SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 [ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Materials Pursuant
[ ] Confidential, for use of the to Section 240.14a-11(c) or
Commission Only (as Section 240.14a-12
permitted by Rule
14a-6(e)(2))
AMERICAN ECO CORPORATION
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
----------------------------------------------
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
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------
2) Form, Schedule or Registration Statement No:
--------------------
3) Filing Party:
---------------------------------------------------
4) Date Filed:
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<PAGE>
AMERICAN ECO CORPORATION
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting of
Shareholders (the "Meeting") of American Eco Corporation (the
"Corporation") will be held at The Sheraton Centre, 123 Queen
Street West, Toronto, Ontario, M5H 3M9, on Thursday, May 28, 1998
at 4:00 in the afternoon (Toronto time), for the following
purposes:
(a) To receive and consider the annual report of management to
the shareholders and the consolidated financial statements
of the Corporation for the year ended November 30, 1997 and
the report of the auditors thereon;
(b) To elect directors of the Corporation for the ensuing year;
(c) To appoint Coopers & Lybrand, L.L.P., Certified Public
Accountants, as auditors of the Corporation for the current
year and to authorize the directors to fix their
remuneration;
(d) To consider and if deemed advisable, approve and confirm
with or without variation, a resolution of the directors of
the Corporation amending the Corporation's stock option
plan;
(e) To consider and if deemed advisable, approve and confirm
with or without variation, a shareholder rights plan (the
"Shareholder Rights Plan") adopted by the directors of the
Corporation;
(f) To consider and if deemed advisable, pass with or without
variation, a resolution authorizing the Corporation to enter
into private placement agreements with arm's length
subscribers during the ensuing 12 month period; and
(g) To transact such other business as may properly come before
the Meeting or any adjournments thereof.
This notice is accompanied by a form of proxy, a management
information circular, the consolidated financial statements of
the Corporation for the year ended November 30, 1997 and the
Shareholder Rights Plan.
Shareholders who are unable to attend the Meeting are requested
to complete, date, sign and return the enclosed form of proxy so
that as large a representation as possible may be had at the
Meeting.
The Board of Directors has fixed the close of business on April
20, 1998 as the record date for the determination of holders of
common shares entitled to notice of the Meeting and any
adjournments thereof.
The Board of Directors has by resolution fixed the close of
business on the second business day preceding the day of the
Meeting (excluding Saturdays, Sundays and holidays) and any
adjournments thereof as the time before which proxies to be used
or acted upon at the Meeting or any adjournments thereof shall be
deposited with the Corporation or its transfer agent.
DATED at Houston, Texas this 20th day of April, 1998.
By Order of the Board of Directors
/s/ Michael E. McGinnis
-----------------------------------
MICHAEL E. MCGINNIS
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
AMERICAN ECO CORPORATION
MANAGEMENT INFORMATION CIRCULAR
SOLICITATION OF PROXIES
-----------------------
THIS MANAGEMENT INFORMATION CIRCULAR (THE "CIRCULAR") IS
FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE
MANAGEMENT OF AMERICAN ECO CORPORATION (THE "CORPORATION") FOR
USE AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS (THE
"MEETING") OF THE CORPORATION TO BE HELD AT THE TIME AND PLACE
AND FOR THE PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF
MEETING. References in this Circular to the Meeting include any
adjournment or adjournments thereof. It is expected that the
solicitation will be primarily by mail, but proxies may also be
solicited personally by officers and regular employees of the
Corporation.
APPOINTMENT AND REVOCATION OF PROXIES
-------------------------------------
The persons named in the enclosed form of proxy are
directors and/or officers of the Corporation. A shareholder
desiring to appoint some other person, who need not be a
shareholder, to represent him at the Meeting, may do so by
inserting such person's name in the blank space provided in the
enclosed form of proxy or by completing another proper form of
proxy and, in either case, depositing the completed proxy at the
registered office of the Corporation or the Corporation's
transfer agent indicated on the enclosed envelope not later than
48 hours (exclusive of Saturdays, Sundays and holidays) before
the time of the Meeting.
The board of directors (the "Board") of the Corporation has
fixed April 20, 1998 as the record date, being the date for the
determination of the registered holders of securities entitled to
receive notice of the Meeting and entitled to vote at the Meeting
except that a transferee of common shares acquired after the
record date shall be entitled to vote the transferred common
shares at the Meeting, if he produces properly endorsed
certificates for such common shares or otherwise establishes that
he owns such common shares and demands by written request,
delivered to the Corporation's transfer agent, CIBC Mellon Trust
Company, no later than ten days before the Meeting, that his name
be included in the list of shareholders entitled to vote at the
Meeting.
A shareholder forwarding the enclosed proxy may indicate the
manner in which the appointee is to vote with respect to any
specific item by checking the appropriate space. If the
shareholder giving the proxy wishes to confer a discretionary
authority with respect to any item of business then the space
opposite the item is to be left blank. The shares represented by
the proxy submitted by a shareholder will be voted in accordance
with the directions, if any, given in the proxy.
A proxy given pursuant to this solicitation may be revoked
by instrument in writing, including another proxy bearing a later
date, executed by the shareholder or by his attorney authorized
in writing, and deposited either at the registered office of the
Corporation or its transfer agent at any time up to and including
the last business day preceding the date of the Meeting or with
the Chairman of the Meeting on the day of the Meeting or in any
other manner permitted by law.
EXERCISE OF DISCRETION BY PROXIES
---------------------------------
The persons named in the enclosed form of proxy will vote
the shares in respect of which they are appointed in accordance
with the direction of the shareholders appointing them. IN THE
ABSENCE OF SUCH DIRECTION, SUCH SHARES WILL BE VOTED IN FAVOR OF
THE PASSING OF ALL THE RESOLUTIONS DESCRIBED BELOW. THE ENCLOSED
FORM OF PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE PERSONS
NAMED THEREIN WITH RESPECT TO AMENDMENTS OR VARIATIONS TO MATTERS
IDENTIFIED IN THE NOTICE OF MEETING AND WITH RESPECT TO OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING. At the time
of printing this Circular, management knows of no such
-1-
<PAGE>
amendments, variations or other matters to come before the
Meeting. However, if any other matters which are not now known to
management should properly come before the Meeting, the proxy
will be voted on such matters in accordance with the best
judgment of the named proxies.
The affirmative vote of a majority of the common shares
represented in person or by proxy at the Meeting is required for
the election of directors, the appointment of the auditors and
the approval of the proposed resolutions.
SECURITIES AND PRINCIPAL HOLDERS THEREOF
----------------------------------------
As at April 20, 1998, 21,644,856 common shares of the
Corporation were issued and outstanding. Each common share
entitles the holder thereof to one vote on all matters to be
acted upon at the Meeting.
To the knowledge of the directors and officers of the
Corporation, no person, firm or corporation beneficially owns,
directly or indirectly, or exercises control or direction over
voting securities of the Corporation carrying more than 5% of the
voting rights attached to any class of voting securities of the
Corporation. As at April 20, 1998, the directors beneficially
owned an aggregate of 692,022 common shares, or approximately
3.1% of the outstanding shares.
STATEMENT OF EXECUTIVE COMPENSATION
-----------------------------------
The following table presented in accordance with Ontario
Regulation 638/93 made under the Securities Act, Ontario sets
forth all annual and long term compensation for services in all
capacities to the Corporation and its subsidiaries for the fiscal
year ended November 30, 1997 to the extent required by the
Regulation in respect of each of the individuals who were, at
November 30, 1997, Executive Officers of the Corporation, as that
term is defined therein (the "Named Executive Officers").
Disclosure of compensation is provided for comparative purposes
notwithstanding that such disclosure is not required where such
Named Executive Officer received salary and bonuses totalling
less than CDN$100,000. Specific aspects of the compensation of
the Named Executive Officers are dealt with in further detail in
subsequent tables.
=============================================================
Annual Compensation
--------------------
-------------------------------------------------------------
Salary Bonus Other Annual
Name and Position Year (US$) (US$) Compensation
----------------- ---- ------- ----- ------------
-------------------------------------------------------------
Michael E. 1997 279,266(1) 0 10,885(2)
McGinnis 1996 252,276(1) 0 6,439(2)
Chairman of the 1995 102,201(1) 0 6,440(2)
Board
President and
Chief Executive
Officer
--------------------------------------------------------------
David L. Norris 1997 161,538(3) 0 4,900(2)
Senior 1996 0 0 0
Vice-President and
Chief
Administrative
Officer
-------------------------------------------------------------
J. C. Pennie 1997 0 0 112,885(4)
Vice-Chairman of 1996 0 0 109,140(4)
the Board 1995 0 0 119,100(4)
=============================================================
=============================================================
Long-Term All Other
Compensation Compensation
----------- ------------
-------------------------------------------------------------
Securities
Underlying
Name and Position Options (#)
----------------- -----------
-------------------------------------------------------------
Michael E. McGinnis 150,000 0
Chairman of the Board 20,000 0
President and Chief 50,000 0
Executive Officer
-------------------------------------------------------------
David L. Norris 70,000 0
Senior Vice-President 15,000 0
and Chief Administrative
Officer
-------------------------------------------------------------
J. C. Pennie 100,000 0
Vice-Chairman of the 0 0
Board 50,000 0
=============================================================
-2-
<PAGE>
(1) Includes US$1,600, US$1,138 and US$1,158 of deferred
compensation contributed by the Corporation to Mr. McGinnis'
401(k) plan in fiscal 1997, 1996 and 1995 respectively.
(2) Represents automobile payments paid by the Corporation.
(3) Mr. Norris became an employee of the Corporation in August
1996. From August 1996 to February 1997, Mr. Norris had
been an executive officer of EIF Holdings, Inc. ("EIF"), a
Hawaii corporation, and the Corporation reimbursed EIF for
compensation amounts paid by EIF to Mr. Norris.
(4) Represents fees paid to Windrush Corporation, 50% of which
is owned by Mr. Pennie, for executive services and
secretarial services for the Corporation's Toronto office.
(5) The Canada/US dollar exchange rate on November 30, 1997 was
$1.42.
LONG-TERM COMPENSATION PLANS
----------------------------
OPTION GRANTS IN 1997
---------------------
The following table provides details on stock options
granted to the Named Executive Officers in the fiscal year ended
November 30, 1997 under the terms of the Corporation's stock
option plan.
==============================================================
% of Total
Options
Securities Granted to
Under Employees in Exercise
Options Financial Price
Name Granted (#) Year (CDN$)
---- ----------- ------------- -----------
-------------------------------------------------------------
Michael E. McGinnis 150,000 15% 9.50
-------------------------------------------------------------
David L. Norris 70,000 7% 10.10
-------------------------------------------------------------
J. C. Pennie 100,000 10% 9.50
=============================================================
=====================================================
Market Value of
Securities
Underlying
Options on the
Date of Grant
Name (CDN$) Expiration Date
---- --------------- ---------------
----------------------------------------------------
Michael E. 9.50 1/15/2002
McGinnis
----------------------------------------------------
David L. Norris 10.10 3/3/2002
----------------------------------------------------
J. C. Pennie 9.50 1/15/2002
====================================================
OPTIONS EXERCISED AND AGGREGATE REMAINING
-----------------------------------------
The following table provides detailed information regarding
options exercised by the Named Executive Officers during the
fiscal year ended November 30, 1997. In addition, details on
remaining options held are provided.
=================================================================
Number of
Underlying
Securities
Underlying
Unexercised Options
at Fiscal Year-
End(#)
-------------------
----------------------------------------------------------------
Securities
Acquired
Upon Value
Exercise Realized Exercisable/
Name (#) (US$) Unexercisable
---- -------- ------ -------------
---------------------------------------------------------------
Michael E. 0 138,000/132,000
McGinnis
---------------------------------------------------------------
David L. Norris 10,000 37,900 14,000/71,000
---------------------------------------------------------------
J. C. Pennie 0 20,000/80,000
===============================================================
=============================================
Value of Unexercised In-
the-Money Stock Options
at Fiscal Year-End
(CDN$)(1)
------------------------
--------------------------------------------
Exercisable/
Name Unexercisable
---- -------------
---------------------------------------------
Michael E. $1,513,900/804,600
McGinnis
---------------------------------------------
David L. Norris 70,700/351,050
---------------------------------------------
J. C. Pennie 113,000/452,000
=============================================
(1) Based on the closing price of the common shares on The
Toronto Stock Exchange (the "TSE") on November 28, 1997 of
CDN$15.15.
-3-
<PAGE>
OTHER COMPENSATION MATTERS
--------------------------
There were no long-term incentive awards made to Named
Executive Officers of the Corporation during the fiscal year
ended November 30, 1997.
The Corporation has instituted for its US branch employees a
401(k) Plan that enables its employees to save for retirement
with tax deferred contributions. The Plan may be summarized as
follows:
Employees become eligible to participate upon attaining age
21 and completing one year of service. Employees may elect
to defer between 1% and 15% of their current compensation
into the Plan, subject to an IRS limitation of a maximum of
15% of their annual compensation (up to the first $150,000
of annual compensation) or US$9,500, whichever is lower. The
Corporation may make a contribution to the Plan, known as a
401(k) matching contribution, on behalf of those
participants who have made salary deferral contributions.
The Corporation's contribution, if any, will be an amount
not to exceed 25% of the first 4% and if any matching 401(k)
contributions remain, they will be allocated to each such
participant in an amount not to exceed 25% of the next 4% of
their compensation contributed as salary deferral
contributions. The Corporation may make a profit sharing
contribution to the Plan for all participants. The amount of
these contributions, if any, will be determined by the
Board. The employees' share of the Corporation's profit
sharing contribution will be allocated to their accounts
based on the ratio that their compensation bears to the
total compensation of all participants eligible for a share
of such contribution.
During the fiscal year 1997, the Corporation's matching
contribution under the 401(k) Plan for Mr. McGinnis was
US$1,600.
EMPLOYMENT CONTRACTS
--------------------
The Corporation and Michael E. McGinnis have entered into an
employment agreement pursuant to which Mr. McGinnis receives an
annual base salary of US$300,000, an automobile allowance of
US$750 per month plus operating and maintenance expenses
associated with such vehicle. Mr. McGinnis is entitled to
participate in an annual bonus program determined by the level of
basic earnings per share of the Corporation for each fiscal year
of the term of the employment agreement. The agreement provides
for up to five (5) years compensation if he is terminated without
cause or upon his death or disability, subject to certain
limitations. The employment agreement terminates on May 1, 2002.
Mr. McGinnis waived his annual bonus for fiscal 1997.
The Corporation and David L. Norris entered into an
employment agreement effective May 1, 1997 pursuant to which Mr.
Norris is paid an annual base salary of US$225,000, an automobile
allowance of US$750 per month plus operating and maintenance
expenses associated with such vehicle. Mr. Norris is entitled to
participate in an annual bonus program determined by the level of
basic earnings per share of the Corporation for each fiscal year
of the term of the employment agreement. The agreement provides
for up to three (3) years compensation if Mr. Norris is
terminated by the Corporation without cause, subject to certain
limitations. Mr. Norris' employment agreement with the
Corporation terminates on May 1, 2000. Mr. Norris waived his
annual bonus for fiscal 1997.
Upon joining the Corporation, Bruce Tobecksen (Senior Vice-
President and Chief Financial Officer of the Corporation,
effective as of April 16, 1998) entered into an employment
agreement with the Corporation effective January 1, 1998 pursuant
to which Mr. Tobecksen is paid an annual base salary of
US$250,000, an automobile allowance of US$750 per month plus
operating and maintenance expenses associated with such vehicle.
Mr. Tobecksen is entitled to participate in an annual bonus
program determined by the level of basic earnings per share of
the Corporation for each fiscal year of the term of the
employment agreement. The agreement provides for up to three (3)
years compensation if Mr. Tobecksen is terminated by the
Corporation without cause, subject to certain limitations. Mr.
Tobecksen's employment agreement with the Corporation terminates
on January 1, 2001.
-4-
<PAGE>
COMPOSITION OF THE COMPENSATION COMMITTEE AND AUDIT COMMITTEE
-------------------------------------------------------------
Messrs. William A. Dimma, Donald R. Getty and Francis J.
Sorg, Jr. comprised the Corporation's Compensation Committee
during fiscal 1997. None of the members of the Compensation
Committee performed similar functions with other public companies
during fiscal 1997 other than Mr. Dimma who serves on the
compensation committee of several other companies.
Messrs. Barry Cracower, Pennie and Sorg comprised the
Corporation's Audit Committee during 1997.
REPORT ON EXECUTIVE COMPENSATION
--------------------------------
It is the responsibility of the Compensation Committee to
determine the level of compensation in respect of the
Corporation's senior executives with a view to providing such
executives with a competitive compensation package having regard
to performance. Performance is defined to include achievement of
the Corporation's strategic objective of growth and the
enhancement of shareholder value through increases in the stock
price resulting from a stronger balance sheet and increased
earnings.
Compensation for executive officers is composed primarily of
three components; namely, base salary, performance bonuses and
the granting of stock options. Performance bonuses are considered
from time to time having regard to the above referenced
objectives.
In establishing the levels of base salary, the award of
stock options and performance bonuses, the Compensation Committee
takes into consideration individual performance,
responsibilities, length of service and levels of compensation
provided by industry competitors.
The Compensation Committee is also responsible for reviewing
the Corporation's manpower and succession plans to ensure that
adequate plans are in place.
COMPENSATION OF DIRECTORS
-------------------------
A. Standard Compensation Arrangements
The directors of the Corporation who are not otherwise
employees or consultants of the Corporation receive CDN$20,000
per year. The directors receive CDN$1,000 per meeting, and all
reasonable expenses incurred by them in respect of their duties
are reimbursed by the Corporation. In addition, the directors
have been granted stock options under the Corporation's stock
option plan.
B. Other Arrangements
None of the directors of the Corporation receives
compensation in his capacity as a director pursuant to any other
arrangement or in lieu of any standard arrangement except through
the granting of stock options. During fiscal 1997 the Board met
in person or telephonically 11 times and each director attended
at least 75% of the meetings. The Board also authorized
corporate actions through written consent resolutions.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
-----------------------------------------------------------------
During fiscal 1997, the Corporation loaned US$84,100 to
Michael E. McGinnis for the purpose of purchasing common shares
of the Corporation in the open market. This loan increased his
indebtedness to the Corporation to US$630,057. The loan matures
on May 7, 1998, bears interest at the rate of 10.0% per annum and
is collateralized by the purchased shares. The balance of the
loan, including interest as of April 20, 1998 is US$655,268.
-5-
<PAGE>
In May 1997, the Corporation loaned US$305,000 at 8.5%
interest per annum to David L. Norris for the purchase of a home
in connection with his relocation to the Corporation's
headquarters in Houston, Texas. The loan matures in May, 1998 and
is unsecured. The balance of the loan, including interest, as of
April 20, 1998 is US$308,238.
In June, 1997, the Corporation loaned US$60,105 to John C.
Pennie. The loan matures in June, 1998, bears interest at the
rate of 9.5% per annum and is unsecured. The balance of the loan
including interest, as of April 20, 1998 is US$62,078.
TRANSACTIONS WITH MANAGEMENT OR AFFILIATES OF MANAGEMENT
--------------------------------------------------------
Pursuant to an agreement between the Corporation and
Windrush Corporation ("Windrush") dated December 1, 1997,
Windrush receives a fee of US$9,000 per month in consideration
for executive services for administration, strategic and
marketing planning provided to the Corporation plus fees which
are negotiated on a project by project basis for other specific
services rendered. The agreement expires on December 1, 2000. J.
C. Pennie, the Vice-Chairman of the Board, owns 50% of Windrush.
As of August 31, 1997, the Corporation sold Eco
Environmental and Environmental Evolutions to Eurostar Interests
Ltd. ("Eurostar") for an aggregate consideration of US$11,000,000
payable pursuant to a one-year promissory note. The interest in
Eco Environmental and Environmental Evolutions is to be assigned
to UKStar (Canada) Inc. ("UKStar") which in turn would transfer
the interest to Unistar Corporation ("Unistar"), a Canadian
company. Unistar posted a guaranty bond in the amount of
US$3,000,000 payable to the Corporation on June 30, 1998 in the
event the note is not paid. Windrush owns 6.6% of UKStar. Mr.
Pennie, the Chairman and Chief Executive Officer of Unistar, owns
50% of Windrush.
In February 1998, Unistar paid US$603,000 to the Corporation
for reimbursement of monies advanced by the Corporation for the
operating expenses of Eco Environmental and Environmental
Evolutions from September 30, 1997 to November 30, 1997.
In March 1997, the Corporation entered into a three year
consulting agreement with Mark White, Chairman of the board of
directors at such time. On May 7, 1997, a new slate of directors
was elected by the shareholders of the Corporation and Mr.
White's directorship terminated. The consideration for the three
year consulting contract of US$500,000 was paid in full in fiscal
1997.
ELECTION OF DIRECTORS [PROPOSAL 1]
---------------------
Six directors will be elected at the Meeting. Each nominee
currently serves as a member of the Board. Management does not
contemplate that any of the nominees will be unable to serve as a
director but if that should occur for any reason prior to the
Meeting, it is intended that discretionary authority shall be
exercised by the persons named in the enclosed form of proxy to
vote the proxy for the election of any other person or persons in
place of any nominee or nominees unable to serve. The term of
office of each of the following proposed nominees will expire at
the next meeting of shareholders of the Corporation when a
successor is duly elected or appointed unless his office is
earlier vacated in accordance with the Corporation's by-laws. The
information as to the shares of each nominee beneficially owned,
or over which control is exercised, has been furnished by the
respective nominee.
-6-
<PAGE>
The following table sets forth certain information
pertaining to the persons proposed to be nominated for election
as directors.
===============================================================
Position Year First
Principal with the Became a
Name Occupation Corporation Director
---- ---------- ------------ -----------
--------------------------------------------------------------
Barry Cracower President, Director 1/92 to
Pharmx Rexall 3/93 and
Drug Stores, 1997
Ltd.
--------------------------------------------------------------
William A. Dimma Chairman of the Director 1997
Board, Swiss
Reinsurance
Company Canada
Ltd.
--------------------------------------------------------------
Hon. Donald R. President, Director 1997
Getty(3) Sunnybank
Investments Ltd.
--------------------------------------------------------------
Michael E. McGinnis Chairman of the Chairman of 1993
Board, President the Board,
and Chief President
Executive and Chief
Officer of the Executive
Corporation Officer
--------------------------------------------------------------
J. C. Pennie President and Vice- 1992
Chief Executive Chairman of
Officer, Unistar the Board
Corporation
--------------------------------------------------------------
Francis J. Sorg, Private Investor Director 1997
Jr.
==============================================================
===========================================
Number of Shares
Beneficially Owned,
Directly or
Indirectly, or over
which Control or
Direction is
Name Exercised*
---- ---------------------
-----------------------------------------
Barry Cracower 40,000(1)
-----------------------------------------
William A. Dimma 40,000(1)
-----------------------------------------
Hon. Donald R. 40,000(1)
Getty(3)
-----------------------------------------
Michael E. 432,010(2)
McGinnis
-----------------------------------------
J. C. Pennie 42,500(3)
-----------------------------------------
Francis J. Sorg, 97,512(4)
Jr.
=========================================
*Unless otherwise indicated, all persons have sole voting and
investment power over the common shares.
(1) Represents common shares underlying presently exercisable
stock options.
(2) Includes (i) 138,000 common shares underlying presently
exercisable stock options and (ii) 81,750 shares owned by
his wife, as to which shares he disclaims beneficial
ownership.
(3) Includes 40,000 common shares underlying presently
exercisable stock options.
(4) Includes 20,000 common shares underlying presently
exercisable stock options.
BARRY CRACOWER (age 60) has been a director of the
Corporation since December 1996. Mr. Cracower has been the
President of Pharmx Rexall Drug Stores Ltd., a drug store chain
based in Concord, Ontario, since 1990. Prior to 1990, he held
senior executive positions at several major Canadian
corporations. Mr. Cracower served on the board of directors of
the Corporation during its restructuring. He also is a director
of Algonquin Mercantile Corporation, a Canadian company.
WILLIAM A. DIMMA (age 70) has been a director of the
Corporation since January 1997. Mr. Dimma has served as the
Chairman of the Board of Canadian Business Media Ltd. since 1992.
For more than five years through 1993, Mr. Dimma served as the
Deputy Chairman and also as the President and Chief Executive
Officer of Royal LePage Limited, a Canadian real estate company.
In addition to the companies mentioned above, Mr. Dimma is a
director of the Greater Toronto Airport Authority, Magellan
Aerospace Corporation, IPL Energy Inc., a pipeline and gas
-7-
<PAGE>
distribution company, London Life Insurance Company, Sears Canada
Inc., Trilon Financial Corporation, a financial services company,
Silcorp Limited, an operator of convenience stores, Swiss Re Life
and Health Canada Ltd., Camreal Corporation and the Monsanto
Canada Innovation and Growth Council. Mr. Dimma also serves as
Chairman of the Board of Swiss Reinsurance Company Canada Ltd.,
Home Capital Group and Royal LePage Commercial Advisory Board.
HON. DONALD R. GETTY (age 64) has been a director of the
Corporation since January 1997. Mr. Getty has been the President
and Chief Executive Officer of Sunnybank Investments Ltd., an
investment and consulting company located in Edmonton, Alberta,
since December 1992. Mr. Getty has held elected and appointive
offices in Canadian government, most recently as the Premier of
the Province of Alberta from 1985 to 1992 and as the Minister of
Energy and Natural Resources for the government of Alberta
between 1971 and 1979. Mr. Getty currently serves as a director
of Mera Petroleum, an oil and gas company, Cen Pro Technologies,
an engineering company, Guyanor Resources, a mining company, Bow
Valley Brewery Inc., a microbrewery, Nation Wide Resources Ltd.,
a producer of road building materials, Eclipse Investment Ltd.,
an investment holding company, and the Alberta Racing
Corporation, a provincial government agency regulating horse
racing, all located in Canada.
MICHAEL E. MCGINNIS (age 48) has been the President and
Chief Executive Officer of the Corporation since 1993, a director
since 1994 and Chairman of the Board since May 1997. He was the
President and Chief Executive Officer of Eco Environmental, Inc.,
a provider of environmental remediation services to industrial
clients, when it was acquired by the Corporation in 1993. Prior
to joining Eco Environmental, Inc. in 1992, Mr. McGinnis was
employed with The Brand Companies, Inc., one of the largest
asbestos abatement contractors in the United States. Mr.
McGinnis joined The Brand Companies in 1965 and served in various
operational and administrative capacities for over 27 years. Mr.
McGinnis has been a director of EIF Holdings, Inc. ("EIF") since
February 1996, having served as its Chairman of the Board from
June 1996 to October 1997, and was President of EIF from March
1996 to August 1996. He has been a director of Dominion Bridge
Corporation since February 1998.
J. C. PENNIE (age 59) has been a director of the Corporation
since February 1992 and the Vice-Chairman of the Board of
Directors since October 1993. Mr. Pennie served as the
Corporation's President and Chief Executive Officer in 1992 in
order to execute the downsizing and reorganization of the
Corporation. Prior to joining the Corporation, Mr. Pennie was a
business consultant with over 25 years of experience in assisting
turnaround and start-up companies. He is the Chairman and Chief
Executive Officer of Unistar Corporation and a principal of
Windrush Corporation, Canadian companies.
FRANCIS J. SORG, JR. (age 76) has been a director of the
Corporation since May 1997. For the past 27 years, he has served
as Chairman of the Board of Separation and Recovery Systems, Inc.
which the Corporation acquired in July 1996. He also served as
Chairman of Thos de la Rue, Inc., the US subsidiary of De La Rue
Ltd; Chairman of Newsrad, Inc.; Chairman of Wolfort Co.; Senior
Vice President of Bowne & Co.; and a founder and President of
North Shore University Hospital, Manhasset, New York.
STATEMENT OF CORPORATE GOVERNANCE PRACTICE
------------------------------------------
In accordance with the disclosure requirements of the TSE
and using the corporate governance guidelines set out in Section
474 of the TSE Company Manual as a reference, the Board has
adopted the following statement of corporate governance
practices:
The Board implicitly and explicitly acknowledges its
responsibility for the stewardship of the Corporation:
(i) The Board participates in strategic planning as the acceptor
and/or adopter of the strategic plans proposed and developed by
management. The strategic planning process has been the
responsibility of management. The Board will undertake periodic
reviews of the strategic planning process.
-8-
<PAGE>
(ii) The Board has considered and in its deliberations considers
the principal risks of the Corporation's business and receives
periodic reports from management of the Corporation's assessment
and management of those risks.
(iii) The Board has, from time to time, considered succession
issues and takes responsibility for appointing and monitoring
officers of the Corporation.
(iv) The Board has discussed and considered how the Corporation
communicates with its various shareholders and periodically
reviews and approves the Corporation's communications with the
public but has no formal communications policy.
(v) The Board, directly and through its Audit Committee,
assesses the integrity of the Corporation's internal control and
management information systems.
Given the extensive experience of senior management of the
Corporation in the Corporation's principal business, it has not
been necessary for the Board to encourage senior management to
participate in appropriate professional and personal development
activities, courses and programs. However, the Board does support
management's commitment to the training and development of all
permanent employees.
The Board currently comprises six members of whom four are
unrelated directors. The Board has considered the relationship
of each current director. Two current directors, namely J. C.
Pennie and Michael E. McGinnis, are related by virtue of their
positions in the Corporation. Messrs. Cracower, Dimma, Sorg and
Getty who are currently directors of the Corporation, are
unrelated.
The Board has not constituted a formal nominating committee
to be responsible for proposing new nominees to the Board and for
assessing directors on an ongoing basis. Nominations for the
Board have been the result of recruitment efforts by several
directors and have been discussed informally with several
directors before being brought to the Board as a whole.
The Corporation has combined the Corporate Governance
Committee and the Audit Committee.
The Corporate Governance Committee expressly assumes
responsibility for developing the Corporation's approach to
governance issues and is responsible for the responses to
governance guidelines. The Corporation has not developed position
descriptions for the Chairman of the Board and the Chief
Executive Officer. Any responsibility which is not delegated to
management or a Board committee remains with the Board.
Board members who are not otherwise employees or consultants
are presently compensated on the basis of CDN$20,000 per year,
paid quarterly. Board members receive CDN $1,000 per meeting and
all reasonable expenses incurred by them in respect of their
duties are reimbursed by the Corporation. In addition, Board
members have been granted stock options under the Corporation's
stock option plan.
The Board has functioned, and is of the view that it can
continue to function, independently of management, as required.
The Board has not appointed a chair of the Board who is an
unrelated director. However, unrelated directors are free to add
items to agendas or to request the calling of Board meetings
where deemed necessary and all members of the Board are invited
to raise issues not on the agenda at Board meetings.
The Board has not met without management present. If the
Board believed it was appropriate and meaningful it would
formalize the process by which the Board would meet without
management and for handling the Board's overall relationship with
management.
The Audit Committee is currently composed of three
directors, all but Mr. Pennie are unrelated. The Compensation
Committee is currently composed of three directors, all of whom
are unrelated.
-9-
<PAGE>
The Audit Committee's mandate includes a review of the
annual and quarterly financial statements, material investments
and transactions that could materially affect the financial
position of the Corporation. The Audit Committee establishes and
monitors procedures to resolve conflicts of interest and reviews
audit and financial matters. Through meetings with external
auditors and senior management, the Audit Committee discusses,
among other things, the effectiveness of internal control
procedures established for the Corporation.
The Board has not constituted a committee comprised
exclusively of outside directors, a majority of whom are
unrelated directors, to assess the effectiveness of the Board as
a whole, the committees of the Board and the contribution of
individual directors. This task has been assigned to the Audit
Committee.
The Corporation does not have a formal process of
orientation and education for new members of the Board. This
process is handled informally by members of the Board.
PERFORMANCE GRAPH
-----------------
The performance graph compares the total cumulative
shareholder return for $100 invested in common shares of the
Corporation during the period from December 1, 1992 through
November 30, 1997 with the cumulative total return of the Toronto
Stock Exchange 300 Company Index and publicly traded companies
which constitute the Engineering and Construction industry group
on Standard & Poor's S&P 500 Index. The shareholder return shown
below for the historical periods may not be indicative of future
performance.
TOTAL SHAREHOLDER RETURNS
BASE YEARS ENDING
PERIOD
COMPANY/INDEX DEC 92 DEC 93 DEC 94 DEC 95 DEC 96 DEC 97
-----------------------------------------------------------------------
AMERICAN ECO
CORP 100 167.48 102.48 142.48 275.00 432.48
TOR STK EXC
300 COMP 100 132.32 132.01 151.19 194.06 223.05
ENGINEERING &
CONSTRUCt-500 100 104.80 100.60 142.92 132.52 109.48
MANUFACTURING
(SPCIALZD)-500 100 112.85 120.18 167.96 186.96 229.48
APPOINTMENT OF AUDITORS [PROPOSAL 2]
-----------------------
Unless such authority is withheld, the persons named in the
accompanying proxy intend to vote for the appointment of Coopers
& Lybrand, L.L.P., Certified Public Accountants, as auditors of
the Corporation for the 1998 fiscal year and to authorize the
directors to fix their remuneration. Coopers and Lybrand L.L.P.
were first appointed the Corporation's auditors on May 7, 1997.
A representative of Coopers & Lybrand L.L.P. is expected to be
present at the Meeting, and he will have an opportunity to make a
statement if he desires and will be available to respond to
appropriate questions.
AMENDMENT TO STOCK OPTION PLAN [PROPOSAL 3]
------------------------------
The Corporation has a stock option plan for the grant of
options to its directors, officers, employees and consultants for
the purchase of the Corporation's common shares (the "Plan").
The Plan as well as the rules of the TSE provide that any
amendment to a stock option plan must be pre-cleared with the TSE
and provide that if there is a proposal to increase the maximum
number of shares issuable under the Plan, the same must be
approved by a majority of the votes cast at a shareholders
meeting.
-10-
<PAGE>
The Plan currently provides that 2,956,700 common shares are
to be reserved for issuance pursuant to the exercise of options
granted thereunder. As of March 17, 1998, an aggregate of
1,850,225 options to purchase common shares have been granted
under the Plan. No options or other entitlements under the Plan
have been granted subject to shareholder ratification. The
proposed amendment will increase the number of common shares
under the Plan by 547,669 common shares.
As the Corporation currently has 21,644,856 issued and
outstanding common shares and seeks to grant stock options from
time to time as part of executives' and employees' compensation
based on merit and to assist in the further growth of the
Corporation, the Board is of the view that it is appropriate to
authorize an amendment to the Plan to provide that the maximum
number of common shares in the capital of the Corporation that
may be reserved for issuance for all purposes thereunder shall be
increased from 2,956,700 common shares to 3,504,369 common
shares, subject to adjustment or increase of such number pursuant
to the provisions of Article 8 of the Plan. Any common shares
subject to a share option which for any reason is canceled or
terminated without having been exercised shall again be available
for grant under the amended Plan. Given that the Corporation has
21,644,856 issued and outstanding common shares, the rules of the
TSE would allow the Plan to be amended to provide that the
maximum number of common shares in the capital of the Corporation
that may be reserved for issuance for all purposes thereunder be
increased to 4,328,971 common shares. At this time, management
of the Corporation has determined to increase the maximum number
of common shares in the capital of the Corporation that may be
reserved for issuance thereunder only to 3,504,369 common shares.
The Plan, as amended, provides that the maximum number of
common shares which may be reserved for issuance to any one
insider pursuant to share options under the amended Plan or any
other share compensation arrangement may not exceed 5% of the
common shares outstanding at the time of grant (on a non-diluted
basis). The maximum number of common shares that may be reserved
for issuance to insiders of the Corporation in the aggregate
under the amended Plan or any other share compensation
arrangement is limited to 10% of the common shares outstanding at
the time of the grant (on a non-diluted basis).
The Corporation will not provide financial assistance to
participants under the Plan to facilitate the purchase of common
shares, except on an ad hoc basis, as and when determined
appropriate by the Board.
The Corporation has no other share compensation plans or
share arrangements in place and none are currently contemplated.
The resolution approving the amendment to the Plan requires
confirmation by a majority of the votes cast thereon at the
Meeting. Additionally, the amendment to the Plan is subject to
the prior approval of the TSE.
The text of the resolution to be submitted to Shareholders
is set forth below.
NOW THEREFORE BE IT RESOLVED THAT:
1. Subject to receipt of requisite regulatory approval,
including without limitation, the approval of The Toronto Stock
Exchange, the Corporation's stock option plan for directors,
officers, employees and consultants be and the same is hereby
amended to delete Article 4 therefrom and substitute therefor the
following:
4. Shares Subject to the Plan
--------------------------
4.1 Options may be granted in respect of authorized and
unissued Shares provided that, subject to increase by the Board,
the receipt of the approval of the Exchange and the approval of
shareholders of the Corporation, the maximum aggregate number of
Shares reserved by the Corporation for issuance and which may be
purchased upon the exercise of all Options shall not exceed
3,504,369 being the sum of: (i) 1,654,144 Shares granted under
this Plan, subject to adjustment or increase of such number
pursuant to the provisions of Article 8; plus (ii) such number of
Shares as are subject to outstanding Options under Share
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<PAGE>
Compensation Arrangements as of the date of adoption of this Plan
(as amended) which are canceled or otherwise terminated without
exercise provided such number of Shares shall not exceed
1,850,225 Shares. Shares in respect of which Options are not
exercised shall be available for subsequent Options under the
Plan. No fractional Shares may be purchased or issued under the
Plan."
2. Any one director or officer of the Corporation be and he is
hereby authorized and directed to do all such acts and things and
to execute and deliver under the corporate seal or otherwise all
such deeds, documents, instruments and assurances as in his
opinion may be necessary or desirable to give effect to this
resolution.
APPROVAL OF SHAREHOLDER RIGHTS PLAN [PROPOSAL 4]
-----------------------------------
On April 9, 1998, the Board adopted a shareholder rights
plan (the "Rights Plan"). The Rights Plan is currently effective,
but is subject to confirmation by the shareholders within six
months of adoption pursuant to the TSE requirements. At the
Meeting shareholders will be asked to consider and, if deemed
advisable, to approve and confirm with or without variation the
Rights Plan and all Rights issued pursuant to the Rights Plan.
The Rights Plan has a term of ten years, subject to earlier
termination if shareholders fail to reconfirm the Rights Plan at
every third annual meeting following the 1998 Meeting. The
Rights Plan is similar to plans adopted recently by several other
Canadian companies and approved by their shareholders.
A copy of the Shareholder Rights Plan Agreement (the "Rights
Agreement"), which gives effect to the Rights Plan, is attached
as Schedule "A" to this Circular. Capitalized terms used below in
relation to the Rights Plan, that are not otherwise defined in
this Circular, have the same meaning given to them in the Rights
Agreement.
Directors' Recommendation
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE RIGHTS PLAN
IS IN THE BEST INTERESTS OF THE CORPORATION AND SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
RIGHTS PLAN.
Background and Purpose of the Rights Plan
The Rights Plan is designed to encourage the fair treatment
of shareholders in connection with any take-over bid for the
Corporation. The Rights Plan will provide the Board and
shareholders with more time to fully consider any unsolicited
take-over bid for the Corporation without undue pressure, it will
allow the Board to pursue, if appropriate, other alternatives to
maximize shareholder value, and it will allow additional time for
competing bids to emerge. Securities legislation in Canada
requires a take-over bid to remain open for only 21 days. The
Board does not believe that this period is sufficient to permit
the Board to determine whether there may be alternatives
available to maximize shareholder value or whether other bidders
may be prepared to pay more for the Corporation's shares than the
Offeror.
Under the Rights Plan, a bidder making a Permitted Bid (as
defined below) for the Common Shares may not take up any shares
before the close of business on the 90th day after the date of
the bid and, on such date, at least 50% of the Common Shares not
Beneficially Owned by the person making the bid and certain
related parties are deposited, in which case, a public
announcement of that fact be made and the bid must be extended
for 10 Business Days on the same terms. The Rights Plan will
encourage an Offeror to proceed by way of a Permitted Bid, or to
approach the Board with a view to negotiation by creating the
potential for substantial dilution of the Offeror's position. The
Permitted Bid provisions of the Rights Plan are designed to
ensure that in any take-over bid, all shareholders are treated
equally, receive the maximum available value for their investment
and are given adequate time to properly assess the bid on a fully
informed basis.
It is management's understanding that in recent years,
unsolicited bids were made for the shares of a number of Canadian
companies. Most of these companies had a shareholder rights plan
which was used by the target company's board of directors to gain
time to seek alternatives to the bid to enhance shareholder
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<PAGE>
value. In each case, a change of control ultimately occurred at
a price in excess of the original bid price; accordingly, the
existence of a shareholder rights plan should not prevent
unsolicited take-over bids for the Common Shares.
The Ontario Securities Commission has concluded in two
recent decisions relating to shareholders rights plans that a
target company's board will not be permitted to maintain a
shareholder rights plan solely to prevent a successful bid, but
may do so if the board is actively seeking alternatives to a
take-over bid and if there is a real and substantial possibility
that the board can increase shareholder choice and maximize
shareholder value.
THE RIGHTS PLAN IS NOT BEING PROPOSED IN RESPONSE TO, OR IN
ANTICIPATION OF, ANY ACQUISITION OR TAKE-OVER OFFER AND IS NOT
INTENDED TO PREVENT A TAKE-OVER OF THE CORPORATION, TO SECURE
CONTINUANCE OF CURRENT MANAGEMENT OR THE DIRECTORS IN OFFICE OR
TO DETER FAIR OFFERS FOR THE COMMON SHARES. THE RIGHTS PLAN DOES
NOT PROHIBIT ANY SHAREHOLDER FROM USING THE PROXY MECHANISM SET
OUT IN THE BUSINESS CORPORATIONS ACT, ONTARIO TO PROMOTE A CHANGE
IN THE MANAGEMENT OR CONTROL OF THE CORPORATION. THE RIGHTS PLAN
MAY, HOWEVER, INCREASE THE PRICE TO BE PAID BY A POTENTIAL
OFFEROR TO OBTAIN CONTROL OF THE CORPORATION AND MAY DISCOURAGE
CERTAIN TRANSACTIONS.
The Rights Plan does not affect in any way the financial
condition of the Corporation. The initial issuance of the Rights
is not dilutive and will not affect reported earnings or cash
flow per share until the Rights separate from the underlying
Common Shares and become exercisable. The adoption of the Rights
Plan will not lessen or affect the duty of the Board to act
honestly and in good faith with a view to the best interests of
the Corporation and its shareholders.
Terms of the Rights Plan
The following is a summary of the terms of the Rights Plan.
This summary is qualified in its entirety by the Rights
Agreement.
To implement the Rights Plan, one Right has been issued by
the Corporation pursuant to the Rights Agreement in respect of
each Common Share outstanding at 5:00 p.m. (Toronto time) on
April 20, 1998 (the "Record Time"). One Right also will be issued
for each additional Common Share issued after the Record Time and
prior to the earlier of the Separation Time (as defined below)
and the Expiration Time. Each Right will entitle the holder to
purchase from the Corporation one Common Share at a price equal
to one-half of the market price for the Common Shares, subject to
certain anti-dilution adjustments. The Rights, however, will not
be exercisable until the Separation Time. Upon the occurrence of
a Flip-in Event, each Right held by a non-Acquiring Person will
become exercisable and may be traded separately from the Common
Shares.
The issuance of Rights will not change the manner in which
shareholders currently trade their Common Shares. Shareholders do
not have to return their certificates in order to receive the
benefit of the Rights.
Until the Separation Time, the Rights will trade together
with the Common Shares, will be represented by the Common Share
certificates and will not be exercisable. After the Separation
Time, the Rights will become exercisable, will be evidenced by
Rights Certificates, and will be transferable separately from the
Common Shares.
The Separation Time is defined in the Rights Agreement as
the close of business on the eighth Trading Day (or such later
day as may be determined by the Board) after the earlier of:
(a) the Stock Acquisition Date, which is the date of the
first public announcement that a Person has become an
Acquiring Person (defined in the Rights Agreement as a
person who has acquired, other than pursuant to an
exemption available under the Rights Plan or pursuant
to a Permitted Bid, Beneficial Ownership of 20% or more
of the Voting Shares of the Corporation); and
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<PAGE>
(b) the date of the commencement of, or first public
announcement of an intention to commence, a Take-over
Bid (other than a Permitted Bid or a Competing
Permitted Bid) to acquire Beneficial Ownership of 20%
or more of the Voting Shares of the Corporation.
A Permitted Bid is defined in the Rights Agreement as a
Take-over Bid made by take-over bid circular and which also
complies with the following requirements:
(a) the bid is made to all holders of Voting Shares as
registered on the books of the Corporation; and
(b) the Take-over Bid is open for at least 90 days and more
than 50% of the Voting Shares (other than shares
Beneficially Owned by the Offeror and certain related
parties) are deposited under the bid and not withdrawn
before any shares may be taken up and paid for and if
50% of the existing Common Shares are so deposited and
not withdrawn, an announcement of such fact is made and
the Bid remains open for a further 10 Business Days.
If an Offeror successfully completes a Permitted Bid, the
Rights Plan provides that the Board may redeem the Rights at
CDN$0.0001 per Right.
A Permitted Bid, even if not approved by the Board, may be
taken directly to the shareholders of the Corporation.
Shareholder approval will not be required for a Permitted Bid.
Instead, shareholders will initially have at least 90 days to
deposit their Common Shares. If more than 50% of the Voting
Shares (other than shares Beneficially Owned by the Offeror) have
been deposited and not withdrawn by the end of such 90 day
period, the Permitted Bid must be extended for a further period
of 10 Business Days to allow initially disapproving shareholders
to deposit their shares if they so, choose.
A potential Offeror does not have to make a Permitted Bid.
It can negotiate with, and obtain the prior approval of, the
Board to make a bid pursuant to a take-over bid circular on terms
which the Board considers fair to all shareholders. In such
circumstances, the Board may waive the application of the Rights
Plan to the transaction, thereby allowing such bid to proceed
without dilution of the Offeror.
Under the Rights Agreement, a Flip-in Event is a transaction
in which any Person becomes an Acquiring Person. Except as set
out below, from and after the close of business on the eighth
trading day following the Stock Acquisition Date:
(a) any Rights Beneficially Owned by the Acquiring Person
and Affiliates, Associates and Transferees of the
Acquiring Person or any Person acting jointly or in
concert with the Acquiring Person will become void; and
(b) each Right (other than Rights which are void) will
entitle the holder thereof to purchase that number of
Common Shares having an aggregate Market Price on the
date of consummation or occurrence of such Flip-In
Event equal to twice the Exercise Price for an amount
in cash equal to the Exercise Price.
Accordingly, a Flip-in Event that is not approved by the
Board will result in significant dilution to an Acquiring Person.
The Board may at any time prior to the occurrence of a Flip-in
Event, elect to redeem all of the outstanding Rights at a
redemption price of CDN$0.0001 per Right.
The Corporation may, from time to time, supplement or amend
the Rights Agreement to correct clerical or typographical errors
or to maintain the validity of the Rights Agreement as a result
of a change in law. All other amendments to the Rights Agreement
after the Meeting require shareholder approval.
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<PAGE>
Canadian Federal Income Tax Consequences
The Corporation will not include any amount in income for
the purposes of the Income Tax Act, Canada as a result of the
issue of the Rights. A right to acquire additional shares of the
Corporation granted to a shareholder does not constitute a
taxable benefit to the recipient that must be included in income
or that is subject to non-resident withholding tax if all holders
of Common Shares are granted the right. A Right was issued in
respect of each Common Share outstanding at the Record Time.
Therefore, holders of Common Shares should not have an income
inclusion or liability for non-resident withholding tax upon the
issuance of the Rights. In any event, the Corporation considers
that the Rights have a negligible monetary value because the
Corporation is not aware of any acquisition or take-over bid
which give rise to a Flip-in Event and there is only a remote
possibility that the Rights will be exercised.
Although a holder of a Right may have income or may be
subject to non-resident withholding tax if the Rights become
exercisable, and are exercised or redeemed, the Corporation
considers the likelihood of such an event occurring to be remote.
SHAREHOLDERS WHO ARE RESIDENT OF A JURISDICTION OTHER THAN
CANADA SHOULD CONSULT THEIR OWN TAX ADVISERS FOR APPLICABLE
INCOME TAX CONSEQUENCES OF THE ISSUANCE OF THE RIGHTS.
Shareholders' Approval
The resolution approving the Rights Plan requires
confirmation by a majority of the votes cast thereon at the
Meeting.
The text of the resolution to be submitted to shareholders
is set forth below.
NOW THEREFORE BE IT RESOLVED THAT:
1. The shareholder rights plan adopted by the board of
directors of the Corporation on April 9, 1998 (the "Rights Plan")
as well as the issuance of rights thereunder be and the same is
hereby approved.
2. Any one director or officer of the Corporation be and he is
hereby authorized and directed to do all such acts and things and
to execute and deliver under the corporate seal or otherwise all
such deeds, documents, instruments and assurances as in his
opinion may be necessary or desirable to give effect to this
resolution.
APPROVAL OF PRIVATE PLACEMENTS [PROPOSAL 5]
------------------------------
In order for the Corporation to raise funds to expand its
business services, the Corporation may require further funding
which would be raised pursuant to one or more private placements.
Shareholders are being asked to approve a resolution
authorizing the Board to enter into one or more private
placements in the 12 month period following the Meeting to issue
additional securities to subscribers who are at arm's length to
the Corporation. Pursuant to the rules adopted by the TSE (and in
particular, paragraph 620 of the TSE Company Manual) shareholder
approval is required for issuances of securities by private
placement of more than 25 % of the number of shares which are
currently outstanding (on a non-diluted basis) in any six month
period. Accordingly, it is prudent to have authority for such
private placements at the present time to save the time and
expense of seeking shareholder approval at future special
meetings of shareholders;
It is not the intention of management to issue the entire
number of securities authorized pursuant to the proposed
resolution. Private placements will be negotiated only if
management believes the subscription price is reasonable in the
circumstances and if funds are required by the Corporation to
expand its activities. The issuance of securities pursuant to
these private placements will not materially affect control of
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<PAGE>
the Corporation. Each such private placement will be made in
accordance with applicable laws and rules of the TSE, which
require the approval of the TSE prior to completion of each
individual private placement. These rules provide that private
placements must be priced at the closing price of the common
shares on the day of the notice of private placement, subject to
prescribed discounts.
Warrants may accompany common shares issued under the
private placement, where such warrants are priced at or above
market and do not exceed the number of common shares issued under
the private placement.
The Nasdaq rules requiring shareholder approval of certain
private placements by Nasdaq National Market issuers, such as the
Corporation, apply only on a transaction specific basis.
Therefore, approval of this proposal will not also constitute
approval of those future private placements by the Corporation
which are subject to Nasdaq shareholder approval rules.
Shareholders are being asked to pass a resolution
authorizing additional private placements which would take place
within one year of the date of this Circular. Such future
private placements will be subject to the following terms:
1. All of the private placement financings will be carried out
in accordance with the guidelines-of the TSE and
specifically in accordance with paragraphs 619 and 622 of
the Manual, copies of which are annexed hereto as Schedule
"B".
2. Such future private placements would not result in
additional shares of the Corporation being issued in an
amount exceeding the current number of issued and
outstanding shares (in the aggregate) of the Corporation.
3. Any of the future private placements would be substantially
at arm's length and would not materially affect control of
the Corporation.
The resolution approving future private placements requires
confirmation by a majority of the votes cast thereon at the
Meeting.
The text of the resolution to be submitted to shareholders
is set forth below.
NOW THEREFORE BE IT RESOLVED THAT:
1. The directors of the Corporation be and they are hereby
authorized and directed to arrange from time to time,
additional private placements in the capital of the
Corporation, subject to the following terms:
(a) All private placement financings will be carried out by
the Corporation in accordance with the guidelines of
The Toronto Stock Exchange and specifically paragraphs
619 and 622 of The Toronto Stock Exchange Company
Manual.
(b) The future private placements will not result in
additional shares of the Corporation being issued in an
amount exceeding the current number of issued and
outstanding shares in the aggregate of the Corporation
(i.e. 21,644,856 common shares).
(c) Any of the future private placements would be
substantially at arm's length and would not materially
affect control of the Corporation.
2. Any one director or officer of the Corporation be and he is
hereby authorized and directed to execute and deliver under
the corporate seal or otherwise all such deeds, documents,
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<PAGE>
instruments and assurances and to do all such acts and
things as in his opinion may be necessary or desirable to
give effect to this resolution.
SHAREHOLDER PROPOSALS
---------------------
December 21, 1998 is the date by which proposals of
shareholders pursuant to the Securities and Exchange Commission
proxy rules intended to be presented at the 1999 Annual and
Special Meeting of shareholders must be received by the
Corporation for inclusion in the Corporation's management
information circular relating to the 1999 Meeting.
EXPENSES OF SOLICITATION
------------------------
The total cost of this solicitation will be borne by the
Corporation. In addition to use of the mails, proxies may be
solicited by officers and regular employees of the Corporation
personally and by telephone or facsimile. The Corporation may
reimburse persons holding shares in their own names or in the
names of the nominees for expenses they incur in obtaining
instructions from beneficial owners of such shares.
OTHER MATTERS
-------------
A copy of the Annual Report of the Corporation for the
fiscal year ended November 30, 1997 including financial
statements, is enclosed herewith. THE CORPORATION WILL PROVIDE
WITHOUT CHARGE TO ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN
REQUEST OF SUCH PERSON, A COPY OF THE CORPORATION'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED NOVEMBER 30, 1997 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE
DIRECTED TO DAVID L. NORRIS, CHIEF ADMINISTRATIVE OFFICER OF THE
CORPORATION, AT 11011 JONES ROAD, HOUSTON, TEXAS 77070.
The Board knows of no other business to be presented at the
Meeting, but if other matters do properly come before the
Meeting, it is intended that the persons named in the proxy will
vote on such matters in accordance with their best judgment.
DIRECTORS' APPROVAL
-------------------
The contents of this Circular and the sending thereof have
been approved by the Board.
By order of the board of directors
/s/ Michael E. McGinnis
-----------------------------------
Michael E. McGinnis
Chairman of the Board,
President and Chief Executive Officer
April 20, 1998
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SCHEDULE "B"
PRICE
619. The Exchange will not accept an issuance of securities by
way of private placement unless all of the following conditions
are met: (For the purposes of this Section, a private placement
of unlisted convertible securities shall be deemed to be a
private placement of the underlying listed securities at a price
equal to the lowest possible conversion price.)
(a) The listed company must give the Exchange's Listings &
Distributions Division written notice of the proposed
private placement. The notice should be in the form of
a Notice of a Proposed Private Placement (APPENDIX D-29
TO D-31), accompanied by a covering letter. The date on
which notice shall be deemed to be given (the "Date of
Notice") shall be, in the case of a notice that is
mailed, the date on which the notice is deposited in a
post office or public letter box. During periods of
postal disruption, listed companies shall be expected
to use alternative means of effecting prompt delivery.
(b) The price per security must be lower than the closing
market price of the security on The Toronto Stock
Exchange on the trading day prior to the Date of Notice
(the "Market Price"), less the applicable discount as
follows:
MARKET PRICE MAXIMUM DISCOUNT THEREFROM
$0.50 or less 25%
$0.51 to $2.00 20%
Above $2.00 15%
(c) Subject to paragraph (e), within 30 days from the Date
of Notice, the listed company must file with the
Exchange's Listings & Distributions Division a Private
Placement Questionnaire and Undertaking (Form P1 -
Appendix D-2 and D-3) completed by each proposed
purchaser, and all other documentation requested by the
Exchange.
(d) The transaction must not close and the securities must
not be issued prior to acceptance thereof by the
Exchange and, subject to paragraph (e), not later than
45 days from the Date of Notice.
(e) An extension of the time period prescribed in paragraph
(c) or (d) may be granted in justifiable circumstances,
provided that a written request for an extension is
filed with the Exchange's Listings & Distributions
Division in advance of the expiry of the 30-day or
45-day period, as the case may be.
(f) The listed company must give the Exchange immediate
notice in writing of the closing of the transaction.
WARRANTS
622. Warrants to purchase listed securities may be issued to a
private placement purchaser if:
(a) the listed company satisfies the Exchange that the
warrants and the provisions attaching to them are
essential to the proposed financing; and
(b) all of the following conditions are met:
B-1
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(i) If the securities purchased initially by the
private places are listed securities, the warrants
must not entitle the holder to purchase a greater
number of listed securities than the number of
securities purchased initially. If the securities
purchased initially are convertible into listed
securities, the warrants must not entitle the
holder to purchase a greater number of listed
securities than the number of securities issuable
upon conversion of the securities purchased
initially. If the securities purchased initially
are neither listed securities nor convertible into
listed securities, the warrants must not entitle
the holder to purchase a greater number of listed
securities than the number obtained by dividing
the initial proceeds of the private placement by
the Market Price per security as defined in
Section 619.
(ii) The warrant exercise price must not be less than
the Market Price, as defined in Section 619 (i.e.
with no discount). The procedure set out in
paragraphs (a), (c), (d), (e) and (f) of Section
619 must be followed in this regard, the "price"
being the warrant exercise price for this purpose.
(iii) The warrants must be exercisable during a
period not extending beyond five years from
the date of the closing of the private
placement transaction.
B-2
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FORM OF PROXY SOLICITED BY THE MANAGEMENT
OF AMERICAN ECO CORPORATION
FOR USE AT AN ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS TO BE HELD ON
THURSDAY, MAY 28, 1998
The undersigned shareholder of AMERICAN ECO CORPORATION (the
"Corporation") hereby appoints David L. Norris, the Senior
Vice-President and Chief Administrative Officer of the
Corporation or Michael E. McGinnis, the Chairman, President and
Chief Executive Officer of the Corporation, or in lieu of the
foregoing, to attend and vote on behalf
of ---------------------------
the undersigned at the Annual and Special Meeting of Shareholders
of the Corporation to be held on the 28th day of May, 1998 and at
any adjournments thereof.
The undersigned specifies that all of the voting shares owned by
him and represented by this form of proxy shall be:
(1) VOTED FOR ( )
WITHHELD FROM VOTING ( )
in respect of the election of all nominees;
Barry Cracower, William A. Dimma, Hon. Donald R. Getty,
Michael E. McGinnis, J. C. Pennie and Francis J. Sorg, Jr.;
----------------------------------------
(Instruction: to withhold authority to vote for any nominee
or nominees, write such nominee's name on the space
provided above.)
(2) VOTED FOR ( )
WITHHELD FROM VOTING ( )
in respect of the appointment of auditors and authorizing
the directors to fix their remuneration;
(3) VOTED FOR ( )
AGAINST ( )
the approval of an amendment to the Corporation's stock
option plan;
(4) VOTED FOR ( )
AGAINST ( )
the approval and confirmation of a shareholder rights plan;
(5) VOTED FOR ( )
AGAINST ( )
the approval of the issuance of additional common shares in
the capital of the Corporation by way of private placements,
as may be deemed necessary by the directors, from time to
time; and
(6) VOTED on such other business as may properly come before the
Meeting or any adjournments thereof;
hereby revoking any proxy previously given.
D A T E D this ________ day of ___________, 1998.
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SIGNATURE OF SHAREHOLDER
------------------------------------------------
NAME OF SHAREHOLDER (PLEASE PRINT)
<PAGE>
IF ANY AMENDMENTS OR VARIATIONS TO MATTERS IDENTIFIED IN THE
NOTICE OF MEETING ARE PROPOSED AT THE MEETING OR ANY ADJOURNMENTS
THEREOF OR IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENTS THEREOF, THIS PROXY CONFERS DISCRETIONARY
AUTHORITY TO VOTE ON SUCH AMENDMENTS OR VARIATIONS ON SUCH OTHER
MATTERS ACCORDING TO THE BEST JUDGEMENT OF THE PERSON VOTING THE
PROXY AT THE MEETING OR ANY ADJOURNMENTS THEREOF.
Notes:
1. This form of proxy must be dated and signed by the appointor
or his attorney authorized in writing or, if the appointor is a
body corporate, this form of proxy must be executed by an officer
or attorney thereof duly authorized.
2. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED
NOT BE A SHAREHOLDER) TO ATTEND AND ACT FOR HIM AND ON HIS BEHALF
AT THE MEETING OR ANY ADJOURNMENTS THEREOF OTHER THAN THE PERSONS
DESIGNATED IN THE ENCLOSED FORM OF PROXY. SUCH RIGHT MAY BE
EXERCISED BY STRIKING OUT THE NAMES OF THE PERSONS DESIGNATED
THEREIN AND BY INSERTING IN THE BLANK SPACE PROVIDED FOR THAT
PURPOSE THE NAME OF THE DESIRED PERSON OR BY COMPLETING ANOTHER
FORM OF PROXY AND, IN EITHER CASE, DELIVERING THE COMPLETED AND
EXECUTED PROXY TO THE REGISTERED OFFICE OF THE CORPORATION OR ITS
TRANSFER AGENT PRIOR TO THE CLOSE OF BUSINESS ON THE SECOND
BUSINESS DAY PRECEDING THE DAY OF THE MEETING OR ANY ADJOURNMENTS
THEREOF.
3. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE INSTRUCTIONS OF THE SHAREHOLDER ON ANY BALLOT
THAT MAY BE CALLED FOR AND SUBJECT TO SECTION 114 OF THE BUSINESS
CORPORATIONS ACT, ONTARIO WHERE A CHOICE IS SPECIFIED, THE SHARES
SHALL BE VOTED ACCORDINGLY AND WHERE NO CHOICE IS SPECIFIED, THE
SHARES SHALL BE VOTED FOR THE MATTERS REFERRED TO IN ITEMS (3),
(4) AND (5). WHERE NO SPECIFICATION IS MADE TO VOTE OR WITHHOLD
FROM VOTING IN RESPECT OF THE ELECTION OF DIRECTORS OR THE
APPOINTMENT OF AUDITORS, THE SHARES WILL BE VOTED FOR.
4. Proxies to be used at the Meeting or any adjournments
thereof must be received at the registered office of the
Corporation or its transfer agent prior to the close of business
on the second business day preceding the day of the Meeting or
any adjournments thereof.
5. Please date the proxy. If not dated, the proxy shall be
deemed to be dated on the date on which it is mailed.
6. This proxy ceases to be valid one year from its date.
7. If your address as shown is incorrect, please give your
correct address when returning this proxy.
PLEASE RETURN THE FORM OF PROXY,
IN THE ENVELOPE PROVIDED FOR
THAT PURPOSE TO:
THE CIBC MELLON TRUST COMPANY
200 Queen's Quay East
Unit 6
Toronto, Ontario
M5A 4K9
Attention: Proxy Department
Fax No.: (416) 368-2502
