<PAGE> 1
POLYMER SOLUTIONS, INC.
SUITE 410, 1055 WEST HASTINGS STREET
VANCOUVER, BRITISH COLUMBIA
V6E 2E9
TEL: (604) 683-3473
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 6, 1998
NOTICE IS HEREBY GIVEN that the Annual General Meeting (the "Meeting") of the
shareholders of Polymer Solutions, Inc. (the "Company"), a Nevada corporation,
will be held at Campney & Murphy, Main Boardroom, 2100 - 1111 West Georgia
Street, Vancouver, British Columbia, Canada on Thursday, August 6, 1998 at 10:00
a.m. (Pacific time) for the following purposes:
1. To appoint Price Waterhouse, Certified Public Accountants as the Company's
independent public auditor for the fiscal year ending March 31, 1999.
2. To elect the following persons as Directors of the Company for a term of 1
year:
Gordon L. Ellis
Gerald A. Habib
Darryl F. Jones
William A. Maligie
Stephen H. Silbernagel
John J. Sutherland
E. Laughlin Flanagan
3. To approve the adoption of the Polymer Solutions, Inc. 1998 Economic Value
Added Incentive Compensation Plan, the terms and conditions of which are
summarized in the accompanying Proxy Statement, authorizing the grant of
options to purchase Common shares of the Company and reservation of the
Common Shares.
4. To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on June 26, 1998 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting or any adjournment(s) thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, SHAREHOLDERS ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY IN THE
ENCLOSED ENVELOPE. A proxy will not be valid unless it is received at the office
of the Transfer Agent, Pacific Corporate Trust Company, 830-625 Howe Street,
Vancouver, British Columbia, V6C 3B6, not less than 48 hours (excluding
Saturdays, Sundays and holidays) before the time fixed for the Meeting. A Form
of Proxy received at the offices of the Transfer Agent or Company after this
time, but prior to the Meeting, may be accepted or rejected as late, at the
discretion of the Chairman. Your Form of Proxy will be returned to you if you
are present at the Meeting and should request its return.
DATED at Vancouver, British Columbia, BY ORDER OF THE BOARD OF DIRECTORS
this 3rd day of July, 1998.
/s/ Gordon L. Ellis
----------------------------------
Gordon L. Ellis, Chairman
<PAGE> 2
POLYMER SOLUTIONS, INC.
Suite 410, 1055 West Hastings Street
Vancouver, British Columbia
V6E 2E9
PROXY STATEMENT
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 6, 1998
- --------------------------------------------------------------------------------
SOLICITATION OF PROXIES
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES
BY THE BOARD OF DIRECTORS (THE "BOARD OF DIRECTORS" OR "BOARD") OF POLYMER
SOLUTIONS, INC. (THE "COMPANY"), A NEVADA CORPORATION, FOR USE AT THE ANNUAL
GENERAL MEETING (THE "MEETING") OF THE SHAREHOLDERS OF THE COMPANY TO BE HELD ON
AUGUST 6, 1998 AT THE TIME AND PLACE AND FOR THE PURPOSES SET FORTH IN THE
ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS. This Proxy
Statement and the accompanying Form of Proxy are being mailed to shareholders of
the Company entitled to vote at the Meeting on or about July 3, 1998. It is
expected that the solicitation will be primarily by mail. Proxies may also be
solicited personally or by mail, telephone or telegraph by directors
("Directors"), officers or regular employees of the Company for no additional
compensation, however, out-of-pocket expenses will be reimbursed. Brokerage
houses and other custodians, nominees and fiduciaries will be requested, in
connection with the shares registered in their names, to forward solicitation
materials to the beneficial owners of such shares. The Company will reimburse
brokerage firms and other persons representing beneficial owners of the common
shares for their reasonable expenses in forwarding solicitation material to such
beneficial owners. THE COSTS OF THIS SOLICITATION WILL BE BORNE BY THE COMPANY.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the accompanying Form of Proxy are executive officers
("Executive Officers") of the Company planning to be in attendance at the
Meeting and nominated by the Board of Directors. A SHAREHOLDER DESIRING TO
APPOINT SOME OTHER PERSON (WHO NEED NOT BE A SHAREHOLDER) TO REPRESENT HIM OR
HER AT THE MEETING AS PROXYHOLDER MAY DO SO, EITHER BY:
1. STRIKING OUT THE PRINTED NAMES AND INSERTING THE DESIRED PERSON'S NAME IN
THE BLANK SPACE PROVIDED IN THE FORM OF PROXY; OR
2. BY COMPLETING ANOTHER PROPER FORM OF PROXY.
The completed Form of Proxy must be received at the office of the transfer
agent, Pacific Corporate Trust Company (the "Transfer Agent"), located at
830-625 Howe Street, Vancouver, British Columbia, V6C 3B8, not less than 48
hours (excluding Saturdays, Sundays and holidays) before the time fixed for the
Meeting or before the time that the Meeting is to be reconvened following any
adjournment thereof. A Form of Proxy received at the offices of the Transfer
Agent or the Company after this time, but prior to the Meeting, may be accepted
or rejected as late, at the discretion of the Chairman.
A shareholder's Form of Proxy will be returned if the shareholder is present at
the Meeting and should request its return. A shareholder who has given a Form of
Proxy may also revoke it by an instrument in writing delivered to the office of
the Transfer Agent or to the registered office of the Company, 1575 Delucchi
Lane, Suite 224, Reno, Nevada, 89502 U.S.A., at any time up to and including the
last business day preceding the day of the Meeting, or any adjournment thereof,
or to the Chairman of the Meeting on the day of the Meeting or any adjournment
thereof, or in any other manner provided by law. If the shareholder is a
corporation, any such instrument of revocation must be executed under the
corporate seal or by a duly authorized officer or attorney of the corporation.
<PAGE> 3
VOTING OF PROXIES
If the Form of Proxy is properly completed and returned to the Transfer Agent,
the shares represented by the Form of Proxy will be voted at the Meeting. Where
a shareholder indicates a choice with respect to any matter to be acted upon at
the Meeting, the shares will be voted in accordance with the specification so
made. IF A CHOICE IS NOT SO SPECIFIED, IT IS INTENDED THAT THE PERSON DESIGNATED
BY THE BOARD OF DIRECTORS IN THE ACCOMPANYING FORM OF PROXY WILL VOTE THE SHARES
REPRESENTED BY THE FORM OF PROXY IN FAVOUR OF EACH MATTER IDENTIFIED ON THE FORM
OF PROXY AND, THEREFORE, "FOR" THE NOMINEES OF THE COMPANY FOR DIRECTORS AND
AUDITOR, AND "FOR" THE ADOPTION OF THE 1998 ECONOMIC VALUE ADDED INCENTIVE
COMPENSATION PLAN.
The Form of Proxy accompanying this Proxy Statement confers discretionary
authority upon the named proxyholder with respect to amendments or variations to
the matters identified in the accompanying Notice of Annual and Special Meeting
and with respect to any other matters which may properly come before the
Meeting. As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no such amendment or variation or matters to come before the
meeting other than those referred to in the accompanying Notice of Annual
General Meeting.
VOTING SHARES
On June 26, 1998, 5,344,950 common shares ("Common Shares") without par value of
the Company were issued and outstanding, each such share carrying the right to
one vote at the Meeting. The Record Date as of which members are entitled to
receive notice of and to vote at the Meeting is June 26, 1998. The closing price
of the Company's Common Shares on the Vancouver Stock Exchange on June 26, 1998
was Cdn$1.00.
FINANCIAL STATEMENTS
The Company's 1998 Annual Report, which contains the consolidated Financial
Statements for the fiscal year ended March 31, 1998 and Management's Discussion
and Analysis thereon, is being mailed with this Proxy Statement to shareholders
entitled to notice of the Meeting.
AUDITORS
APPOINTMENT OF AUDITORS (ITEM 1 OF FORM OF PROXY)
The Board of Directors of the Company recommends Price Waterhouse, Certified
Public Accountants for appointment by the shareholders as the Company's
independent public auditor for the fiscal year ended March 31, 1999. Price
Waterhouse has acted as the Company's auditor since fiscal 1989 and will have a
representative present at the Meeting to make a statement, if they desire to do
so, and to respond to any questions from the shareholders.
2
<PAGE> 4
PRINCIPAL SHAREHOLDERS AND
SHARE OWNERSHIP OF MANAGEMENT
The following table provides information, as of the Record Date, with respect to
Common Share ownership by (i) the persons known to management beneficially
owning Common Shares carrying more than 5% of the voting rights attached to all
Common Shares of the Company, (ii) each Director, (iii) the Chief Executive
Officer, (iv) each Executive Officer named in the Summary Compensation Table,
and (v) all Directors and Executive Officers as a group. Except as otherwise
indicated in the footnotes below, all of the shares listed for a person named in
the table are directly held, with sole voting and dispositive power.
<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OWNED PERCENT OF CLASS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Gordon L. Ellis (1)(2)(3)(4)(5) 1,217,640 21.7%
North Vancouver, British Columbia, Canada
Common Stephen H. Silbernagel (6)(7) 137,689 2.5%
Vancouver, British Columbia, Canada
Common John J. Sutherland (8) 35,667 <1.0%
West Vancouver, British Columbia, Canada
Darryl F. Jones (9)
Common Surrey, British Columbia, Canada 50,934 <1.0%
Gerald A. Habib (12)
Common Shokan, New York, USA 32,330 <1.0%
Common William A. Maligie (10)(11)
Chico, California, USA 349,444 6.2%
- ---------------------------------------------------------------------------------------------------------------------------
Common Directors and Executive Officers 1,893,704 31.6%
as a Group (7 Persons)(13)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 572,000 common shares and 81,500 common shares underlying share
purchase warrants and 38,888 common shares subject to earn-out provisions,
held by ABE Industries (1980) Inc. Mr. Ellis controls voting and
dispositive powers.
(2) Includes 67,500 common shares underlying share purchase warrants held by
Mr. Ellis.
(3) Includes 46,670 common shares underlying incentive stock options granted
to Mr. Ellis.
(4) Includes 15,500 common shares and 7,750 common shares underlying share
purchase warrants and 116,666 common shares subject to earn-out
provisions, held by Shelan Development Corp. Gordon Ellis and Shelley R.
Smith each own a 50% interest in Shelan and equally share voting and
dispositive powers.
(5) Includes 83,000 commons shares and 41,500 common shares underlying share
purchase warrants and 11,666 common shares subject to earn-out provisions
held by Gordann Consultants Ltd. Gordon L. Ellis owns 51% interest and Mr.
Ellis' spouse owns 49% interest in Gordann Consultants Ltd., Mr. Ellis
controls voting and dispositive powers.
(6) Includes 30,000 common shares underlying incentive stock options granted
to Mr. Silbernagel.
(7) Includes 41,000 common shares and 20,500 common shares underlying share
purchase warrants granted to L.E. Management Ltd. Mr. Silbernagel owns 33%
interest in L.E. Management Ltd. and controls 100% of share voting and
dispositive powers.
(8) Includes 30,000 common shares underlying incentive stock options granted
to Mr. Sutherland.
(9) Includes 30,000 common shares underlying incentive stock options granted
to Mr. Jones.
(10) Includes 150,000 common shares underlying incentive stock options granted
to Mr. Maligie.
(11) Includes 60,000 common shares underlying share purchase warrants granted
to Mr. Maligie.
(12) Includes 32,330 common shares underlying incentive stock options granted
to Mr. Habib.
(13) Includes 20,000 common shares and 10,000 common shares underlying share
purchase warrants and 40,000 common shares underlying incentive stock
options granted to Mr. Walls.
3
<PAGE> 5
DIRECTORS AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS (ITEM 2 OF FORM OF PROXY)
The number of Directors may be determined by resolution of the Board of
Directors at any meeting; presently, the Board has set the number of Directors
at seven (7).
Unless otherwise directed in the accompanying Form of Proxy, the persons
appointed in the Form of Proxy intend to nominate and vote the shares
represented by such Form of Proxy "FOR" the election of each of the following
nominees for the office of Director of the Company, to serve as a Director for a
term of one year, or until his successor is duly elected or appointed, unless
his office is earlier vacated in accordance with the By-laws of the Company or
he becomes disqualified to act as a Director. All of the nominees are presently
Directors and will have their terms of office as Directors expire at the
Meeting.
<TABLE>
<CAPTION>
DIRECTOR OF TERM AS
PRESENT POSITION PREDECESSOR DIRECTOR OF DIRECTOR
NOMINEE AGE WITH COMPANY SINCE PSI SINCE TO EXPIRE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gordon L. Ellis 51 Director, Chairman Dec. 1996 Feb. 26, 1997 1998
Stephen H. Silbernagel 51 Director Sept. 1990 Feb. 26, 1997 1998
Darryl F. Jones 44 Director Jan. 1994 Feb. 26, 1997 1998
John J. Sutherland 48 Director Aug. 1989 Feb. 26, 1997 1998
William A. Maligie 40 Director, President of AMT Sept. 1995 Feb. 26, 1997 1998
U.S.A.
Gerald A. Habib 52 Director - May 2, 1996 1998
E. Laughlin Flanagan 50 Director, President, CEO - Mar. 25, 1998 1998
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Although the Company does not contemplate that the above named nominees will
refuse or be unable to accept or serve as Directors of the Company, the persons
appointed in the enclosed accompanying Form of Proxy intend, if a nominee
becomes unavailable, to vote the shares represented by the Form of Proxy "FOR"
the election of such other person as may be nominated or designated by the Board
of Directors, unless they are directed by the Form of Proxy to do otherwise.
No family relationship exists between any Director, Executive Officer, or
significant employee.
The following is a brief summary of the business experience, during the past
five years, of each Director and nominee for Director of the Company.
Gordon L. Ellis has been Chairman and a Director of the Company or its
predecessors since December 1986. Mr. Ellis is also a Director of Alternative
Materials Technology, Inc. ("AMT USA"), the Company's operating subsidiary. Mr.
Ellis is President and a director of ABE Industries (1980) Inc. and Gordann
Consultants Ltd., both privately-held management or holding companies. Mr. Ellis
is President, C.E.O. and a director of International Absorbents Inc. ("IAB"), a
publicly-held company, listed on the OTC Bulletin Board, which manufactures and
sells absorbent products for the industrial and animal care markets. Mr. Ellis
is a Director of Orion Technologies, Inc. ("OTI") a company engaged in the
development and operation of a computer network to provide EDI and electronic
financial services to financing institutions in Asia.
Stephen H. Silbernagel has been a director of the Company or its predecessors
since September 1990. Mr. Silbernagel is a lawyer, practicing in Vancouver,
British Columbia and is a partner in the firm Silbernagel & Company. Mr.
Silbernagel is a director of IAB.
Darryl F. Jones has been a director of the Company or its predecessors since
January 1994. Mr. Jones is a Chartered Accountant and is Vice President, Finance
for OTI. Prior to joining Orion in early 1997, Mr. Jones was President, CEO and
a director of IAB.
4
<PAGE> 6
John J. Sutherland has been a director of the Company or its predecessors since
August, 1989. Mr. Sutherland is a Certified General Accountant and is President
of AVCAN Global Systems Inc. ("AVCAN"), a VSE-listed company which develops
software for use in global positioning satellite systems. Prior to joining AVCAN
in January 1997, Mr. Sutherland was Vice-President Finance of Arequipa Resources
Ltd. and a financial consultant to public and private companies in Vancouver,
British Columbia. Mr. Sutherland is a director of IAB.
William A. Maligie has been a Director of the Company or its predecessors since
September 1995. Mr. Maligie has been a Director and the President of AMT USA
since its inception in 1989.
Mr. Habib has been a director of the Company since its organization in May 1996.
Mr. Habib is currently serving as a Director of Besicorp Group, an AMEX listed
independent energy company and as Vice-President of a small specialty water
soluble polymer company. In 1993 Mr. Habib formed The Berkshire Group, a
screening and assessment company for mergers and acquisitions. Prior, Mr. Habib
directed worldwide planning and business development for $1 Billion NL,
Chemicals. Previously, Mr. Habib was Vice-President of Elitine Corp. and
Business and Planning Manager for Olin Chemicals.
Mr. E. Laughlin Flanagan became President of the Company and CFO of AMT USA on
February 6, 1998. Effective June 1, 1998, Mr. Flanagan became President and CEO.
Immediately prior to joining the Company, Mr. Flanagan was COO, CFO and
Principal of LTAC, Inc., a holding company established for the acquisition of
other companies. Prior to that, he was VP-operations and CFO of Active Noise and
Vibration Technologies, Inc.
BOARD MATTERS AND COMMITTEES
During the 1998 fiscal year, the Board of Directors of the Company or its
predecessors held twelve regular (monthly) meetings. Each of the members of the
Board of Directors of the Company participated in at least 75% of the aggregate
number of meetings of the Board of Directors and all committees of the Board on
which the Director served during the 1998 fiscal year.
The Company's Board of Directors has two committees, an audit committee ("Audit
Committee") comprised of Messrs. Ellis, Silbernagel and Sutherland, and a stock
option committee ("Stock Option Committee") comprised of Messrs. Silbernagel,
Sutherland and Jones for the fiscal year ended March 31, 1998.
The Audit Committee held one meeting during the 1998 fiscal year. Its duties
include making recommendations to the Board of Directors concerning the hiring
and dismissal of the Company's independent auditors; reviewing the completed
audit with the independent auditors regarding the conduct of the audit,
accounting adjustments, recommendations for improving internal controls and any
other significant findings during the audit; meeting periodically with
management to discuss accounting and financial controls; and initiating and
supervising any special investigations deemed necessary.
The Stock Option Committee held one meeting during the 1998 fiscal year. Its
primary duties concern the granting and amending of incentive stock options to
employees of the Company and its subsidiaries.
Please see "SPECIAL BUSINESS" (ITEMS 3 OF THE FORM OF PROXY) for a description
of the 1998 Economic Value Added Incentive Compensation Plan "EVA Plan" approved
by the Board of Directors and submitted for approval by the shareholders at the
Meeting. The administration of this plan, which is the responsibility of the
Board of Directors, has been delegated to the Stock Option Committee, as
permitted by plan. The Stock Option Committee is therefore responsible for
determining the persons to whom and the dates on which options will be granted,
the number of shares to be subject to each option, the time or times during the
term of each option within which all or a portion of such option may be
exercised, and the other terms of the options.
EXECUTIVE OFFICERS OF THE COMPANY
For the purpose of this Proxy Statement, "Executive Officer" of the Company
means the Chairman and any Vice-Chairman of the Board of Directors, where that
person performs the functions of such officer on a full-time basis, the
President, and any Vice-President in charge of a principal business unit such as
sales, finance or production, and any officer of the Company or of a subsidiary
who performs a policy-making function in respect of the Company, whether
5
<PAGE> 7
or not such officer is also a Director of the Company or the subsidiary.
The Executive Officers of the Company (including positions held with the
operating subsidiary, Alternative Materials Technology, Inc. ("AMT USA")), their
ages, principal occupations and business experience for the past five years, and
tenures as Executive Officers are shown in the following table. Executive
officers are appointed by, and serve at the pleasure of, the Board of Directors.
<TABLE>
<CAPTION>
OFFICE HELD OFFICE HELD WITH COMPANY (OR PREDECESSORS) AND
NAME AGE SINCE OPERATING SUBSIDIARY
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gordon L. Ellis 51 1998 Chairman
1986 Chairman, President and C.E.O.
1989 Director of AMT USA; See "Election of Directors"
E. Laughlin Flanagan
50 1998 President, C.E.O. and Director
William A. Maligie
40 1989 President, C.E.O. and Director of AMT USA
1995 Director
James B. Sanders
55 1998 CFO
William Walls 32 1998 Secretary
1994 Vice President, CFO and Secretary
1992 Controller
- --------------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors submit the following report to shareholders in respect to
the compensation policies applicable to the Company's Executive Officers during
the fiscal year ended March 31, 1998.
COMPENSATION PHILOSOPHY
The Board of Directors believes that the Company's executive compensation policy
("Executive Compensation Policy") is a critical part of the effective management
of its key executives. The Executive Compensation Policy serves to reward senior
management behavior, which in turn builds the long-term value of the Company for
shareholders, by focusing on the following objectives:
- Maintaining a strong relationship between performance and rewards;
- Establishing consistent decision-making processes and rules of
conduct;
- Clearly communicating the pay program and its link to performance; and
- Actively encouraging share ownership.
EXECUTIVE COMPENSATION POLICY
The principal elements of the Company's Executive Compensation Policy are base
salary and incentive compensation (annual bonuses and stock options) and this
policy applies to all salaried executive employees.
Base Salary
The Company establishes base salaries annually in relation to comparable
positions among industry competitors and (geographical) neighbouring businesses.
Base salaries may be adjusted from time to time to reflect increased average
salary within industry and local employers, increased responsibilities
undertaken by the executive, or individual
6
<PAGE> 8
performance of the executive. Although base salaries may be set at levels
somewhat below these other employers, performance-based incentive compensation
provides an opportunity for above-market total compensation.
Employee Benefit and other Compensatory Plans
The Company provides incentive compensation in the form of annual bonuses and
grants of stock options. The Company does not have any pension, cash profit
sharing, retirement or similar plans or agreements or understandings pursuant to
which cash or non-cash compensation (including non-accountable expense
allowances or commissions) is payable to any of its Executive Officers, other
officers or Directors other than as provided in this Proxy Statement. The
Company does not plan to adopt any pension, cash profit sharing, retirement or
other similar benefit plan in the near future.
The Company, by means of the granting of stock options, seeks to provide for
itself or any subsidiary or affiliate of the Company a means to attract and
retain the best available persons for positions of substantial responsibility
and to provide certain key employees with an additional incentive to contribute
to the success of the Company. Stock option amounts are based upon an employee's
duties, responsibilities and length of employment by the Company, its
subsidiaries or affiliates.
Please see "SPECIAL BUSINESS" (ITEMS 3 OF THE FORM OF PROXY) regarding the
proposed adoption of the 1998 Economic Value Added Incentive Compensation Plan
approved by the Board of Directors and submitted for approval by the
shareholders at the Meeting.
STOCK OPTION REPRICING RATIONALE
Further to the Executive Compensation Policy discussed above, and particularly
in respect to stock options, the Stock Option Committee of the Board of
Directors periodically reviews the status of stock options granted and as yet
unexercised to determine if it is in the best interests of the Company and its
shareholders to offer a repricing of the stock option exercise price to certain
key directors, executive officers and employees as a means of ensuring a
reasonable incentive program and thus retaining their valuable services for the
long term. The amended exercise prices which arise from such repricings always
reflect the fair market value on the "Repricing Date", (ie. the trading price of
the Company's common shares on the Vancouver Stock Exchange).
<TABLE>
<S> <C> <C>
/s/ Stephen H. Silbernagel /s/ Gordon L. Ellis /s/ Darryl F. Jones
- --------------------------------- --------------------------------- ---------------------------------
Stephen H. Silbernagel Gordon L. Ellis Darryl F. Jones
Director Director Director
/s/ John J. Sutherland /s/ William A. Maligie /s/ Gerald Habib
- --------------------------------- --------------------------------- ---------------------------------
John J. Sutherland William A. Maligie Gerald Habib
Director Director Director
/s/ E. Laughlin Flanagan
- ---------------------------------
E. Laughlin Flanagan
Director
</TABLE>
7
<PAGE> 9
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the total direct or
indirect (management service agreements) compensation during the last three
fiscal years of the Company's Chairman and its other Executive Officers whose
compensation exceeded (US) $100,000. Information is given for each of the last
three fiscal years for each Executive Officer who served at any time during such
year as an Executive Officer of the Company, its predecessors or its
subsidiaries.
<TABLE>
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL FISCAL ANNUAL COMPENSATION LONG TERM COMPENSATION COMPENSATION
POSITION YEAR ------------------------------------------------------------------------------- ($)
SALARY BONUS($) OTHER(1) AWARDS PAYOUTS
(1)($) COMPEN-
SATION($) --------------------------------------
RESTRICTED LTIP
OPTIONS STOCK PAYOUTS
GRANTED(#) AWARD(S)($) ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gordon L. Ellis(2) 1998 C$60,000 - C$2,042 46,670 - - -
Chairman 1997 C$60,000 - C$2,647 - - - -
1996 C$60,000 - C$2,788 - - - -
(3)
E. Laughlin Flanagan 1998 US$ - - US$70,000 - - - -
President & C.E.O.
William A. Maligie
President & C.E.O. 1998 US$120,000 - US$12,800 150,000 - - -
AMT USA 1997 US$120,000 - US$10,366 - - - -
1996 US$120,000 - US$10,697 - - - -
</TABLE>
(1) Paid or payable by the Company or its subsidiaries.
(2) Management service agreement fees paid to Gordann Consultants Ltd.
(3) Relocation Cost Reimbursement
OPTION GRANTS TABLE
The Company has never granted stock appreciation rights ("SAR's") and it is
currently intended that none be granted in the future. The following table sets
forth information regarding all grants of options to the individuals named in
the Summary Compensation Table during the fiscal year ended March 31, 1998, and
the potential realizable value of such options using a 5% and 10% assumed annual
rate of appreciation in the price of the Company's Common Shares. The particular
assumed annual rates of stock appreciation used in this table are specified
under the rules and regulations of the Securities and Exchange Commission and
are not necessarily indicative of future stock price performance or the
Company's projections thereof. Over a three-year option term, the corresponding
increase in the Company's market capitalization over the same period (measured
from the end of the last fiscal year) would be (a) $510,536 with an assumed 5%
annual rate of stock appreciation, and (b) $1,072,086 with an assumed 10% annual
rate of stock appreciation.
<TABLE>
<CAPTION>
NAME OPTIONS GRANTED PERCENTAGE OF TOTAL EXERCISE PRICE EXPIRATION POTENTIAL REALIZABLE
(NO. OF SHARES) OPTIONS GRANTED TO US$ DATE VALUE IN U.S. $ AT
EMPLOYEES IN FISCAL YEAR ASSUMED ANNUAL RATES OF
APPRECIATION FOR OPTION
TERM
5% 10%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gordon Ellis 46,670 100% $0.713 May 2, 2000 $ 5,245 $11,014
William Maligie 150,000 100% $0.713 May 2, 2000 $16,857 $35,399
</TABLE>
8
<PAGE> 10
OPTION EXERCISES AND FISCAL YEAR-END VALUE
The following table sets forth information concerning the exercise of options
during the fiscal year ended March 31, 1998, and the value at March 31, 1998 of
unexercised "in-the-money" options held by each of the executive officers named
in the Summary Compensation Table. All options are exercisable, in whole or in
part, at any time until date of expiration.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
AT MARCH 31, 1998
NAME # OF SHARES VALUE REALIZED($) # OF VALUE IN CDN $
ACQUIRED ON UNEXERCISED
EXERCISE OPTIONS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gordon Ellis - - 46,670 -
William Maligie - - 150,000 -
All Directors and
executive officers as a - - 359,000 -
group (Total 7)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYMENT AGREEMENTS
During 1988, the Company entered into a management services agreement with
Gordann Consultants Ltd., (50.1% of the shares of which are owned by Gordon L.
Ellis) for the services of Gordon L. Ellis. Mr. Ellis devotes no less than 75%
of his time to the affairs of the Company or its subsidiaries. The management
services agreement is terminable upon three months notice by either party.
Gordann Consultants Ltd. receives Cdn$5,000 per month.
During the year ended March 31, 1998, the Company and AMT USA entered into a
written employment agreement with William A. Maligie in respect to his position
as President of AMT USA and confirming the basic terms of his employment and
responsibilities which have been established orally from time to time since AMT
USA's formation in 1989. Mr. Maligie currently receives a salary of US$10,000
per month. The written employment agreement has a six year term commencing March
1, 1997 and contains compensation (remaining salary until expiry of term) and
non-compete covenants in the case of the Company's termination of Mr. Maligie's
employment without cause.
During the year ended March 31, 1998 the Company entered into an employment
agreement with Mr. E. Laughlin Flanagan, wherein Mr. Flanagan was President of
the Company effective on that date, and President and Chief Executive Officer
effective June 1, 1998. Mr. Flanagan was also elected as a director of the
Company on March 26, 1998. The term of the employment agreement is for a period
of three years, automatically renewable until terminated. Mr. Flanagan's annual
salary became $150,000 effective June 1, 1998.
During the year ended March 31, 1998, the Company paid (or accrued) to W. Walls
Financial Services (a single proprietorship owned by William Walls) a total of
US$44,335 for the management services of William Walls as Vice President, Chief
Financial Officer and Secretary of the Company and its predecessors. Due to
other obligations, Mr.
Walls has reduced his involvement in the Company and is no longer the CFO.
BOARD COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Although the Company does not have a compensation committee, the Board of
Directors establishes the policies governing the compensation of the Company's
Executive Officers. Messrs Silbernagel, Sutherland, Jones and Habib, the
Company's outside directors, were not at any time during fiscal 1998, nor during
any preceding fiscal year, an Executive Officer or employee of the Company or
its predecessors, nor did they receive any salary or fee remuneration for
attendance at meetings or other deliberations of the Board. Messrs. Ellis,
Flanagan and Maligie serve as Executive Officers of the Company and are
compensated pursuant to written management service agreements. No amendments to
the compensation terms provided in those agreements have been made during the
fiscal year, except as disclosed above (see "EMPLOYMENT Agreements"). In fiscal
1998, there were two deliberations of the Board of Directors concerning
executive compensation.
It is the policy of the Board to exclude any interested Director from voting on
any matter, which may involve an actual
9
<PAGE> 11
or potential conflict of interest,
including the granting or amending of stock options.
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
Other than routine indebtedness, none of the Directors, Executive Officers and
proposed nominees for election as Directors of the Company, and associates or
affiliates of such Directors, Executive Officers or proposed nominees are or
have been indebted to the Company since the beginning of the last completed
financial year of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the commencement of the Company's last completed fiscal year, no insider
of the Company, proposed nominee for election as a Director of the Company, nor
any associate or affiliate of such insider or proposed nominee, has been
materially interested in any transaction of the Company, nor is any such person
interested in any proposed transaction which has materially affected or would
materially affect the Company (or any of its subsidiaries) except for the
matters referred to below. With regard to any matter involving an actual or
potential conflict of interest with any member of the Company's Board of
Directors, it has been the policy of the Board to exclude the interested
Director from voting on such a matter.
Effective February 1, 1995, the Company and its subsidiaries rent their
executive office space and office equipment in Vancouver, British Columbia from
ABE, a company controlled by Gordon L. Ellis, for a total monthly fee of
Cdn$3,000 per month. Management believes this rental fee is less than rents
charged by third parties for similar accommodations.
During the year ended March 31, 1998 ABE was paid $87,921.95 for office rent and
related services, and reimbursement of advances, investor relations and
secretarial services. In addition, as at March 31, 1998, $231,712.53 was owed by
the Company to ABE for these advances and reimbursable expenses. A large portion
of the Company's indebtedness was extinguished by an agreement for common stock
of the Company for debt.
The Company has entered into a management services agreement with Gordann
Consultants for the services of Gordon L. Ellis (Chairman of the Board of
Directors) and an employment agreements with William A. Maligie and E. Laughlin
Flanagan. Please see "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" for
description of the remuneration paid or payable under these agreements.
The Company has, in prior years, granted stock options and warrants to certain
of its Directors and Executive Officers. See "COMPENSATION OF DIRECTORS AND
EXECUTIVE OFFICERS".
10
<PAGE> 12
SPECIAL BUSINESS
ADOPTION OF POLYMER SOLUTIONS, INC. 1998 ECONOMIC VALUE ADDED INCENTIVE
COMPENSATION PLAN
(ITEM 3 OF FORM OF PROXY)
It is the desire of the Directors of the Company to establish an Economic Value
Added Incentive Compensation Plan ("EVA Plan"). The shareholders are being asked
to vote on a proposal to adopt the EVA Plan. An EVA Plan raises the portion of
management's wealth tied to company performance, aligning management's interests
directly to shareholders' wealth.
The Board of Directors adopted the EVA Plan in July, 1998, subject to the
approval of the shareholders of the Company at the Meeting and the satisfaction
of applicable British Columbia and U.S. federal and state regulatory
requirements.
EVA is the economic value added to (or subtracted from) a company in a given
time period. It is equal to the net operating profit after tax, minus a charge
for capital, calculated as the weighted-average cost of capital times the total
debt and equity capital employed, therefore allowing for a predetermined return
for shareholders and payment of interest on debt prior to consideration of any
incentive.
An EVA Incentive Compensation Plan provides management a bonus based upon a
portion of the increase in year-over-year EVA, or penalizes them for a
year-over-year reduction in EVA. This bonus is put into a "bank", from which a
"target" bonus, plus one-third of the amount above the target bonus, is paid out
in out-of-the-money stock options. This bank is forfeited upon voluntary
termination of employment, thereby increasing the retention rate of successful
managers.
The EVA Plan was adopted to assist the Company and the Company's subsidiaries in
retaining the best available persons for positions of responsibility and to
provide key employees with an additional incentive to contribute to the success
of the Company.
REQUIRED VOTE
Shareholder approval of the adoption of the EVA Plan is being solicited in order
to satisfy certain requirements provided in the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and applicable securities laws. The approval of
the adoption of the EVA Plan requires the affirmative vote of the holders of a
majority of the Common Shares present or represented and entitled to vote at the
Meeting.
The form of resolution sought for shareholder approval of the amendment to the
EVA Plan is attached as Schedule "A" to this Proxy Statement.
Due to the important role the EVA Plan plays in the Company's efforts to recruit
and retain the services of individuals of outstanding ability for itself and its
subsidiaries, the Board of Directors recommends to the shareholders that they
vote "FOR" the proposal to adopt the EVA Plan.
The essential features of the EVA Plan and copies of the Plan are available upon
written request to the President of the Company.
11
<PAGE> 13
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
It is not known that any other matters will come before the meeting other than
as set forth above and in the Notice of Annual General Meeting, but if such
should occur the persons named in the accompanying Form of Proxy intend to vote
on them in accordance with their best judgement, exercising discretionary
authority with respect to amendments or variations of matters identified in the
Notice of Annual General Meeting and other matters which may properly come
before the meeting or any adjournment thereof.
PROPOSALS OF SHAREHOLDERS
In accordance with the rules of the Securities and Exchange Commission,
shareholders of the Company may present proposals to the Company for inclusion
in the Company's Proxy Statement prepared in connection with its next Annual
General Meeting of Shareholders. Proposals to be included in the Proxy Statement
prepared in connection with the next Annual General Meeting scheduled to be held
in August of 1999 must be received by the Company no later than March 31, 1999,
in order to be considered for inclusion.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Annual Report for the Fiscal Year ended March 31, 1998 are being mailed to
shareholders with this Proxy Statement. The Annual Report is not to be
considered as proxy soliciting material. A copy of the Company's Annual Report
on Form 10-K (without exhibits) will be provided upon written request to the
Secretary, c/o the Company's address at Suite 410 - 1055 West Hastings Street,
Vancouver, British Columbia, Canada V6E 2E9.
BOARD APPROVAL
The contents of this Proxy Statement have been approved and its mailing has been
authorized by a resolution of the Board of Directors of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gordon L. Ellis
-----------------------------------------
Gordon L. Ellis, Chairman
12
<PAGE> 14
SCHEDULE "A"
Management of the Company is seeking shareholder approval of the following
resolution in respect of the adoption of the Company's 1998 Economic Value Added
Incentive Compensation Plan "EVA Plan":
"RESOLVED THAT:
1. The directors be and they are hereby authorized to adopt the Polymer
Solutions, Inc. 1998 Economic Value Added Incentive Compensation Plan "EVA
Plan", the terms and conditions of which are summarized in the accompanying
Proxy Statement, authorizing the grant of options for the purchase of
1,000,000 Common shares of the Company and reservation of the 1,000,000
Common Shares.
2. No further resolution or approval by the shareholders shall be required for
the implementation of the adoption of the EVA Plan pursuant to this
resolution."
<PAGE> 15
SUPPLEMENTAL MAILING LIST RETURN CARD
(National Policy 41)
NOTICE TO SHAREHOLDERS OF POLYMER SOLUTIONS, INC.
On October 28, 1987, the Canadian Securities Administrators gave approval to
National Policy Statement No. 41 Shareholder Communication (the "Policy") which
essentially established a framework for communication between issuers and their
registered and non-registered shareholders.
Companies incorporated in British Columbia were formerly required to deliver
interim (semi-annual) financial statements only to their registered
shareholders. The Policy now exempts companies from having to deliver these
statements to their registered shareholders if the companies send 1st, 2nd and
3rd quarter financial statements to those shareholders, whether registered or
not, who request in writing to receive them.
If you are a registered or non-registered shareholder, and wish to be placed on
a supplemental mailing list for the receipt of these financial statements, you
must complete and return the Supplemental Return Card below.
The supplemental mailing list will be updated each year and, therefore, a Return
Card will be required annually in order to receive quarterly financial
statements. All other shareholder mailings will continue to be mailed to
registered shareholders in the normal manner without the completion of a Return
Card.
===============================================================================
POLYMER SOLUTIONS, INC.
The undersigned certifies that he is the owner of securities (other than debt
instruments) of the Company, and requests that he be placed on the Company's
Supplemental Mailing List in respect of its quarterly financial statements.
Name (Please print)
Address
City/Province (or State)/Postal Code
Signature Dated
PLEASE COMPLETE AND RETURN THIS CARD TO:
Polymer Solutions, Inc.
410 - 1055 West Hastings Street
Vancouver, British Columbia V6E 2E9
Tel: (604) 683-3473
Fax: (604) 682-3361
<PAGE> 16
POLYMER SOLUTIONS, INC.
SUITE 410, 1055 WEST HASTINGS STREET
VANCOUVER, BRITISH COLUMBIA V6E 2E9
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF POLYMER
SOLUTIONS, INC. (THE "COMPANY") FOR THE ANNUAL GENERAL MEETING (THE "MEETING")
OF SHAREHOLDERS TO BE HELD AUGUST 6, 1998.
================================================================================
The undersigned, a registered shareholder of the Company, hereby appoints Gordon
Lloyd Ellis, an executive officer of the Company, or instead of him
__________________________ as proxyholder, with full powers of substitution and
appointment, to attend and vote on behalf of the undersigned at the Meeting of
shareholders of the Company to be held on August 6, 1998, and at any adjournment
thereof. The undersigned hereby revokes any Form of Proxy heretofore given with
respect to the Meeting or any adjournment thereof.
The proxyholder is hereby directed to vote as follows:
1. To appoint Price Waterhouse, Certified Public Accountants, as the Company's
independent public auditor for the fiscal year ending March 31, 1999.
FOR ( ) WITHHOLD ( )
2. To elect the following persons as Directors of the Company for a term of
one year:
NAME
----
Gordon L. Ellis FOR ( ) WITHHOLD ( )
Gerald A. Habib FOR ( ) WITHHOLD ( )
Darryl F. Jones FOR ( ) WITHHOLD ( )
William A. Maligie FOR ( ) WITHHOLD ( )
Stephen H. Silbernagel FOR ( ) WITHHOLD ( )
John J. Sutherland FOR ( ) WITHHOLD ( )
E. Laughlin Flanagan FOR ( ) WITHHOLD ( )
3. To adopt the Polymer Solutions, Inc. 1998 Economic Value Added Incentive
Compensation Plan "EVA Plan" of which is summarized in the accompanying
Proxy Statement, authorizing the grant of options for the purchase of
1,000,000 Common shares of the Company and reservation of the 1,000,000
Common Shares.
FOR ( ) WITHHOLD ( )
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED OR WITHHELD FROM VOTING ON
ANY BALLOT IN ACCORDANCE WITH THE INSTRUCTIONS OF THE SHAREHOLDER.
WHERE THE UNDERSIGNED HAS NOT SPECIFIED A CHOICE WITH RESPECT TO ANY OF THE
FOREGOING MATTERS, THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO
SUCH MATTER(S) UPON THE ABOVE-NAMED PROXYHOLDER. IF NO SPECIFICATION IS MADE,
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN FAVOUR OF THOSE ITEMS.
THIS PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR
VARIATIONS OF THE MATTERS IDENTIFIED IN THE NOTICE OF ANNUAL AND SPECIAL MEETING
AND WITH RESPECT TO OTHER MATTERS WHICH MIGHT PROPERLY COME BEFORE THE MEETING.
THE UNDERSIGNED HEREBY Signature _________________________________
ACKNOWLEDGES RECEIPT OF THE
NOTICE OF ANNUAL AND SPECIAL Name ______________________________________
MEETING, THE PROXY STATEMENT (Please Print)
AND THE COMPANY'S ANNUAL
REPORT FOR THE FISCAL YEAR Address ___________________________________
ENDED MARCH 31, 1998.
___________________________________
Number of Shares _________________________
<PAGE> 17
Dated this ______ day of _________, 1998.
NOTES TO FORM OF PROXY:
SHAREHOLDERS HAVE THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER)
TO REPRESENT THEM AT THE MEETING OF SHAREHOLDERS OTHER THAN MANAGEMENT NOMINEES.
If you desire to designate as a proxyholder a person other than Messr. Ellis,
the management nominee, you should either strike out his name and insert in the
space provided the name of the person you desire to designate as proxyholder or
complete another proper form of proxy.
4. A proxy, to be valid, must be dated and signed by the member or by his
attorney authorized in writing or, where the member is a corporation, under
its corporate seal or by duly authorized and appointed officer, attorney or
representative of the corporation. Please sign exactly as your name appears
on the proxy. If the proxy is executed by an attorney for an individual
shareholder or by an officer, attorney or representative or a corporate
shareholder, the instrument so empowering the officer, attorney or
representative as the case may be, or a notarial copy thereof, must
accompany the proxy instrument. If this proxy is not dated in the space
provided, it is deemed to bear the date on which it is mailed to the
shareholder.
5. A proxy, to be effective, must be deposited at the office of the Transfer
Agent, Pacific Corporate Trust Company, 830 - 625 Howe Street, Vancouver,
British Columbia, V6C 3B8, not less than 48 hours (excluding Saturdays,
Sundays and holidays) before the time fixed for the Meeting or before the
time that the Meeting is to be reconvened following the adjournment
thereof.
2