<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SPECTRUM SIGNAL PROCESSING INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
SPECTRUM SIGNAL PROCESSING INC.
8525 Baxter Place
100 Production Court
Burnaby, B.C. V5A 4V7
(604)421-5422 (Telephone)
(604) 421-1764 (Facsimile)
NOTICE OF ANNUAL GENERAL MEETING
TO THE MEMBERS:
NOTICE IS HEREBY GIVEN that the annual general meeting of
Spectrum Signal Processing Inc. (the "Company") will be held at the Waterfront
Centre Hotel, 900 Canada Place Way, Vancouver, B.C. on Tuesday, the 22nd day of
June, 1999 at the hour of 12:00 o'clock in the afternoon (Vancouver time) to
transact the usual business of an annual general meeting and for the following
purposes:
1. To receive and consider the Report of the Directors to the Members.
2. To receive and consider the financial statements of the Company,
together with the auditor's report thereon for the fiscal year ended
December 31, 1998.
3. To consider and, if thought fit, to approve an ordinary resolution to
set the number of directors at seven.
4. To elect directors to hold office until the next annual general
meeting of the Company.
5. To appoint an auditor for the Company to hold office until the next
annual general meeting of the Company.
6. To authorize the directors to fix the remuneration to be paid to the
auditor for the Company.
7. To consider and, if thought fit, to approve an ordinary resolution to
amend the existing formal stock option plan by increasing the number
of options covered by the plan by 400,000 to allow for the granting to
directors and employees of the Company of incentive stock options to
purchase up to a total of 3,050,000 common shares in the capital stock
of the Company, details of which are set out in the enclosed
Information Circular.
8. To consider and, if thought fit, to approve an ordinary resolutions to
adopt an Employee Share Purchase Plan having substantially the terms
as set out in the enclosed Information Circular subject to such
amendments as may be requested by The Toronto Stock Exchange.
9. To transact such further or other business as may properly come before
the meeting and any adjournment or adjournments thereof.
The accompanying Information Circular provides additional information
relating to the matters to be dealt with at the meeting and is deemed to form
part of this notice.
A shareholder entitled to attend and vote at the meeting is entitled
to appoint a proxy to attend and vote in his stead. If you are unable to attend
the meeting in person, please complete, sign and date the enclosed form of Proxy
and return it within the time and to the location in accordance with the
instructions set out in the form of Proxy and Information Circular accompanying
this Notice.
Please advise the Company of any change in your address.
DATED at Vancouver, British Columbia, this 11th day of May, 1999.
By Order of the Board of
SPECTRUM SIGNAL PROCESSING INC.
"Kenneth A. Spencer"
------------------------------
KENNETH A. SPENCER,
Chair of the Board
<PAGE> 3
SPECTRUM SIGNAL PROCESSING INC.
#100 - 8525 Baxter Place
Burnaby, B.C.
V5A 4V7
(604) 421-5422 (Telephone)
(604) 421-6099 (Facsimile)
INFORMATION CIRCULAR
(As at May 11, 1999 except as indicated)
MANAGEMENT SOLICITATION
THIS INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY THE MANAGEMENT OF SPECTRUM SIGNAL PROCESSING INC.
(THE "COMPANY") FOR USE AT THE ANNUAL GENERAL MEETING (THE "MEETING") OF THE
COMPANY TO BE HELD ON TUESDAY, JUNE 22, 1999. The solicitation will be by mail
and possibly supplemented by telephone or other personal contact to be made
without special compensation by regular officers and employees of the Company.
The Company does not reimburse shareholders, nominees or agents for the cost
incurred in obtaining from their principals authorization to execute forms of
proxy. No solicitation will be made by specifically engaged employees or
soliciting agents. The cost of solicitation will be borne by the Company.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the enclosed form of proxy are directors of the
Company.
Any shareholder returning the enclosed form of proxy may revoke the same
at any time insofar as it has not been exercised. In addition to revocation in
any other manner permitted by law, a proxy may be revoked by an instrument in
writing executed by the shareholder or by his attorney authorized in writing or,
where the shareholder is a corporation, by a duly authorized officer, or
attorney, of the corporation, and delivered either to the office of the Company
or the registrar and transfer agent's office at least 48 hours prior to the
scheduled time of the meeting or by the Chairman of such meeting at the
scheduled commencement of the meeting, or any adjournment of it, and upon any of
such deposits the proxy is revoked.
<PAGE> 4
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VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Company is authorized to issue 50,000,000 common shares without par
value, of which 10,035,654 common shares are issued and outstanding.
Only the holders of common shares are entitled to vote at the Meeting
and the holders of common shares are entitled to one vote for each common share
held. Holders of common shares of record on May 11, 1999 will be entitled to
vote at the Meeting.
To the knowledge of the directors and senior officers of the Company, no
persons beneficially own shares carrying more than 10% of the voting rights
attached to all shares of the Company.
VOTING OF PROXIES AND EXERCISE OF DISCRETION
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 OTHER
THAN THE PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY. TO EXERCISE THIS
RIGHT THE SHAREHOLDER MAY INSERT THE NAME OF THE DESIRED PERSON IN THE BLANK
SPACE PROVIDED IN THE PROXY AND STRIKE OUT THE OTHER NAMES OR MAY SUBMIT ANOTHER
PROXY.
THE SHARES REPRESENTED BY PROXIES IN FAVOUR OF MANAGEMENT WILL BE VOTED
ON ANY POLL (SUBJECT TO ANY RESTRICTIONS THEY MAY CONTAIN) IN FAVOUR OF THE
MATTERS DESCRIBED IN THE PROXY.
The enclosed form of proxy, when properly completed and delivered and
not revoked, confers discretionary authority on the persons appointed thereunder
to vote with respect to any amendments of variations of 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 of this Information Circular, the
management of the Company knows of no such amendment, variation or the matter
which may be presented to the Meeting.
ELECTION OF DIRECTORS
The directors of the Company are elected at each annual general meeting
and hold office until the next annual general meeting or until their successors
are appointed. In the absence of instructions to the contrary, the enclosed
proxy will be voted for the nominees herein listed.
The shareholders will be asked to pass an ordinary resolution to set the
number of directors of the Company at seven (7). Management of the Company
proposes to nominate each of the following persons for election as a director.
Information concerning such persons, as furnished by the individual nominees, is
as follows:
<PAGE> 5
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<TABLE>
<CAPTION>
==============================================================================================
NAME, COUNTRY OF ORDINARY PRINCIPAL OCCUPATION OR APPROX. NO. DATE ON WHICH THE
RESIDENCE AND POSITION HELD EMPLOYMENT AND, IF NOT AN OF VOTING NOMINEE BECAME A
WITH THE COMPANY ELECTED DIRECTOR, SHARES DIRECTOR OF THE
OCCUPATION DURING THE PAST BENEFICIALLY COMPANY
FIVE YEARS OWNED,
DIRECTLY OR
INDIRECTLY,
OR
CONTROLLED
OR DIRECTED
==============================================================================================
<S> <C> <C> <C>
BARRY JINKS(1)(2) President and Chief 28,428 July 27, 1990
Canada Executive Officer of the
PRESIDENT, CHIEF EXECUTIVE Company
OFFICER and DIRECTOR
KENNETH A. SPENCER(2) Chair of the Board of the 20,000 November 3, 1997
Canada Company
CHAIR OF THE BOARD and
DIRECTOR
JOHN E. BRENNAN President and Director of 69,000 December 14, 1995
United States Activated Communications
DIRECTOR Inc.
CHARLES C. JOHNSTON(2) President and Director of 299,100 December 20, 1992
United States J & C Resources Ltd.
DIRECTOR
SAMUEL ZNAIMER(1)(3) Senior Vice-President of 4,000 July 27, 1990
Canada Ventures West Capital Ltd.
DIRECTOR
PASCAL SPOTHELFER Senior Vice-President, Nil March 15, 1999
Canada Strategic Development at
DIRECTOR Teekay Shipping (Canada)
Ltd
ANDREW HARRIES Vice President, Marketing Nil April 16, 1999
Canada and Co-Founder of Sierra
DIRECTOR Wireless, Inc.
</TABLE>
(1) Member of Audit Committee. There is currently a vacancy on the audit
committee to be filled by the Board at its next scheduled meeting.
(2) Member of Compensation Committee
(3) Member of Acquisition Committee
The Advance Notice of the Meeting inviting nominations for directors of
the Company as required by Section 111 of the Company Act (British Columbia) was
mailed to the Ontario Securities Commission, the British Columbia Securities
Commission and to The Toronto Stock Exchange and was published in The Province
newspaper, Vancouver, British Columbia on April 22, 1999.
STATEMENT OF EXECUTIVE COMPENSATION
Particulars of compensation paid to:
(a) the Company's chief executive officer ("CEO");
<PAGE> 6
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(b) each of the Company's four most highly compensated executive
officers who were serving as executive officers at the end of
the most recently completed financial year and whose total
salary and bonus exceeds CAD$100,000 per year; or
(c) any additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not
serving as an executive officer of the Company at the end of the
most recently completed financial year;
(the "Named Executive Officers") is set out in the summary compensation table
below:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------
Awards Payouts
- -----------------------------------------------------------------------------------------------
Name and Other Secur- Restricted LTIP All Other
Principal Year Salary Bonus(1) Annual ities Shares or Payouts Compen-
Position (CAD$) (CAD$) Compen- Under Restricted sation (2)
sation Option/ Share
SARs Units
Granted
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barry Jinks, 1998 $235,935 Nil Nil 13,000 Nil Nil $291.00
President and 1997 $221,025 $146,023 Nil 13,000 Nil Nil $286.00
CEO 1996 $193,200 $115,391 Nil Nil Nil Nil $330.00
Martin 1998 $155,043 Nil Nil 7,500 Nil Nil $216.00
McConnell, 1997 $145,245 $76,766 Nil 7,500 Nil Nil $220.00
VP, Finance, 1996 $137,906 $60,670 Nil 30,000 Nil Nil $264.00
Secretary & CFO
Brian Lowe, 1998 $156,302 Nil Nil 7,500 Nil Nil $216.00
VP, Sales 1997 $148,437 $66,753 Nil 7,500 Nil Nil $220.00
1996 $139,088 $55,276 Nil 30,000 Nil Nil $264.00
Doug Johnson, 1998 $134,820 Nil Nil 7,500 Nil Nil $216.00
VP, Logistics 1997 $126,300 $66,753 Nil 7,500 Nil Nil $220.00
1996 $109,032 $56,752 Nil 30,000 Nil Nil $264.00
David Hobbs 1998 $134,820 Nil Nil 7,500 Nil Nil $229.20
VP, Engineering 1997 $126,300 $66,753 Nil 7,500 Nil Nil $233.00
1996 $109,199 $48,760 Nil 30,000 Nil Nil $264.00
Ron Wages(3) 1998 $183,750 $20,000 Nil 7.500 Nil Nil $216.00
VP, Marketing 1997 $123,958 $70,000 Nil 50,000 Nil Nil $15,153.00
1996 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
<PAGE> 7
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(1) Under the Company's Executive Compensation Plan, cash bonuses may be
earned by officers based upon the achievement of targets relating to
financial performance of the Company. These bonuses are reported in the
year they were earned, based upon Company performance. Bonuses earned in
any particular year are paid out in the first quarter of the following
year.
(2) Consists of insurance premiums paid by the Company for the benefit of
each Named Executive Officer for group term life insurance.
(3) Commenced April 15, 1997.
The value of perquisites and other personal benefits for each Named
Executive Officer does not exceed the lesser of CAD$50,000 and 10% of the total
of his annual salary and bonus.
Other than as set out above, there were no other persons who would
qualify as Named Executive Officers serving as executive officers at the end of
the most recently completed financial year, nor were there any executive
officers who are no longer serving the Company who received a salary in excess
of CAD$100,000 during the most recently completed financial year.
There were no long term incentive plans in place for any Named Executive
Officer of the Company during the most recently completed financial year.
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
<TABLE>
<CAPTION>
===============================================================================================
NAME SECURITIES % OF TOTAL EXERCISE MARKET VALUE EXPIRATION DATE
UNDER OPTIONS OPTIONS OR BASE OF
(a) GRANTED (#) GRANTED TO PRICE SECURITIES (f)
EMPLOYEES (CAD$/ UNDERLYING
(b) IN SECURITY) OPTIONS ON
FINANCIAL THE DATE OF
YEAR (d) GRANT
(CAD$/SECURITY)
(c) (e)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Barry Jinks 13,000(1) 4.2% $7.50 $7.50 June 10, 2008
Martin McConnell 7,500(2) 2.4% $7.50 $7.50 June 10, 2008
Brian Lowe 7,500(2) 2.4% $7.50 $7.50 June 10, 2008
Doug Johnson 7,500(2) 2.4% $7.50 $7.50 June 10, 2008
David Hobbs 7,500(2) 2.4% $7.50 $7.50 June 10, 2008
Ron Wages 7,500(2) 2.4% $7.50 $7.50 June 10, 2008
</TABLE>
(1) These options vest as to 2,600 each year commencing as of June 10, 1999.
(2) These options vest as to 1,500 each year commencing as of June 10, 1999.
<PAGE> 8
-6-
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
==============================================================================================
NAME SECURITIES AGGREGATE UNEXERCISED VALUE OF
ACQUIRED ON VALUE OPTIONS AT FY-END UNEXERCISED IN THE
(a) EXERCISE REALIZED (#) MONEY OPTIONS AT
(CAD$) FY-END
(b) EXERCISABLE/ (CAD$)
(c) UNEXERCISABLE
EXERCISABLE/
(d) UNEXERCISABLE
(e)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Barry Jinks Nil Nil 410,771 / 63,401 $861,538 / NIL
Martin McConnell Nil Nil 84,000 / 28,500 $47,600 / NIL
Brian Lowe Nil Nil 66,500 / 28,500 $14,200 / NIL
Doug Johnson Nil Nil 53,500 / 28,500 $4,640 / NIL
David Hobbs Nil Nil 58,000 / 28,500 $4,260 / NIL
Ron Wages Nil Nil 33,334 / 24,166 NIL / NIL
</TABLE>
There were no defined benefit or actuarial plans in place for any Named
Executive Officer during the most recently completed financial year.
There are no employment contracts or compensatory plans or arrangements
between the Company and a Named Executive Officer.
The Company has a compensation committee comprised of Barry Jinks, the
President and CEO of the Company and two other directors: Mr. Kenneth A.
Spencer, the Chair of the Board and Mr. Charles C. Johnston.
EXECUTIVE COMPENSATION REPORT
It is the responsibility of the compensation committee to review and
recommend compensation policies and programs for executives of the Company. The
compensation committee makes recommendations to the Board of Directors which
gives final approval on these policies. The Company's compensation policies are
designed to reward and recognize executive performance consistent with the
success of the business and to be aligned with increasing shareholder value. Its
policies are intended to attract and retain capable and experienced people.
The Company's executive compensation is designed to encourage,
compensate and reward employees on the basis of individual and corporate
performance, both in the short and long term. The compensation committee
establishes aggregate compensation levels for all executive officers and these
levels have been ratified by the Board of Directors.
In 1996, the Compensation Committee retained Towers Perrin to do a
survey of executive compensation plans of Canadian and U.S. small capital, high
technology companies. As a result of
<PAGE> 9
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their findings and recommendations the Compensation Committee adjusted the base
salaries of the Chief Executive Officer and all executives and provided for an
annual adjustment. The Compensation Committee also recommended that each
Vice-President receive an annual grant of options for 7,500 common shares. In
1997, the bonus plan was modified following a review by Towers Perrin. The bonus
plan was modified to provide for an executive bonus pool that would vary based
on annual earnings per share growth.
Approved by the Compensation Committee:
Barry Jinks Kenneth A. Spencer
Charles C. Johnston
PERFORMANCE GRAPH
The following graph charts performance of an investment in the Company's
common shares against the TSE 300 Share Index, assuming an investment of CAD$100
on December 31, 1993:
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Dec 31/93 Dec 31/94 Dec 31/95 Dec 31/96 Dec 31/97 Dec 31/98
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Spectrum 100($10.00) 50 ($5.00) 187 ($18.75) 83 ($8.30) 83 ($8.30) 47 ($4.70)
(share price
in brackets)
TSE300 100 99 114 144 168 163
</TABLE>
COMPENSATION OF DIRECTORS
Particulars of stock options granted to directors of the Company during
the most recently completed financial year are as follows:
<PAGE> 10
-8-
<TABLE>
<CAPTION>
==========================================================================================
NAME OF DIRECTOR NO. OF SHARES EXERCISE PRICE PER DATE OF GRANT
COMMON SHARE (CAD$) EXPIRY DATE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kenneth A. Spencer 4,000 $7.50 06/10/1998 -
06/10/2003
Joseph Abrams 4,000 $7.50 06/10/1998 -
06/10/2003
Dr. Karl Brackhaus 5,000 $7.50 06/10/1998 -
06/10/2003
John E. Brennen 3,000 $7.50 06/10/1998 -
06/10/2003
Charles C. Johnston 4,000 $7.50 06/10/1998 -
06/10/2003
Samuel Znaimer 7,000 $7.50 06/10/1998 -
06/10/2003
</TABLE>
OTHER COMPENSATION TO DIRECTORS
In 1997, the board of directors of the Company approved a fee of
CAD$1,000 for in person meetings. The board also approved the following annual
allotment of incentive stock options:
<TABLE>
<CAPTION>
No. of Options
--------------
<S> <C>
Director retainer 3,000
Chair of the board 1,000 additional
Chair of Committee of the board 1,000 additional
Committee member 1,000 additional
</TABLE>
The board may also grant an initial allotment of shares to a director at
the time he is appointed, at its discretion.
In addition to the above, Kenneth Spencer, a director of the Company,
also acts as a consultant for the Company and receives a consulting fee of
$20,000 per year, billed quarterly. For the last completed financial year, Mr.
Spencer received a total of $20,000 of consulting fees.
No other compensation was paid to directors of the Company during the
last completed financial year.
STOCK OPTION PLAN
Shareholder approval as evidenced by a majority of the votes cast at the
annual general meeting by "disinterested shareholders" will be sought to approve
an amendment to the existing formal stock option plan (the "Plan") by increasing
the number of stock options covered by the Plan by 400,000 to allow for the
granting to directors and employees of the Company of options to acquire a total
of 3,050,000 common shares in the capital stock of the Company (which number
includes the 991,720 options currently outstanding). In all other respects the
Plan remains the same as previously approved by shareholders.
Under the policies of The Toronto Stock Exchange, a disinterested
shareholder vote is required if more than 10% of the number of outstanding
shares of the Company could be reserved
<PAGE> 11
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for options to insiders or issued to insiders within a one-year period. A
disinterested shareholder vote is also required if more than 5% of the number of
outstanding shares could be issued upon exercise of options to any one insider
in a one-year period.
Under the policies of The Toronto Stock Exchange, "disinterested
shareholders" are shareholders entitled to vote at a meeting of the Company
other than:
(a) insiders of the Company to whom shares may be issued pursuant to
the share compensation arrangement; and
(b) "associates" of such insiders, as that term is defined in the
Ontario Securities Act.
For the purpose of such resolutions, 428,628 shares held by insiders of
the Company will not be counted in the voting.
EMPLOYEE STOCK PURCHASE PLAN
The Company proposes to adopt an Employee Share Purchase Plan (the
"ESPP") subject to the approvals of The Toronto Stock Exchange and the Company's
shareholders. The ESPP allows full time employees and directors of the Company
and its affiliates to purchase shares of the Company through payroll deductions
and advance payments. The objective of the ESPP is to allow employees and
directors to share in the Company's success through having a proprietary
interest in the Company.
It is intended that the ESPP will be registered under the Employee
Investment Act of British Columbia which would allow certain eligible employees
resident in British Columbia to receive a 20% tax credit with respect to share
purchases made under the ESPP. The Company also intends to allow those employees
which participate in the Group RRSP and 401K plans offered by the Company to
direct some of their investment into the ESPP.
Purchases under the ESPP will be made semi-annually at the end of June
and December of each year with the initial purchase period ending December 31,
1999. Purchases will be made at the lower of the weighted 5-day trading average
of the Company's stock at the beginning and the end of a purchase period less a
15% discount. 250,000 shares in total are to be allotted for issuance under the
ESPP with a maximum of 100,000 in any one year. The maximum contribution for
employees is an amount equal to 10% of their compensation but in any event the
maximum contribution of any employee or director is to be limited to $12,500.
The policies of The Toronto Stock Exchange require that the ESPP be
approved by a majority of "disinterested" shareholders as the ESPP is available
to insiders of the Company. Accordingly, shareholders will be asked to consider,
and if thought fit, pass the following resolution:
"Resolved that the Company adopt an Employee Share Purchase Plan
having substantially the terms as set out in the Company's information circular
dated May 11, 1999, subject to such amendments as may be requested by The
Toronto Stock Exchange."
428,628 shares held by insiders of the Company will not be
counted in the voting on the above resolution.
<PAGE> 12
-10-
INDEBTEDNESS TO COMPANY OF DIRECTORS AND SENIOR OFFICERS
None of the directors and senior officers of the Company, proposed
nominees for election or associates of such persons is or has been indebted to
the Company or its subsidiaries at any time since the beginning of the last
completed financial year of the Company and no indebtedness remains outstanding
as at the date of this Information Circular.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Save and except the foregoing, or as disclosed elsewhere in this
information circular, since January 1, 1998, being the commencement of the
Company's last completed financial year, none of the following persons has any
material interest, direct or indirect, in any transaction or proposed
transaction which has materially affected or will materially affect the Company
or any of its subsidiaries:
(a) any director or senior officer of the Company;
(b) any proposed nominee for election as a director of the Company;
(c) any member holding, directly or indirectly, more than 10% of the
voting rights attached to all the shares of the Company; and
(d) any associate or affiliate of any of the foregoing persons.
STATEMENT OF CORPORATE GOVERNANCE POLICIES
The report of the Toronto Stock Exchange Committee on Corporate
Governance resulted in The Toronto Stock Exchange introducing a new listing
requirement in 1995 wherein companies listed on The Toronto Stock Exchange are
required to disclose their corporate governance system in their annual reports
or information circulars, with specific reference to the guidelines (the
"Guidelines") set out in The Toronto Stock Exchange Company Manual, copies of
which are available from the Toronto Stock Exchange or the Company.
Mandate and Responsibilities of the Board
The fundamental objective of the Board of Directors of the Company is to
ensure that the Company operates in a fashion which maximizes shareholder value
over the long term. The Board's duties and responsibilities are all carried out
in a manner consistent with that fundamental objective.
The principal duty and responsibility of the Board is to oversee the
management and operations of the Company, with the day to day management of the
business and affairs of the Company delegated by the Board to the Chief
Executive Officer and other executive officers.
<PAGE> 13
-11-
The Board's responsibilities include overseeing the conduct of the
Company's business, providing leadership and direction to its management, and
setting policies. Strategic direction for the Company is developed through the
Board's annual planning process. Through this process, the Board adopts the
operating plan for the coming year, and monitors management's progress relative
to that plan through a regular reporting and review process.
Notwithstanding the suggested Guidelines, no formal position
descriptions for the Board and the Chief Executive Officer have been developed.
Composition and Size of the Board
The seven-member Board of Directors is elected by the shareholders of
the Company, with two related directors, Barry Jinks and Kenneth A. Spencer. In
addition to serving as a director, Mr. Jinks is the Company's President and
Chief Executive Officer. Mr. Spencer is the Chair of the Board and also provides
certain consulting services to the Company. The five unrelated directors are
independent of management and free from any interest, business or other
relationships that could, or could reasonably be perceived to, materially
interfere with their ability to act with a view to the best interests of the
Company, other than interests and relationships arising from shareholding.
In 1995, the Board increased the number of directors by one, bringing
the total number of directors to seven, a size which the Board believes to be
appropriate for the Company.
Committees of the Board
The Board has three standing committees: Audit, Compensation and
Acquisition. The committees are each comprised of three, three and two directors
respectively. Each committee also has available to it as a resource such members
of management as may from time to time be determined to be appropriate.
The Audit committee assesses, influences, and helps set the tone for
quality financial reporting and sound internal controls. The committee reviews
the annual audit and meets with the Company's independent accountants to review
the adequacy and effectiveness of the Company's internal controls and financial
management practices, and recommends the Company's financial statements to the
Board for approval.
The Compensation committee reviews and recommends compensation policies
and programs for executives of the Company. The committee makes recommendations
to the Board which gives final approval on these policies.
The Acquisition committee reviews and recommends acquisitions
opportunities with the executives of the Company. The committee makes
recommendations to the Board which gives final approval on any acquisition.
The Guidelines contemplate that committees of the Board should generally
be composed of outside directors, a majority of whom are unrelated directors.
The Company complies with the requirements of the British Columbia Company Act
in that the majority of its audit committee is comprised of directors who are
not officers or employees of the Company; however, the Board feels it is
appropriate to have Barry Jinks, the President and Chief Executive Officer of
the Company, sit
<PAGE> 14
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on both the Audit and Compensation committees as he is the director who is most
familiar with the operations of the Company. Further the Board feels it benefits
from the input of Kenneth Spencer on the Compensation committee notwithstanding
that he may not be categorized as an "outside" director by virtue of serving as
Chair of the Board.
Decision requiring prior Board approval and Expectations of Management
The Board has delegated to the Chief Executive Officer and senior
management responsibility for the day to day management of the business of the
Company. Matters of policy and issues outside the normal course of business are
brought before the Board for its review and approval, along with all matters
dictated by statute and legislation as requiring Board review and approval. The
Chief Executive Officer and senior management review the Company's progress in
relation to the current operating plan at Board meetings, which are held at
least six times a year. The Board meets on a regular basis with and without
management present. Financial, operational and strategic issues facing the
Company are reviewed, monitored and approved at the Board meetings.
Recruitment of New Directors and Assessment of Board Performance
Notwithstanding the suggested Guidelines, the Company does not have a
committee of outside, i.e. non-management directors, a majority of whom are
unrelated directors, with the responsibility for proposing to the Board new
nominees to the Board and for assessing directors on an ongoing basis. Instead,
any one director may propose new nominees to the Board for consideration by the
Board as a whole. In addition, although no formal orientation and education
program for new directors has been established, new directors visit the
Company's head office and meet with other directors and executive officers prior
to becoming a director. Further, to date, all new appointees to the board have
had extensive experience in serving on boards of many varied organizations,
including public companies.
The Guidelines also contemplate that a Board of Directors should
implement a process to be carried out by an appropriate committee for assessing
the effectiveness of the Board as a whole, the committees of the Board and the
contribution of individual directors. Due to the size and composition of the
Board, the Board is of the view that a formal process of assessment is
unnecessary, and instead The Board assesses Board committee and individual
director's effectiveness on an informal basis.
Director's Compensation
In 1997, the Board has adopted a compensation program which provides for
a fee of (CAD)$1,000 for in person meetings and for the following annual
allotment of incentive stock options for each independent director, in addition
to an initial allotment at the time of becoming a director:
<TABLE>
<CAPTION>
No. of Options
--------------
<S> <C>
Director retainer 3,000
Chair of the board 1,000 additional
Chair of Committee of the board 1,000 additional
Committee member 1,000 additional
</TABLE>
<PAGE> 15
-13-
The Board believes this realistically reflects the responsibilities and
risk involved in being an effective director. Barry Jinks, the President and
Chief Executive Officer, does not receive any additional remuneration for acting
as a director or as a member of either of the standing committees.
Shareholder Feedback and Concern
Under the direction of the Chief Executive Officer, there is a
shareholder relations program in place which involves providing information with
respect to reported financial results and other announcements by the Company to
a broad spectrum of investors and interested parties. Shareholder concerns of a
significant nature are directed to the Vice-President, Finance and the Chief
Executive Officer for information and resolution, and management reports to the
Board on these matters and other major shareholder and investor matters.
APPOINTMENT OF AUDITOR
Unless otherwise instructed, the proxies given pursuant to this
solicitation will be voted for the re-appointment of KPMG, Chartered
Accountants, of Vancouver, British Columbia, as auditor of the Company to hold
office until the close of the next annual general meeting of the Company. It is
proposed that the remuneration to be paid to the auditor of the Company be fixed
by the Board of Directors.
KPMG were first appointed auditor of the Company on July 31, 1987.
MANAGEMENT CONTRACTS
There are no management functions of the Company or a subsidiary thereof
which are to any substantial degree performed by a person other than the
directors or senior officers of the Company or a subsidiary thereof.
THE YEAR 2000 ISSUE
The Company has established a Year 2000 program to coordinate and
monitor the assessment, conversion or replacement, and testing of computer
systems throughout the Company to ensure key business information and process
control systems will function successfully after December 31, 1999. In addition,
the Company is taking steps to ensure that all relevant non-information
technology systems will be Year 2000 compliant.
Potential Year 2000 risks could include, without limitation, a temporary
inability to engage in normal business activities such as conducting general
banking tasks, invoicing, and materials planning and purchasing. The Company has
determined that its major internal system, the MRP system, is Year 2000
compliant, which means that internal order processing and filing will be
unaffected. The Company has committed internal and external resources to address
its potential Year 2000 problems. Progress on Year 2000 issues is centrally
coordinated, with regular reporting to the Audit Committee and the full Board of
Directors.
<PAGE> 16
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The Company has completed its assessment of internal Year 2000 issues.
The Company does not expect to incur any costs in remediating (where required)
any Year 2000 issues relating to its business, other than the time spent by
employees on ensuring compliance. In any case, total costs to the Company with
respect to its Year 2000 compliance activities are not anticipated to be
material to the Company's financial condition or results of operations in any
given year. These costs and the date on which the Company plans to complete Year
2000 modification and testing processes are based on management's best
estimates, which were derived utilizing numerous assumptions. However, there can
be no guarantee that these estimates will prove to be accurate and actual
results could differ significantly.
As the Company relies on third party suppliers for utilities,
transportation, and other key services, interruption of supplier operations
could affect the Company's operations, however, this risk is being assessed and
contingency plans being developed. The Company has initiated communications with
suppliers with which it does significant business to determine the extent to
which the Company may be vulnerable to such parties' failure to remedy their own
Year 2000 problems. The Company expects to complete its assessment of third
party Year 2000 risks by March 31, 1999. There can be no assurance that the
systems of such suppliers will be converted on a timely basis.
The Company's Year 2000 contingency plans are as follows: (i) all
"critical path" systems are being identified and testing will be continuous,
(ii) back-up systems are being put in place for alternate suppliers for all
aspects of production and delivery, and (iii) the Company already has in place a
redundant system of supply for its manufactured products. Continuing monitoring
and risk management are taking place and the Company's contingency plans will be
updated as new issues are identified. Based on its current assessment,
management believes the Year 2000 issue will not have a material adverse effect
on the Company's business, financial conditions, or results of operations.
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
The management of the Company is not aware of any other matter to
come before the Meeting other than as set forth in the Notice of the Meeting. If
any other matter properly comes before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares represented
thereby in accordance with their best judgement on such matters.
By Order of the Board of
SPECTRUM SIGNAL PROCESSING INC.
"KENNETH A. SPENCER "
Per: Kenneth A. Spencer,
Chair of the Board
