For Withhold
8. Appointment of Auditors ________ __________
9. To elect LAWRENCE BECERRA as a Director ________ __________
10. To elect JOHN BOLEGOH as a Director ________ __________
11. To elect KEVIN CARLSON as a Director ________ __________
12. To elect BERNARD PINSKY as a Director ________ __________
13. To elect ROBERT RUDMAN as a Director ________ __________
14. To elect DANA STONEROOK as a Director ________ __________
=============================================================================================================================
</TABLE>
<PAGE> 91
INSTRUCTIONS FOR COMPLETION OF PROXY
1. THIS PROXY IS SOLICITED BY THE MANAGEMENT OF THE COMPANY.
2. This form of proxy ("Instrument of Proxy") MAY NOT BE VALID UNLESS IT IS
SIGNED by the Shareholder or by his attorney duly authorized by him in
writing, or, in the case of a corporation, by a duly authorized officer
or representative of the corporation; and IF EXECUTED BY AN ATTORNEY,
OFFICER, OR OTHER DULY APPOINTED REPRESENTATIVE, the original or a
notarial copy of the instrument so empowering such person, or such other
documentation in support as shall be acceptable to the Chairman of the
Meeting, must accompany the Instrument of Proxy.
3. IF THIS INSTRUMENT OF PROXY IS NOT DATED in the space provided,
authority is hereby given by the Shareholder for the proxyholder to date
this proxy on the date on which it is received by Pacific Corporate
Trust Company.
4. A SHAREHOLDER WHO WISHES TO ATTEND THE MEETING AND VOTE ON THE
RESOLUTIONS IN PERSON, may do so as follows:
(a) IF THE SHAREHOLDER IS REGISTERED AS SUCH ON THE BOOKS OF THE
COMPANY, simply register the Shareholder's attendance with the
scrutineers at the Meeting.
(b) IF THE SECURITIES OF A SHAREHOLDER are HELD BY A FINANCIAL
INSTITUTION, (i) cross off the management appointees' names and
insert the Shareholder's name in the blank space provided; (ii)
indicate a voting choice for each resolution or, alternatively,
leave the choices blank if you wish not to vote until the
Meeting; and (iii) sign, date and return the Instrument of Proxy
to the financial institution or its agent. At the Meeting, a
vote will be taken on each of the resolutions set out on this
Instrument of Proxy and the Shareholder's vote will be counted
at that time.
5. A SHAREHOLDER WHO IS NOT ABLE TO ATTEND THE MEETING IN PERSON BUT WISHES
TO VOTE ON THE RESOLUTIONS, may do either of the following:
(a) TO APPOINT ONE OF THE MANAGEMENT APPOINTEES named on the
Instrument of Proxy, leave the wording appointing a nominee as
is, and simply sign, date and return the Instrument of Proxy.
Where no choice is specified by a Shareholder with respect to a
resolution set out on the Instrument of Proxy, a management
appointee acting as proxyholder will vote the securities as if
the Shareholder had specified an affirmative vote.
(b) TO APPOINT ANOTHER PERSON, who need not be a Shareholder of the
Company, to vote according to the Shareholder's instructions,
cross off the management appointees' names and insert the
Shareholder's appointed proxyholder's name in the space
provided, and then sign, date and return the Instrument of
Proxy. Where no choice is specified by the Shareholder with
respect to a resolution set out on the Instrument of Proxy, this
Instrument of Proxy confers discretionary authority upon the
Shareholder's appointed proxyholder.
6. THE SECURITIES REPRESENTED BY THIS INSTRUMENT OF PROXY WILL BE VOTED OR
WITHHELD FROM VOTING IN ACCORDANCE WITH THE INSTRUCTIONS OF THE
SHAREHOLDER ON ANY POLL of a resolution that may be called for and, if
the Shareholder specifies a choice with respect to any matter to be
acted upon, the securities will be voted accordingly. Further, if so
authorized by this Instrument of Proxy, the securities will be voted by
the appointed proxyholder with respect to any amendments or variations
of any of the resolutions set out on the Instrument of Proxy or matters
which may properly come before the Meeting as the proxyholder in its
sole discretion sees fit.
7. If a registered Shareholder has returned the Instrument of Proxy, THE
SHAREHOLDER MAY STILL ATTEND THE MEETING and may vote in person should
the Shareholder later decide to do so. However, to do so, the
Shareholder must record his/her attendance with the scrutineers at the
Meeting and revoke the Instrument of Proxy in writing.
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TO BE REPRESENTED AT THE MEETING, THIS INSTRUMENT OF PROXY MUST BE RECEIVED AT
THE OFFICE OF "PACIFIC CORPORATE TRUST COMPANY" BY MAIL OR BY FAX NO LATER THAN
48 HOURS PRIOR TO THE COMMENCEMENT OF THE MEETING (OR IF ADJOURNED OR POSTPONED,
ANY RECONVENING THEREOF) OR WITH THE CHAIRMAN OF THE MEETING ON THE DAY OF THE
MEETING, OR ANY ADJOURNMENT THEREOF.
The mailing address of Pacific Corporate Trust Company is #830 - 625 Howe
Street, Vancouver, BC V6C 3B8, and its fax number is (604)689-8144.
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