UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------------------------------------
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF DECEMBER, 2002
Commission File Number ____________________
PEACE ARCH ENTERTAINMENT GROUP INC.
(Translation of Registrant's name into English)
#500, 56 EAST 2ND AVENUE, VANCOUVER, B.C., CANADA V5T 1B1
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F______ Form 40-F______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ______
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101 (b)(7):_______
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes______ No______
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- ______
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, XXXX XXX Ltd., has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: December 18, 2002
By: /s/ JULIET JONES
----------------------
Juliet Jones
President and CEO
[PEACE ARCH ENTERTAINMENT GROUP INC. LOGO]
NOTICE OF ANNUAL GENERAL MEETING OF MEMBERS
TAKE NOTICE that the 2003 Annual General Meeting of the Members of Peace Arch
Entertainment Group Inc. (hereinafter called the "Company") will be held at 5th
floor, 56 East 2nd Avenue, Vancouver, British Columbia, on:
January 20, 2003
at the hour of 10:00 o'clock in the forenoon (Pacific Standard Time) for the
following purposes:
1. to receive the Report of the Directors;
2. to receive the financial statements of the Company for its fiscal year
ended August 31, 2002 and the report of the Auditors thereon;
3. to appoint Auditors for the ensuing year and to authorize the Directors to
fix their remuneration;
4. to determine the number of directors and to elect directors;
5. to pass a resolution approving the issuance or reservation for issuance of
an aggregate 16,196,333 Class B Subordinate Voting shares of the Company
pursuant to the Private Placement Financing, Asset Acquisition, Debt
Restructuring and Release and Reconstitution of Loan Guarantee described
under the heading "Particulars of Matters to be Acted Upon -- Approval of
Share Issuances" in the Company's Information Circular dated December 18,
2002;
6. to pass a resolution authorizing the directors to arrange from time to time
additional private placements that are substantially at arm's length, in
accordance with The Toronto Stock Exchange guidelines, not materially
affecting control of the Company and not to exceed the number of issued and
outstanding shares in the aggregate of the Company after giving effect to
the share issuances described under the heading "Particulars of Matters to
be Acted Upon -- Approval of Share Issuances -- Private Placement Financing
and Asset Acquisition" in the Company's Information Circular dated December
18, 2002;
7. to pass a resolution amending the Company's Amended Share Option Plan to
increase the number of shares of the Company reserved for issuance
thereunder;
8. to transact such other business as may properly come before the Meeting.
Suite 500, 56 East 2nd Avenue, Vancouver, B.C., Canada V5T 1B1
Tel: (604) 681.9308 Fax: (604) 681-3299
www.peacearch.com
2
Accompanying this Notice are an Information Circular and Form of Proxy.
A shareholder entitled to attend and vote at the Meeting is entitled to appoint
a proxyholder to attend and vote in his place. If you are unable to attend the
Meeting, or any adjournment thereof, in person, please read the Notes
accompanying the form of Proxy enclosed herewith and then complete, date, sign
and return the Proxy within the time set out in the Notes. The enclosed form of
Proxy is solicited by Management of the Company but, as set out in the Notes,
you may amend it if you so desire by striking out the names listed therein and
inserting in the space provided the name of the person you wish to represent you
at the Meeting. Unregistered shareholders who received the enclosed form of
Proxy through an intermediary must deliver the Proxy in accordance with the
instructions given by such intermediary.
Dated at Vancouver, British Columbia, this 18th day of December, 2002.
BY ORDER OF THE BOARD OF DIRECTORS
"Juliet Jones"
President and CEO
[PEACE ARCH ENTERTAINMENT GROUP INC. LOGO]
Suite 500, 56 East 2nd Avenue
Vancouver, B.C., Canada V5T 1B1
Telephone: (604) 681-9308
INFORMATION CIRCULAR
AS AT AND DATED THE 18TH DAY OF DECEMBER 2002
(unless otherwise noted herein)
This Information Circular accompanies the Notice of the 2003 Annual General
Meeting of Members of PEACE ARCH ENTERTAINMENT GROUP INC. (hereinafter called
the "Company"), and is furnished in connection with a solicitation of proxies
for use at that Meeting and at any adjournment thereof.
PERSONS OR COMPANIES
MAKING THE SOLICITATION
THE ENCLOSED PROXY IS BEING SOLICITED BY
MANAGEMENT OF THE COMPANY
Solicitations will be made 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 may reimburse members'
nominees or agents (including brokers holding shares on behalf of clients) 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.
COMPLETION, DEPOSIT AND VOTING OF PROXIES
Those members so desiring may be represented by proxy at the Meeting. The
persons named in the enclosed form of proxy are directors or officers of the
Company. A member has the right to appoint a person (who need not be a member)
to attend and act on his behalf at the Meeting other than the persons named as
proxyholders in the form of proxy accompanying this Information Circular. To
exercise this right, the member must either insert the name of the desired
person in the blank space provided in the proxy and strike out the other names
or submit another proxy.
The instrument of proxy must be dated and signed and, together with the power of
attorney or other authority, if any, under which it is signed or a notarially
certified copy thereof, deposited either at the office of the Registrar and
Transfer Agent of the Company, CIBC Mellon Trust Company, Suite 1600, The
Oceanic Plaza, 1066 West Hastings Street, Vancouver, British Columbia, V6E 3X1,
or at the Head Office of the Company at the address set out above, not less than
one hour prior to the time of the holding of the Meeting or any adjournment
thereof. Unregistered shareholders who received the proxy through an
intermediary must deliver the proxy in accordance with the instructions given by
the intermediary.
THE SHARES REPRESENTED BY THE PROXY SOLICITED HEREBY WILL BE VOTED OR WITHHELD
FROM VOTING IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ON ANY BALLOT THAT MAY BE
CALLED FOR AND, IF A CHOICE IS SPECIFIED WITH RESPECT TO ANY MATTER TO BE ACTED
UPON, THE SHARES SHALL BE VOTED OR WITHHELD FROM VOTING ACCORDINGLY. WHERE NO
CHOICE IS OR WHERE BOTH CHOICES ARE SPECIFIED IN RESPECT OF ANY MATTER TO BE
ACTED UPON OTHER THAN THE APPOINTMENT OF AN AUDITOR OR THE ELECTION OF DIRECTORS
AND A MANAGEMENT NOMINEE IS
2
NAMED IN THE FORM OF PROXY TO ACT AS THE MEMBER'S PROXY, THE SHARES REPRESENTED
BY THE PROXY HEREBY SOLICITED SHALL BE VOTED IN FAVOUR OF ALL SUCH MATTERS. THE
FORM OF PROXY GIVES THE PERSON NAMED AS PROXYHOLDER DISCRETIONARY AUTHORITY
REGARDING AMENDMENTS OR VARIATIONS TO MATTERS IDENTIFIED IN THE NOTICE OF
MEETING AND OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
REVOCABILITY OF PROXY
In addition to revocation in any other manner permitted by law, a proxy may be
revoked by instrument in writing executed by the member or his attorney
authorized in writing, or if the member is a corporation, by a duly authorized
officer or attorney thereof, and deposited either at the registered office of
the Company at any time up to and including the last business day preceding the
day of the Meeting, or any adjournment thereof, or, as to any matter in respect
of which a vote shall not already have been cast pursuant to such proxy, with
the Chairman of the Meeting on the day of the Meeting, or any adjournment
thereof, and upon either of such deposits the proxy is revoked.
VOTING SHARES AND
PRINCIPAL HOLDERS THEREOF
The Company is authorized to issue 100,000,000 Class A Multiple Voting Shares
without par value, 100,000,000 Class B Subordinate Voting Shares without par
value and 25,000,000 preference shares without par value. As at December 13,
2002, there are 1,091,874 Class A Multiple Voting Shares, 2,795,971 Class B
Subordinate Voting Shares and no preference shares issued and outstanding. At a
General Meeting of the Company, on a show of hands, every member present in
person and entitled to vote and every proxyholder duly appointed by a holder of
a share who would have been entitled to vote shall have one vote and, on a poll,
every member present in person or represented by proxy or other proper authority
and entitled to vote shall have ten (10) votes for each Class A Multiple Voting
Share and one (1) vote for each Class B Subordinate Voting Share of which such
member is the registered holder. Shares represented by proxy will only be voted
on a poll that is requested by a member or proxyholder present at the Meeting or
required because the number of shares represented by proxies that are to be
voted against a matter is greater than 5% of the votes that could be cast at the
Meeting.
Presence in person or by proxy of 33 1/3% of the Company's shares issued and
outstanding on the record date is required for a quorum.
To the knowledge of the directors and senior officers of the Company, no person
or company beneficially owns, directly or indirectly, or exercises control or
direction over, voting securities carrying more than 10% of the outstanding
voting rights attached to any one class of voting securities of the Company,
other than:
NUMBER OF SECURITIES PERCENTAGE OF CLASS
---------------------------- ------------------------------
NAME TYPE OF OWNERSHIP CLASS A CLASS B CLASS A CLASS B
---- ----------------- ------------- -------------- ------------- ----------------
Working Opportunity Fund Direct 160,000 160,000 14.7% 5.7%
(EVCC) Ltd.
RBC Capital Partners Direct 127,919 139,170 11.7% 5.0%
The directors have determined that all members of record as of the 16th day of
December, 2002 will be entitled to receive notice of and to vote at the Meeting.
RESTRICTIONS ON THE ISSUE AND TRANSFER OF SHARES
THE POWER OF THE COMPANY TO ISSUE ANY OF ITS SHARES OR ANY SECURITY CURRENTLY
CONVERTIBLE INTO ANY OF ITS SHARES AND THE RIGHT OF ANY HOLDER OF THE COMPANY'S
SHARES TO TRANSFER SUCH SHARES IS RESTRICTED IN THE MANNER SET OUT IN THE
COMPANY'S ARTICLES FOR THE PURPOSES OF ENSURING THAT THE COMPANY, OR ANY
CORPORATION IN WHICH THE COMPANY HAS A DIRECT OR INDIRECT INTEREST THROUGH THE
HOLDING OF SHARES IN THAT OR
3
OTHER CORPORATIONS, IS AND REMAINS ELIGIBLE FOR INCENTIVES, LOANS, GRANTS, TAX
CREDITS AND OTHER FINANCIAL ASSISTANCE AVAILABLE ONLY TO CANADIANS.
ELECTION OF DIRECTORS
Each Director of the Company is elected annually and holds office until the
next Annual General Meeting of the Members unless that person ceases to be a
Director before then. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY THE SHARES
REPRESENTED BY PROXY WILL BE VOTED ON A POLL FOR THE NOMINEES LISTED BELOW OR,
FAILING SHAREHOLDER APPROVAL OF THE SHARE ISSUANCES DESCRIBED HEREIN UNDER THE
HEADING "PARTICULARS OF MATTERS TO BE ACTED UPON -- APPROVAL OF SHARE
ISSUANCES", NOMINEES PROPOSED BY ONE OR MORE MEMBERS OF THE CURRENT BOARD OF
DIRECTORS OF THE COMPANY AS REFERRED TO IN FOOTNOTE 1 BELOW .
MANAGEMENT DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE
AS A DIRECTOR. IN THE EVENT THAT PRIOR TO THE MEETING ANY VACANCIES OCCUR IN THE
SLATE OF NOMINEES HEREIN LISTED, IT IS INTENDED THAT DISCRETIONARY AUTHORITY
SHALL BE EXERCISED BY THE PERSON NAMED IN THE PROXY AS NOMINEE TO VOTE THE
SHARES REPRESENTED BY PROXY ON A POLL FOR THE ELECTION OF ANY OTHER PERSON OR
PERSONS AS DIRECTORS. Management nominees for the board of directors are based
on the Share Issuances described herein under the heading "Particulars of
Matters to be Acted Upon -- Approval of Share Issuances" receiving shareholder
approval. Failing shareholder approval of the Share Issuances, it is intended
that the person named in the proxy as nominee will vote the shares represented
by proxy on a poll for the election of nominees proposed by one or more members
of the current board of directors of the Company as referred to in footnote 1
below.
Management proposes that the number of directors for the Company be reduced by
one (1) from the preceding year and fixed at five (5) for the ensuing year,
subject to such increases as may be permitted by the Articles of the Company.
The Management nominees for the Board of Directors and information concerning
them as furnished by the individual nominees is as follows:
NO. OF SHARES BENEFICIALLY OWNED,
DIRECTLY OR INDIRECTLY, OR OVER
WHICH CONTROL OR DIRECTION IS
EXERCISED AT THE DATE OF THIS PRINCIPAL OCCUPATION AND IF NOT AT
INFORMATION CIRCULAR PRESENT AN ELECTED DIRECTOR,
NAME AND DIRECTOR -------------------------------------- OCCUPATION DURING THE PAST FIVE (5)
PRESENT OFFICE HELD SINCE CLASS A SHARES CLASS B SHARES YEARS
------------------------------- ------------- ------------------- ------------------ ---------------------------------------
JULIET JONES February 9,981 7,410 President and CEO of Peace Arch
West Vancouver, B.C. 22, 2001 Entertainment Group Inc.
President and CEO
------------------------------- ------------- ------------------- ------------------ ---------------------------------------
NELSON THALL[1] Nominee Nil Nil Media Scientist, Independent Contractor
Toronto, Ontario
See (4) below
------------------------------- ------------- ------------------- ------------------ ---------------------------------------
GARY HOWSAM[1] Nominee Nil Nil President of Greenlight Film &
Toronto, Ontario Television Inc. (1997 - Present)
See (2) below
------------------------------- ------------- ------------------- ------------------ ---------------------------------------
RICHARD K. WATSON[1] Nominee Nil Nil Self Employed Lawyer
Toronto, Ontario (1987 - Present)
See (3) below
------------------------------- ------------- ------------------- ------------------ ---------------------------------------
4
JAMIE BROWN[1] Nominee Nil Nil Company Director of Studio Eight
London, UK Productions Ltd. (1994 - Present)
See (5) below
============================================================================================================================
[1] The consent to act as a director of each of these nominees is subject to the
approval by shareholders of the Share Issuances described hereunder under the
heading "Particulars of Matters to be Acted Upon -- Approval of Share
Issuances". If such Share Issuances are not approved, then the persons to be
nominated for these positions as directors shall be as determined by the members
duly represented at the Meeting or any adjournment thereof and may include
persons proposed by one or more members of the current board of directors of the
Company.
(2) Gary Howsam has more than twenty years of executive level experience in the
Canadian motion picture industry. From 1997 to present, Mr. Howsam was President
of Greenlight Film and Television Inc., which along with its affiliates,
develops, produces, finances and distributes feature films.
From 1991 to 1997, Mr. Howsam was President of Healthlink Communications Inc., a
company in the business of healthcare communications. From 1994 to 1997, Mr.
Howsam was CEO of Greenlight Communications Inc., overseeing its entertainment
division. Greenlight Communications Inc. is a publicly held Toronto Company.
From 1980 to 1987 Mr. Howsam was Chairman and CEO of Greenlight Productions
Ltd., a film and video production company in the business of producing
healthcare products, computer graphics and special effects and medical education
products and documentaries. Mr. Howsam produced and directed over 100 hours of
health education documentary shorts during this period.
(3) Richard Watson has practiced corporate commercial law in Toronto for over 25
years. During that time, he has been legal counsel for a wide variety of
Canadian public and private companies. Mr. Watson has over 20 years of business
and advisory experience in the Canadian film industry, working with writers,
directors and production companies and has had significant involvement with the
financing of Canadian feature films.
(4) Nelson Thall has an extensive business career, including serving as a
director of Torstar Corp., McLuhan Institute and Nielsen-Ferns Limited. Mr.
Thall also has served in the North American entertainment industry as an
independent producer, a manager of talent and an advisor to such companies as
Stan Lee Media Inc. Mr. Thall is a well known media critic and social
commentator in North America. He studied media science under Marshall McLuhan at
the Center for Culture and Technology and St. Michaels College in Toronto.
(5) Jamie Brown is a Canadian producer and writer who resides in London,
England. He has produced or executive produced approximately 29 feature films
and in the UK is one of the most active producers of U.K. \ Canada
co-productions. As a writer, Mr. Brown created several successfully-produced
screenplays, supervised story departments on major television series and has
published five novels, including a Canadian best-seller. Mr. Brown co-produced
two major television series in the pound sterling 15 million budget region with
the Company. Through his contacts in Canada, the U.K. France and Ireland, Jamie
has become highly experienced in developing and financing international
co-productions.
Four (4) of the Five (5) nominees are residents of Canada. At December 13, 2002,
the Company has audit (Vincent Lum, Alan Hibben and Derek Douglas),
executive/corporate governance (Cameron White, Juliet Jones and Alan Hibben),
greenlight (project approval) (Derek Douglas and Cameron White) and compensation
(Vincent Lum and Derek Douglas) committees, the members of which are to be
appointed for the ensuing year.
Advance Notice of the Meeting was published pursuant to Section 111 of the
Company Act (British Columbia) at Vancouver, B.C. on the 24th day of November,
2002.
EXECUTIVE COMPENSATION
(FORM 41, B.C. SECURITIES ACT)
"CEO" means the individual who served as chief executive officer of the Company
or acted in a similar capacity during the most recently completed financial
year.
5
"Named Executive Officer" means the CEO regardless of the amount of compensation
of that individual, each of the Company's four most highly compensated executive
officers, other than the CEO, who were serving as executive officers at the end
of the most recently completed financial year and whose total salary and bonus
amounted to $100,000 or more and any individuals whose total salary and bonus
during the most recently completed financial year exceeded $100,000 whether or
not they were an executive officer at the end of such financial year.
The following table sets forth all annual and long term compensation for
services to the Company for the three most recently completed financial years as
at 31st August 2002 in respect of the Named Executive Officers. At the end of
the most recently completed financial year, the Company had six Named Executive
Officers, W.D. Cameron White, Timothy Gamble, Juliet Jones, Garth Albright, Kent
Wingerak and John Nicolls. There were no other executive officers of the
Company, or other individuals, whose total compensation exceeded $100,000 during
the financial year ended 31st August 2002.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
----------------------------------------- ----------------------------------
AWARDS PAYOUTS
----------- ----------- ----------------- ------------------- --------------
NAME AND OTHER ANNUAL SECURITIES UNDER ALL OTHER
PRINCIPAL YEAR SALARY BONUS COMPENSATION OPTIONS GRANTED LTIP PAYOUTS COMPENSATION
POSITION [1] ($) ($) ($) (#) ($) ($)
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
WD Cameron 2002 Nil Nil Nil 10,000[2] Nil 200,000[8]
White, ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Chairman[3] 2001 108,333 Nil Nil 25,000[2] Nil 91,667[8]
------- ----------- ----------- ----------------- ------------------- -------------- -----------------
2000 200,000 100,000 Nil 25,000[2] Nil Nil
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Timothy Gamble[4] 2002 50,000 Nil Nil Nil Nil 50,000[9]
------- ----------- ----------- ----------------- ------------------- -------------- -----------------
2001 200,000 Nil Nil 50,000[2] Nil Nil
------- ----------- ----------- ----------------- ------------------- -------------- -----------------
2000 200,000 100,000 Nil 25,000[2] Nil Nil
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Juliet Jones, 2002 168,445 Nil Nil 100,000[2] Nil Nil
President and ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Chief Executive 2001 157,417 Nil Nil 50,000[2] Nil Nil
Officer[5] ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
2000 120,000 60,000 Nil 25,000[2] Nil Nil
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
6
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Garth Albright 2002 112,626 Nil Nil Nil Nil 30,000[8]
Chief Financial ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Officer[10] 2001 49,520 Nil Nil 20,000[2] Nil Nil
------- ----------- ----------- ----------------- ------------------- -------------- -----------------
2000 N/A N/A N/A N/A N/A N/A
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Kent Wingerak. 2002 86,250 22,500[7] Nil 35,000[2] Nil Nil
Executive Vice ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
President, Peace 2001 82,500 Nil Nil Nil Nil Nil
Arch Productions ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Inc. 2000 Nil Nil Nil 20,000[2] Nil Nil
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
John Nicolls 2002 97,867 Nil 2,200[11] Nil Nil 30,548[8]
Director of ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
Business 2001 97,500 Nil Nil Nil Nil Nil
Affairs[12] ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
2000 81,000 8,000 Nil 8,500[2] Nil Nil
------------------ ------- ----------- ----------- ----------------- ------------------- -------------- -----------------
[1] Ended 31st August.
[2] Class B Subordinate Voting Shares.
[3] CEO until 27th March 2001. Chairman from 27th March 2001 to present.
[4] President until 30th November 2001.
[5] Chief Financial Officer ("CFO") until 27th March 2001. CEO from 27th March
2001 and President/CEO from 1st December 2001 to present.
[6] Executive In Charge of Production until 5th October 2001.
[7] Bonus, awarded on successful completion of two films.
[8] Severance payments upon termination of employment, which have been paid in
full.
[9] Consulting fee paid to a company owned by Timothy Gamble.
[10] Chief Financial Officer from April 3, 2001 to August 20, 2002.
[11] Vacation pay upon termination.
[12] Director of Business Affairs from November 23, 1998 to July 31, 2002.
LONG TERM INCENTIVE PLANS --
AWARDS IN MOST RECENTLY COMPLETED FINANCIAL YEAR
There were no performance bonuses earned pursuant to long term incentive plans
during the most recently completed financial year.
Effective May 9, 2001, the Company eliminated the prior Compensation
(Performance Bonus) Plan and implemented a new Compensation (Performance Bonus)
Plan available to all employees including Juliet Jones and Timothy Gamble. The
new Performance Bonus is not limited in amount and is based on several key
indicators including working capital, earnings before interest, depreciation and
taxes and free share price cash flow calculation. The performance criteria is
predetermined and approved by the Board of Directors each year. The actual bonus
calculation and apportionment between employees is recommended by the CEO and is
subject to the approval of the Board of Directors.
Pursuant to the Amendment Agreements described under the heading "Employment
Agreements", a bonus entitlement of up to 50% of three (3) months base salary
for Ms. Jones and up to 100% of three (3) months base salary for Mr. Wingerak
was implemented upon certain performance criteria being fulfilled in connection
with temporary salary reductions.
7
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
During the most recently completed financial year, options to purchase an
aggregate of 145,000 Class B Subordinate Voting shares were granted to the Named
Executive Officers as follows:
% OF TOTAL MARKET VALUE OF
OPTIONS EXERCISE SECURITIES
SECURITIES GRANTED TO OR BASE UNDERLYING
NAME OF NAMED UNDER EMPLOYEES IN PRICE OPTIONS ON DATE OF
EXECUTIVE OFFICER OPTIONS GRANTED (#) FISCAL YEAR ($/SHARE) GRANT ($/SHARE) EXPIRATION DATE
---------------------- ------------------------------ -------------- ------------ -------------------- ----------------
W.D. Cameron White 10,000 Class B Shares 9.6% $0.30 $0.30 Aug. 21, 2005
---------------------- ------------------------------ -------------- ------------ -------------------- ----------------
Juliet Jones 100,000 Class B Shares 19.2% $0.30 $0.30 Aug. 21, 2005
---------------------- ------------------------------ -------------- ------------ -------------------- ----------------
Kent Wingerak 35,000 Class B Shares 2.7% $0.30 $0.30 Aug. 21, 2005
====================== ============================== ============== ============ ==================== ================
AGGREGATED OPTION EXERCISES DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR END OPTION VALUES
During the most recently completed financial year, no options were exercised by
the Named Executive Officers.
VALUE OF UNEXERCISED IN
UNEXERCISED OPTIONS AT FISCAL YEAR END THE MONEY OPTIONS AT
SECURITIES AGGREGATE EXERCISABLE/ UNEXERCISABLE (#) FISCAL YEAR END
NAME OF NAMED EXECUTIVE ACQUIRED ON VALUE ----------------------------------------- EXERCISABLE/
OFFICERS EXERCISE (#) REALIZED ($) CLASS A SHARES CLASS B SHARES UNEXERCISABLE ($)
------------------------- --------------- ------------- ------------------ ---------------------- --------------------------
W.D. Cameron White Nil N/A 23,025/0 67,000/10,000[1] Nil/Nil
------------------------- --------------- ------------- ------------------ ---------------------- --------------------------
Timothy Gamble Nil N/A 23,250/0 82,000/0 Nil/Nil
------------------------- --------------- ------------- ------------------ ---------------------- --------------------------
Juliet Jones Nil N/A 13,800/0 180,000/100,000[1] Nil/Nil
------------------------- --------------- ------------- ------------------ ---------------------- --------------------------
Garth Albright Nil N/A Nil 20,000/0[2] Nil/Nil
------------------------- --------------- ------------- ------------------ ---------------------- --------------------------
Kent Wingerak Nil N/A Nil 55,000/35,000[1] Nil/Nil
------------------------- --------------- ------------- ------------------ ---------------------- --------------------------
John Nicolls Nil N/A 2,000/0 10,500/0[3] Nil/Nil
========================= =============== ============= ================== ====================== ==========================
[1] As at August 31, 2002, these options were unexercisable pending the earlier
of shareholder approval of amendments to the Company's Amended Share Option
Plan, and an equivalent number of options becoming available under the Company's
Amended Share Option Plan due to the expiry or cancellation of outstanding
options. Such equivalent amount of options have since become available.
[2] As at November 20, 2002 these options were cancelled in connection with
termination of employment.
[3] As at November 21, 2002 these options were cancelled in connection with
termination of employment.
Except for the Company's Amended Share Option Plan and Compensation (Performance
Bonus) Plan, there are no plans in effect pursuant to which cash or non-cash
compensation was paid or distributed to Named Executive
8
Officers during the most recently completed financial year or is proposed to be
paid or distributed in a subsequent year.
Termination of Employment, Changes in Responsibilities and Employment Contracts
Except as noted below under "Employment Agreements", the Company has no
compensatory plan or arrangement with respect to the Named Executive Officers in
the event of resignation, retirement or any other termination of the Named
Executive Officers' employment with the Company and its subsidiaries or in the
event of a change of control of the Company or its subsidiaries or in the event
of a change in the Named Executive Officers' responsibilities following a change
in control, where in respect of the Named Executive Officers the value of such
compensation exceeds $100,000.
Employment Agreements
Effective 27th March 2001, the Company entered into an Employment Agreement with
Juliet Jones. The Agreement provides for, inter alia, a base salary of $175,000
per annum, as well as participation in such executive bonus plan as shall be
implemented by the Company. The Agreement also provides that, in the event of a
change of control, or if the Agreement is terminated by the Company without
cause, Ms. Jones will be provided with two months notice of such termination or
will be paid the amount of $29,166.67 in lieu of such notice. Ms. Jones will
also receive a lump sum termination payment of $150,000. Ms. Jones' compensation
is to be reviewed annually by the Company's Compensation Committee.
Effective 30th November 2001, the Company entered into an Agreement with Timothy
Gamble, terminating his employment with the Company. Pursuant to the terms of
the Agreement, Mr. Gamble resigned as a director and officer of the Company and
all subsidiaries of the Company. Under the Agreement, Mr. Gamble was paid, inter
alia, the amount of $50,000 for services performed with respect to the Company's
television series "Animal Miracles". In addition, the Company entered into a
non-exclusive, Independent Contractor Agreement with Mr. Gamble, which engages
Mr. Gamble to provide services to the Company with respect to certain television
programs and provides that Mr. Gamble will earn fees from the programs based on
certain criteria.
Effective June 19, 2002, the Company entered into an agreement with Kent
Wingerak. The agreement provides that in the event of termination of employment
without cause, Mr. Wingerak would receive three (3) months salary in lieu of
notice or that, upon written notice, within ninety (90) days of a change of
control of the Company, if Mr. Wingerak's position is significantly reduced in
stature, he would receive six (6) months salary in lieu of notice.
Effective August 1, 2002 the Company entered into temporary Amendment Agreements
with Juliet Jones, Kent Wingerak and certain other employees of the Company in
connection with their respective Employment Agreements. Pursuant to the
Amendment Agreements, a salary reduction was in effect for a term of three (3)
months, commencing August 1, 2002 until October 31, 2002. The salaries of Juliet
Jones and Kent Wingerak were reduced by 50% during the three-month period. In
connection with such salary reductions, a bonus entitlement of up to 50% of
three (3) months base salary for Ms. Jones and up to 100% of three (3) months
base salary for Mr. Wingerak was implemented upon certain performance criteria
being fulfilled and employee stock options were granted.
DIRECTORS
During the previous fiscal year ended August 31, 2001, the Directors of the
Company were paid a yearly retainer of $5,000. As well, Directors were paid $500
for each Directors' or Committee Meeting attended in person and $300 for each
Directors' or Committee Meeting attended by conference call. Chairpersons of any
Directors' or Committee Meeting were paid twice that of a non-chair member. For
the most recently completed fiscal year, each of the outside Directors and/or
Committee Members of the Company have agreed to waive all fees and compensation
payable by the Company for meetings attended, with the exception of Vincent Lum,
who is due an amount of $16,500. During the last completed financial year, stock
options were granted pursuant to the Company's Amended Share Option Plan to
non-Named Executive Officer Directors of the Company to purchase up to 30,000
Class B Subordinate Voting Shares of the Company at a price of $0.30 per share
on or before three years from the date of grant. Such stock options were granted
to non-Named Executive Officer Directors of the Company subject to the approval
of amendments to the Company's Amended Share Option Plan by the shareholders of
the Company, unless an equivalent number of options become available under the
Company's
9
Amended Share Option Plan due to the expiry or cancellation of outstanding
options. Such equivalent number of options have since become available. No stock
options were exercised by any non-Named Executive Officer Directors.
Set forth below is a list of all stock options granted by the Company pursuant
to the Company's Amended Share Option Plan to non-Named Executive Officer
directors and other "insiders" (as that term is defined in the Securities Act
(British Columbia) of the Company, outstanding and exercisable at the date of
this Information Circular.
EXERCISE
NO. OF CLASS NO. OF PRICE PER
NAME OF OPTIONEE A SHARES CLASS B SHARES SHARE DATE OF GRANT EXPIRY DATE
------------------------------ -------------- --------------- ------------- ---------------------- ----------------------
Non-Named Executive
Officer Directors
Alan Hibben 0 10,000 $0.30 August 21, 2002 August 21, 2005
0 7,500 $3.60 April 12, 2001 April 12, 2004
John Derek Douglas 0 10,000 $0.30 August 21, 2002 August 21, 2005
0 7,500 $3.60 April 12, 2001 April 12, 2004
Vincent Lum 0 10,000 $0.30 August 21, 2002 August 21, 2005
0 7,500 $3.60 April 12, 2001 April 12, 2004
0 7,500 $5.00 (US) February 2, 2000 February 2, 2003
5,000 5,000 $9.50 February 16, 1999 February 16, 2004
--------------------------------------------- --------------- ------------- ---------------------- ----------------------
Other Insiders of the Company
Blair Reekie 0 45,000 $0.30 August 21, 2002 August 21, 2005
0 15,000 $3.00 December 21, 2000 December 21, 2003
0 15,000 $5.50 January 13, 2000 January 13, 2003
4,000 4,000 $9.50 March 23, 1998 March 23, 2003
Kent Wingerak 0 35,000 $0.30 August 21, 2002 August 21, 2005
0 20,000 $5.00 July 27, 2000 July 27, 2003
Dave Berenbaum 0 10,000 $0.30 August 21, 2002 August 21, 2005
0 6,000 $3.00 December 21, 2000 December 21, 2003
0 4,200 $5.50 January 13, 2000 January 13, 2003
2,000 2,000 $9.50 March 23, 1998 March 23, 2003
============================= =============== =============== ============= ====================== ======================
No pension plan or retirement benefit plans have been instituted by the Company
and none are proposed at this time.
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
None of the directors or senior officers of the Company, no proposed nominee for
election as a director of the Company, and no associates or affiliates of any of
them, have been indebted to the Company or its subsidiaries at any time since
the beginning of the Company's last completed financial year.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
No insider of the Company, no proposed nominee for election as a director of the
Company and no associate or affiliate of any of the foregoing, has any material
interest, direct or indirect, in any transaction since the commencement of the
Company's last financial year or in any proposed transaction, which, in either
case, has materially affected or will materially affect the Company or any of
its subsidiaries other than as disclosed under the headings "Executive
Compensation" and "Particulars of Matters to be Acted Upon" and as set out
below.
10
On November 30, 2001, the Company completed a re-financing of its outstanding
$5,687,000 subordinated debt. Working Opportunity Fund (EVCC) Ltd. ("WOF")
increased its subordinate debt with new debt of $3,960,000, which was used to
repay the outstanding indebtedness owed to BCMC Capital Limited Partnership,
BCMC Capital II Limited Partnership and Business Development Bank of Canada. In
consideration for advancing these funds and agreeing to extend the term of the
loan past its February 2002 due date to December 2002, the Company agreed to pay
WOF interest at 36% per annum and to grant WOF warrants to purchase up to an
aggregate 160,000 Class B Subordinate Voting Shares at a price of $1.255 per
share until 30th June 2003. Yad Garcha, who was a Director of the Company at the
end of the fiscal year and John Derek Douglas, a Director of the Company, are
also insiders of WOF, which in turn is an insider of the Company.
As consideration for not requiring the interest rate to be increased from 18% to
36% per annum, the Company agreed to grant Timothy Gamble, the former Director
and President of the Company and W.D. Cameron White, the Chairman of the
Company, warrants to purchase up to a total of 70,000 Class B Subordinate Voting
Shares at a price of $1.255 per share until 30th June 2003.
It was a further term of the Subordinate Debt refinancing that the Company
agreed, subject to regulatory approval, to reduce the exercise price from $5.00
per share to the then current market price of the Company's shares in respect of
an aggregate 17,998 Class A Multiple Voting Shares extension warrants and 12,958
Class B Subordinate Voting Shares extension warrants held by Timothy Gamble,
Cameron White and WOF which were issued pursuant to Loan Agreements dated August
2000, but not exercisable until after 15th February 2002. The Toronto Stock
Exchange declined to approve the reduction in exercise price on all but 2,880
Class A Multiple Voting Share extension warrants held by Mr. Gamble.
INTEREST OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON
None of the directors or senior officers of the Company, no management nominee
for election as a director of the Company, none of the persons who have been
directors or senior officers of the Company since the commencement of the
Company's last completed financial year and no associate or affiliate of any of
the foregoing has any material interest, direct or indirect, by way of
beneficial ownership of securities or otherwise, in any matter to be acted upon
at the Meeting other than as disclosed under the headings "Executive
Compensation" and "Particulars of Matters to be Acted Upon".
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Under the rules of The Toronto Stock Exchange (the "TSX"), the Company is
required to disclose information relating to its system of corporate governance,
with reference to the guidelines set out in the TSX Company Manual (the
"Guidelines"). The Company's disclosure addressing each of the Guidelines is set
out in Schedule "A" to this Information Circular.
PARTICULARS OF
MATTERS TO BE ACTED UPON
A. APPROVAL OF SHARE ISSUANCES
The Company has entered into agreements with regard to a series of transactions
(referred to collectively as the "Transactions"), each of which is subject to
regulatory approval. Pursuant to the Transactions, the Company is proposing to
issue or reserve for issuance an aggregate 16,196,333 Class B Subordinate Voting
Shares to effect the Private Placement Financing, Asset Acquisition, Debt
Restructuring and Release and Reconstitution of Loan Guarantee described below
(referred to collectively as the "Share Issuances"). The transactions are each
contingent upon the other transactions and will close concurrently. Management
recommends that the shareholders approve the Share Issuances described herein.
Pursuant to the rules adopted by The Toronto Stock Exchange (the "TSX"),
shareholder approval is required for share issuances of more than 25% of the
number of shares which are outstanding (on a non-diluted basis) at the
commencement of any six month period or that materially affect control of the
Company. The 16,196,333 Class B Subordinate Shares proposed to be issued or
reserved for issuance pursuant to the Share Issuances represent in excess of 25%
of the 3,887,845 currently issued shares of the Company and the 8,333,333 Class
B Subordinate
11
Voting Shares proposed to be issued pursuant to the Asset Acquisition represent
approximately 28% of the 29,911,044 voting rights attached to the outstanding
shares of the Company after the proposed Share Issuances.
The proceeds of the Private Placement Financing are intended to be used for
general working capital purposes and will assist the Company in remedying its
working capital deficiency and providing growth capital. MANAGEMENT BELIEVES
THAT IF SHAREHOLDERS DO NOT APPROVE THE SHARE ISSUANCES, THE COMPANY WILL NOT
HAVE ADEQUATE WORKING CAPITAL TO CONTINUE OPERATIONS.
It is anticipated that the Asset Acquisition will provide the Company with
$2,500,000 of additional working capital within the next 18 months. In addition,
this acquisition will add valuable management expertise and increase the
business of the Company in a complementary manner. If the shareholders do not
approve the Share Issuances, the Transactions will not take place.
It is proposed that Gary Howsam be appointed Chief Executive Officer of the
Company effective December 20, 2002 pending closing of the Asset Acquisition.
Gary Howsam is a nominee for director as more particularly described below. Each
of the Transactions is at arm's length.
Pursuant to the Transactions, the Company's Board of Directors will be
reconstituted in favor of directors with specific financial and entertainment
industry experience (See above under the heading "Election of Directors").
The current shareholders of the Company, as a group (on a non-diluted basis)
will hold approximately 22.6% of the 17,221,178 issued and outstanding shares of
the Company, and approximately 50.7% of the 27,048,044 voting rights attached to
the issued and outstanding shares of the Company, immediately following the
Share Issuances.
The following table sets out the pro forma share capital (on a non-diluted
basis) prior to the Transactions and immediately following the Share Issuances:
PRO FORMA CAPITALIZATION
-------------------------------------------------------------------------------------------------------------------------
CLASS A MULTIPLE VOTING CLASS B SUBORDINATE
SHARES VOTING SHARES
-------------------------------------------------------------------- --------------------------- ------------------------
Shares issued as at December 13, 2002 1,091,874 2,795,971
Shares to be issued pursuant to the Share Issuances:
Private Placement Financing Nil 5,000,000
Asset Acquisition Nil 8,333,333
Reserved for Debt Restructuring
Nil (1)
Reserved for Release and Reconstitution of Loan Guarantee
Nil (1)
-------------------------------------------------------------------- --------------------------- ------------------------
ISSUED CAPITAL: 1,091,874 16,129,304
-------------------------------------------------------------------- --------------------------- ------------------------
(1) The proposed Debt Restructuring could result in the additional issuance of a
maximum of approximately 2,527,000 Class B Subordinate Voting Shares during the
ninety days following December 31, 2004 and the proposed Release and
Reconstitution of Loan Guarantee could result in the additional issuance of a
maximum of approximately 336,000 Class B Subordinate Voting Shares during the
ninety days following December 31, 2005.
12
AT THE MEETING, THEREFORE, THE MEMBERS WILL BE ASKED TO PASS A RESOLUTION IN THE
FORM SET FORTH IN SCHEDULE B TO THIS INFORMATION CIRCULAR, WHICH RESOLUTION
APPROVES THE ISSUANCE OR RESERVATION FOR ISSUANCE OF AN AGGREGATE 16,196,333
CLASS B SUBORDINATE VOTING SHARES PURSUANT TO THE PRIVATE PLACEMENT FINANCING,
ASSET ACQUISITION, DEBT RESTRUCTURING AND RELEASE AND RECONSTITUTION OF LOAN
GUARANTEE. IF SHAREHOLDER APPROVAL OF THE SHARE ISSUANCES IS NOT GIVEN, NONE OF
THE TRANSACTIONS WILL PROCEED.
1. PRIVATE PLACEMENT FINANCING
The Company has agreed to a private placement of 5,000,000 Class B Subordinate
Voting Shares at a subscription price of $0.30 per share, which price
approximates the market price of the Class B Subordinate Voting Shares at the
time the private placement was negotiated, for total proceeds of $1,500,000 (the
"Private Placement Financing"). Under the Private Placement Financing, not less
than four (4) arm's length investors will irrevocably subscribe and pay an
aggregate CDN$1,500,000, in cash, for 5,000,000 Class B Subordinate Voting
treasury shares of the Company. The Private Placement Financing is subject to
and will close concurrently with the other Transactions.
The Board of Directors believes that the subscription price is reasonable in the
circumstances. The proceeds of the Private Placement Financing are intended to
be used for general working capital purposes and would assist the Company to
remedy its working capital deficiency and provide growth capital. In July 2002,
the Company announced that it requires additional capital to enable it to
continue operations.
13
2. ASSET ACQUISITION
The Company has agreed to acquire a portfolio of assets owned and controlled by
CPC Communications Inc. ("CPC") and/or its subsidiaries, in consideration for
the issuance of 8,333,333 Class B Subordinate Voting Shares of the Company at a
deemed price of $0.30 per share (the "Asset Acquisition"). The assets include
Film Production Company Assets, the Assigned Receivable Assets and the ongoing
business activities of Greenlight Film and Television Inc. ("Greenlight"), a
wholly owned subsidiary of CPC, collectively (the "Assets"). The Assets,
described herein, are represented by CPC to have a value of not less than
CDN$2,500,000.
Greenlight, a Toronto company, has been in business since 1997 and is primarily
in the business of producing theatrical motion pictures. In the five years since
its inception, Greenlight has produced, through its wholly owned subsidiaries,
more than thirty (30) feature films for worldwide distribution. These films,
produced and/or executive produced by its President and founder, Mr. Gary
Howsam, have been licensed by entities including Lions Gate Entertainment,
Artisan Entertainment, Trimark, HBO and Blockbuster, Showtime, Hallmark
Entertainment and Encore. Greenlight focuses on films with budgets from $4
million to $25 million, designed both for theatrical release and DVD/television.
Following the Acquisition, the Company will continue the future business
activities of Greenlight.
The Film Production Company Assets proposed to be acquired by the Company from
CPC include five films, held by single purpose companies, that qualify as
Canadian content as determined by the CRTC (Canadian Radio-television and
Telecommunications Commission), four (4) of which are being produced under tax
treaties between Canada and the UK. The films, which are presently in
production, have aggregate Canadian budgets of approximately $26.5 million. The
five companies are wholly owned by CPC or its subsidiaries and their feature
films are described as follows:
1. GFT Crime Spree Films Inc. is in production of a feature film "Crime
Spree", a caper comedy starring Gerard Depardieu and Harvey Keitel,
and directed by Brad Mirman. Crime Spree is scheduled to be delivered
in January, 2003.
2. GFT Absolon Films Inc. is in production of a feature film "Absolon", a
futuristic thriller starring Christopher Lambert and Lou Diamond
Philips. This film is scheduled for delivery in January, 2003.
3. GFT Rough Rider Films Inc. is in production of "Partners in Action",
an action thriller starring Armand Assante and directed by Sidney J.
Furie. This film is scheduled for delivery in December, 2002.
4. GFT Detention Films Inc. is in production of "Detention", an action
thriller starring Dolf Lungren and directed by Sidney J. Furie. This
film is scheduled for delivery in March, 2003.
5. GFT Limit Films Inc. is in production of "The Limit", a suspense film
starring Lauren Bacall and Claire Forlani and directed by Lewin Webb.
This film is scheduled for delivery in June, 2003.
The above single purpose production companies (collectively the "Prodcos") own
majority copyright and certain residual rights to the above noted feature films.
Prior to closing of the Acquisition, Greenlight will transfer 100% of the shares
of the Prodcos to GFT Entertainment Inc., a newly incorporated company. Upon
closing, the Company will acquire 100% of the shares of GFT Entertainment Inc.
The Assigned Receivable Assets to be acquired by the Company are as follows:
1. Federal and Ontario tax credit receivables due to the Prodcos in the
estimated amount of CDN$280,000;
2. Interim collateral deposit release of CDN$300,000;
3. Ownership of loan due to a subsidiary of CPC from GFT Limit Films Inc.
in the amount of US$959,713; and
4. Assignment of CDN$408,000 due to CPC with respect to proceeds of
France exploitation of Crime Spree (the "French Proceeds"). Provided
that the Company receives actual cash from the Assigned Receivable
Assets and from the Film Production Company Assets in the amount of
CDN$2,500,000, the Company
14
shall remit any further cash received from these assets to CPC until
an amount equal to the French Proceeds actually received by the
Company has been recouped by CPC.
The Company retained Ellis Foster, Chartered Accountants to provide an
independent estimate of the fair market value of the Assets. The conclusion of
such estimate was that, as at November 15, 2002, the fair market value of the
Assets proposed to be acquired by the Company is not less than CDN$2,500,000.
The Board of Directors of the Company believes that CDN$2,500,000 is a
reasonable price for the Assets and that $0.30 per share is a reasonable price
per share in the circumstances for the issuance of 8,333,333 Class B Subordinate
Voting Shares pursuant to the Asset Acquisition.
In connection with the proposed Asset Acquisition, the President of Greenlight,
Gary Howsam, who is a producer with over twenty years experience at an executive
level, is to become the new President and CEO of the Company. The Company's
current President and Chief Executive Officer, Juliet Jones, will continue her
employment with the Company throughout a transition period and her ongoing
employment will be determined by mutual approval. Mr. Howsam is to be appointed
CEO of the Company effective December 20, 2002. He is also a nominee for
director of the Company.
The Asset Acquisition is estimated to provide the Company with $2,500,000 of
additional working capital within the next eighteen (18) months, further
assisting the Company in improving its financial position. In addition,
management believes the Asset Acquisition will add valuable management expertise
and increase the business of the Company in a complimentary manner.
3. DEBT RESTRUCTURING
The Company has agreed to a restructuring of the debt (the "Debt Restructuring")
due to Fremantle Media Enterprises Ltd. ("Fremantle").
As at the date of this Information Circular, the Company is indebted to
Fremantle in the approximate aggregate principal amount of CDN$7.58 million,
accruing interest at a rate of 10% per annum (the "Fremantle Debt"). The
Fremantle Debt is secured, providing Fremantle with a fixed and floating charge
over all of the assets of the Company and its subsidiaries and a specific charge
on certain assets held by the Company or its subsidiaries, subject to certain
other priority charges.
Pursuant to the proposed Debt Restructuring, and subject to and coincidentally
with the closing of the other Transactions, Fremantle has agreed that the scope
of the Fremantle Debt and collateral charged will be restricted to the business,
assets and undertaking of the Company as they exist immediately prior to the
closing of the Transactions and any proceeds derived from the pre-existing
business of the Company after those closings. Fremantle will not have any
recourse, right or claim against any funding, proceeds and/or assets conveyed to
the Company as a result of the Private Placement Financing or Asset Acquisition.
Upon closing of the Transactions, the pre-existing assets and undertaking of the
Company will be conveyed to one or more new or existing wholly-owned
subsidiaries of the Company on the condition that such conveyance will not
adversely affect the Fremantle Debt. The new subsidiary(s) will assume the
Fremantle Debt and the Company will be released from liability in respect of the
Fremantle Debt. Payments on the Fremantle Debt shall be made directly from the
income stream of the new subsidiary(s). The Company will manage the business of
the new subsidiary(s), subject to Fremantle's approval of operating budgets and
business plans.
It is a term of the proposed Debt Restructuring that the Company deliver, on or
before the closing of the Transactions, an instrument in favour of Fremantle
that evidences the principal amount of the Fremantle Debt and permits Fremantle,
for a period of ninety (90) days from December 31, 2004, to convert, subject to
regulatory approval, such principal amount outstanding at December 31, 2004,
into Class B Subordinate Voting Shares of the Company at the lower price of
either (a) CDN$5.00 per share or (b) the closing price of the Class B
Subordinate Voting Shares for the thirty (30) days prior to December 31, 2004,
provided that in no event shall the conversion price be less than CDN$3.00 per
share. If the whole of the principal amount of the Fremantle Debt, (excluding
interest), remains outstanding at December 31, 2004 and the 30-day average
closing price of the shares is CDN$3.00 or less, the maximum number of shares
issuable on such conversion would be 2,527,000 Class B Subordinate Voting
Shares.
15
The restructuring of the Fremantle debt will further assist the Company in
improving its financial position.
4. RELEASE AND RECONSTITUTION OF LOAN GUARANTEE
The Company has agreed to a reconstitution of a loan guarantee (the "Release and
Reconstitution of Loan Guarantee") provided to Comerica Bank - California
("Comerica") with respect to the guarantee of a loan from Comerica to Big Sound
Productions Inc. of the United Kingdom, an unrelated company controlled by Jamie
Brown, a nominee for director of the Company.
There is approximately US$1.075 million due to Comerica under the loan
agreement, which is currently in default. Big Sound Productions Inc. was the
Company's co-production partner on its 22 episode television series, "Big
Sound". In the event that the loan is in default, the Company may at its option
assume all of the co-producer's rights and interest to the series, subject to
Comerica's charge on the rights to the proceeds from exploitation of the series
in certain international territories (the "Exploitation Rights").
Pursuant to the Release and Reconstitution of Loan Guarantee and subject to and
coincidentally with the closing of the other Transactions, Comerica will release
the Company from its guarantee of the loan and the guarantee shall be
reconstituted into the form of a non-interest bearing, unsecured liability (the
"Comerica Liability"). Furthermore, Comerica has agreed that, with the exception
of the Exploitation Rights, the scope of the Comerica Liability will be
restricted to the business, assets and undertaking of the Company as they exist
immediately prior to the closing of the Transactions and any proceeds derived
from the pre-existing business of the Company after these closings, subject to
the secured creditors and the priority of the Fremantle Debt. Comerica will not
have any recourse, right or claim against any funding, proceeds and/or assets
conveyed to the Company as a result of the Private Placement Financing or Asset
Acquisition.
Upon closing of the Transactions, the pre-existing assets and undertaking of the
Company will be conveyed to one or more new or existing wholly-owned
subsidiaries of the Company as described in the section entitled "Debt
Restructuring" above. The new subsidiary(s) will assume the Comerica Liability
and the Company will be released from liability in respect of the guarantee.
Payments of the Comerica Liability shall be made directly from the income stream
of the new subsidiary(s), subject to priority and security interests.
It is a term of the Release and Reconstitution of Loan Guarantee that the
Company deliver on or before the closing of the Transactions, an instrument in
favour of Comercia that evidences the principal amount of the Comerica Liability
and permits Comerica, for a period of ninety (90) days from December 31, 2005,
to convert, subject to regulatory approval, such principal amount outstanding at
December 31, 2005, into Class B Subordinate Voting Shares of the Company at a
price of CDN$5.00 per share. If the whole of the current balance of the Comerica
Liability of US $1.075 million, remains outstanding at December 31, 2005, the
maximum number of shares issuable on such conversion, based on the August 31,
2002 US exchange rate of $1.56, would be 335,077 Class B Subordinate Voting
Shares.
B. APPROVAL OF FUTURE PRIVATE PLACEMENTS
In order for the Company to raise funds to expand its activities, the Company
may require further funding which would be raised under one or more private
placements.
At the Meeting, members will be asked to pass a resolution, in addition to the
resolution in respect of the proposed Share Issuances referred to above under
the heading "Approval of Share Issuances", authorizing the Board of Directors to
enter into one or more private placements, in addition to the Private Placement
Financing and Asset Acquisition, in the 12 month period following the Meeting,
to issue additional shares to subscribers who are substantially at arm's length
to the Company. Pursuant to the rules adopted by The Toronto Stock Exchange (the
"TSX"), shareholder approval is required for the issuance of shares 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. Management is
proposing that the reference to the number of shares currently outstanding be a
reference to the number of shares outstanding after giving effect to the Share
Issuances contemplated above under the headings "Approval of Share Issuances -
Private Placement Financing and Asset Acquisition". In this regard, there are
currently an aggregate of 3,887,845 shares of all classes issued and
outstanding. Following such Share Issuances, there will be an aggregate
16
of 17,221,178 shares of all classes issued and outstanding. 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 shares
authorized pursuant to the proposed resolution. The private placements will be
negotiated only if management believes the subscription price is reasonable in
the circumstances and if the funds are required by the Company to expand its
activities. The issuance of shares pursuant to these private placements will not
materially affect control of the Company. Each such private placement will be
made in accordance with applicable by-laws and rules of the TSX, which require
the approval of the TSX prior to completion of each individual private
placement. These rules provide that private placements be priced at the closing
price on the day prior to the notice of private placement, subject to prescribed
discounts as set forth below:
MARKET PRICE MAXIMUM DISCOUNT THEREFROM
------------ --------------------------
$0.50 or less 25%
$0.51 to $2.00 20%
Above $2.00 15%
As well, warrants may accompany shares issued under the private placement, where
such warrants are priced at or above market and do not exceed the number of
shares issued under the private placement.
Paragraph 620 of the TSX Company Manual (the "Manual") provides that the total
number of shares of a listed company which are issued or subject to issuance
pursuant to private placement transactions during any six month period must not
exceed 25% of the number of shares of the Company which are outstanding prior to
giving effect to such transactions. The Manual, however, permits this
restriction to be relaxed with shareholder approval on certain terms.
Shareholders are being asked, therefore, to pass a resolution, in addition to
the resolution in respect of the proposed Share Issuances referred to above
under the heading "Approval of Share Issuances", authorizing additional private
placements which would take place within one year of the date of the Meeting.
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 TSX in accordance with
paragraphs 619 and 622 of the Manual.
2. Such future private placements would not result in additional shares
of the Company being issued in any amount exceeding the number of
issued and outstanding shares (in the aggregate) of the Company after
giving effect to the share issuances described under the headings
"Approval of Share Issuances - Private Placement Financing and Asset
Acquisition" set out above.
3. Any of the future private placements would be substantially at arm's
length and would not materially affect control of the Company.
The resolution with respect to private placement financings requires
confirmation by a majority of the votes cast thereon at the Meeting. In the
event the resolution is not passed, the Company will not proceed with any
private placement that requires shareholder approval under the rules of the TSX
unless and until such shareholder approval is received.
The text of the resolution to be submitted to the shareholders at the Meeting is
set forth in Schedule C attached to this Information Circular.
C. APPROVAL OF AMENDMENTS TO AMENDED SHARE OPTION PLAN
The Company has an outstanding Share Option Plan (the "Plan") which was approved
by the Company's shareholders on January 20, 1998. On July 14, 1999 and February
21, 2001 the Company's shareholders approved amendments to the Plan (the
"Amended Plan"). In accordance with the Amended Plan, the number of
17
shares issuable upon the exercise of options pursuant to the Amended Plan and
any other Share Compensation Arrangements (as such term is defined in the
Amended Plan) is 115,950 Class A Multiple Voting Shares and 650,000 Class B
Subordinate Voting Shares. Options to purchase Class A Multiple Voting Shares
and Class B Subordinate Voting Shares have been exercised or cancelled, such
that at the date of this Information Circular, options to purchase up to 19,800
Class A Multiple Voting Shares and 519,600 Class B Subordinate Voting Shares are
outstanding. The Amended Plan further provides that any options granted after
14th July 1999 may only be exercisable into Class B Subordinate Voting Shares.
The purpose of the Amended Plan is to advance the interests of the Company
through the acquisition of shares of the Company (the "Shares") by its
directors, officers, employees and others who assist in the conduct and growth
of its business ("Participants"). This provides an increased incentive for these
individuals to contribute to the future success and prosperity of the Company,
thus enhancing the value of the Shares for the benefit of all the shareholders
and increasing the ability of the Company and its subsidiaries to attract and
retain skilled and motivated individuals in the service of the Company.
The Amended Plan is structured to permit option grants to Participants,
including Incentive Stock Option grants to employees and employee/directors of
the Company or its affiliates in accordance with U.S. federal income tax laws,
and provides that the maximum number of Shares reserved for issuance to any one
Participant upon the exercise of options shall not exceed 5% of the combined
number of Class A Multiple Voting Shares and Class B Subordinate Voting Shares
outstanding immediately prior to such reservation for issuance. Under the
Amended Plan, the exercise price must be determined by the Board of Directors of
the Company and shall not be less than the higher of (i) the Fair Market Value
(as defined in the Amended Plan) of the Shares on the date the option is granted
and, if the Participant is a Restricted Shareholder (as defined in the Amended
Plan), shall not be less than 110% of the Fair Market Value of the Shares on the
date the option is granted, and (ii) the average of the daily high and low board
lot trading prices of the Shares on The Toronto Stock Exchange (or, if the
Shares are not then listed on such exchange, the American Stock Exchange or such
other stock exchange on which the Shares are listed, posted and called for
trading) (the "Exchange") over the 10 day period immediately preceding the date
of the grant; and (iii) the closing price of the Shares on the Exchange on the
last trading day preceding the date on which the grant of the option is approved
by the Board of Directors (or if the Shares are not then listed and posted for
trading on the Exchange, on such exchange or quotation system upon which the
Shares are listed and posted for trading as may be selected by the Board of
Directors) or, if the Shares did not trade on the Exchange on such last trading
day, the average of the high and low prices in respect of the Shares on the
Exchange for the previous five trading days. In the event that the Shares are
not listed and posted for trading on any stock exchange or other quotation
system, the exercise price shall be the fair market value of the Shares as
determined by the Board of Directors in its sole discretion. The shares in
respect of which options are granted but expire, terminate or are surrendered
unexercised are available for subsequent option grants.
The period during which options may be exercised shall be determined by the
Board of Directors, in its discretion, to a maximum of ten years from the date
the option is granted, except as the same may be reduced with respect to any
option on termination of employment or death of the Participant and except that
no Participant who is a Restricted Shareholder may be granted an Incentive Stock
Option which is exercisable after the expiration of five years after the date of
the grant of the option.
The Amended Plan provides that a Participant may, rather than exercise options
which he or she is entitled to exercise, elect in lieu of receiving the Shares
to which such Participant would have been entitled on exercise of such options
("Designated Shares"), to receive instead the number of Shares, disregarding
fractions which, when multiplied by the fair value per share (which shall be the
weighted average trading price of the Shares on the Exchange (or if the Shares
are not listed and posted for trading on the Exchange, on such other stock
exchange or quotation system on which the Shares are listed and posted for
trading as selected by the Board of Directors) during the five (5) days
preceding the date of determination) of the Designated Shares, is equal to the
product of the number of Designated Shares times the difference between the fair
value and the exercise price per share of the Designated Shares.
The Board of Directors in its sole discretion may from time to time appoint a
Committee of no less than two members of the Board of Directors to administer
the Amended Plan and, subject to, and to the extent required by, applicable law
to exercise all of the powers, authority and discretion of the Board of
Directors under the Amended Plan and may from time to time remove members from,
or add members to, the Committee, and vacancies on the Committee shall be filled
by the Board of Directors. The Board of Directors may abolish the Committee at
any time or revest in the Board of Directors the administration of the Amended
Plan. The Committee shall report to the
18
Board of Directors the names of Participants granted options under the Amended
Plan, the number of Shares covered by each such option and the terms and
conditions of each such option.
In light of the purpose of the Amended Plan, the Company is of the view that it
is appropriate to have approximately 20% of its issued capital reserved for
issuance upon the exercise of options granted pursuant to the Amended Plan and
any other Share Compensation Arrangements (as such term is defined in the
Amended Plan). As at the date of this Information Circular, there are an
aggregate 3,887,845 Class A Multiple Voting Shares and Class B Subordinate
Voting Shares outstanding, such that approximately 20% thereof is 777,569. Upon
closing of the Private Placement Financing and Asset Acquisition more
particularly described above under the heading "Approval of Share Issuances",
there will be an aggregate 17,221,178 Class A Multiple Voting Shares and Class B
Subordinate Voting Shares outstanding such that approximately 20% thereof is
3,444,235. As there are currently options to purchase 19,800 Class A Multiple
Voting Shares outstanding and options to purchase up to 5,500 Class A Multiple
Voting Shares have been exercised and no further options to purchase Class A
Multiple Voting Shares may be granted under the Amended Plan, the Company is
proposing that the Amended Plan be further amended by decreasing the number of
Class A Multiple Voting Shares issuable upon the exercise of options from
115,950 to 25,300 and ;
(a) if the Share Issuances are approved, reducing the percentage of shares
reserved for issuance upon the exercise of options to 15% of the Company's
issued capital, and increasing the number of Class B Subordinate Voting Shares
issuable upon the exercise of options from 650,000 to 2,560,000, on the closing
of the Private Placement Financing and Asset Acquisition; or
(b) if the Share Issuances are not approved, increasing the number of Class B
Subordinate Voting Shares issuable upon the exercise of options from 650,000 to
750,000;
subject to adjustment or increase of such number pursuant to Section 2.10 of the
Amended Plan.
Section 2.04 of the Amended Plan entitled "Limits with Respect to Insiders"
provides that:
(a) The number of Shares issuable to Insiders pursuant to options granted under
the (Amended) Plan, together with Shares issuable to Insiders under any
other Share Compensation Arrangement of the Company, shall not:
(i) exceed 10% of the combined number of Class A Multiple Voting Shares
and Class B Subordinate Voting Shares outstanding immediately prior to
the grant of any such option; or
(ii) result in the issuance to Insiders, within a one year period, of in
excess of 10% of the combined number of Class A Multiple Voting Shares
and Class B Subordinate Voting Shares outstanding immediately prior to
the grant of any such option.
(b) The number of Shares issuable to any Insider and such Insider's Associates
pursuant to options granted under the (Amended) Plan, together with Shares
issuable to such Insider or such Insider's Associates under any other Share
Compensation Arrangement of the Company shall not, within a one year
period, exceed 5% of the combined number of Class A Multiple Voting Shares
and Class B Subordinate Voting Shares outstanding immediately prior to the
grant of any such option.
The term "Insider" is defined in the Amended Plan as having the meaning ascribed
to it in the Securities Act (British Columbia) and generally includes directors
and senior officers of the Company and its subsidiaries, the five highest paid
employees and holders of greater than 10% of the voting securities of the
Company, but the Amended Plan excludes from such definition a person who is an
Insider solely by virtue of being a director or senior officer of a subsidiary
of the Company and any Associates of an Insider.
In accordance with the terms of the Amended Plan, the proposed amendments to the
Amended Plan are subject to the approval of the stock exchanges upon which the
Company's Shares are listed or of other regulatory bodies having jurisdiction
over the securities of the Company. Furthermore, the rules of The Toronto Stock
Exchange (the "TSX") require that any amendment to a stock option plan must be
pre-cleared with the TSX and, if there is a proposal to increase the maximum
number of shares issuable under the Amended Plan, then such proposal must
19
be approved by a majority of the votes cast, in person or by proxy, at the
shareholders meeting. The American Stock Exchange has similar shareholder
approval requirements. The rules of the TSX also require, in certain
circumstances, shareholder approval by a majority of the votes cast other than
respecting securities owned by insiders to whom shares may be issued under the
stock option plan or their associates but, because of the limitations set out in
Section 2.04 limits with respect to Insiders of the Amended Plan, insiders and
their associates will be permitted to vote on the proposed resolution, provided
the resolution is not amended to remove these limitations.
The text of the resolution to be submitted to the shareholders at the Meeting is
set forth in Schedule D to this Information Circular.
In the event the proposed amendments to the Amended Plan, or a modified version
thereof, are not approved by the requisite vote of shareholders, the proposed
amendments to the Amended Plan will not be proceeded with.
The Amended Plan incorporating the proposed further amendments will be available
for inspection at the Meeting. The Directors recommend that the members approve
the proposed amendments to the Amended Plan.
ADDITIONAL DOCUMENTATION
The Company is a reporting issuer accountable to the securities commissions of
certain provinces of Canada and is therefore required to present financial
statements and information circulars to the various securities commissions in
such provinces. The Company files an Annual Information Form with such
securities commissions. Copies of the Company's Annual Information Form,
Information Circular and the most recent consolidated and audited financial
statements are available on request from the Company's CEO. The Company may
charge reasonable fees if the request is made by someone other than a holder of
securities in the Company.
MANAGEMENT KNOWS OF NO OTHER MATTERS TO COME BEFORE THE MEETING OTHER THAN THOSE
REFERRED TO IN THE NOTICE OF MEETING. HOWEVER, SHOULD ANY OTHER MATTERS PROPERLY
COME BEFORE THE MEETING, THE SHARES REPRESENTED BY THE PROXY SOLICITED HEREBY
WILL BE VOTED ON SUCH MATTERS IN ACCORDANCE WITH THE BEST JUDGMENT OF THE
PERSONS VOTING THE SHARES REPRESENTED BY THE PROXY.
APPROVAL OF INFORMATION CIRCULAR
The contents and the sending of this Information Circular have been approved by
the directors of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
"Juliet Jones"
President and CEO
SCHEDULE "A"
PEACE ARCH ENTERTAINMENT GROUP INC.
STATEMENT OF CORPORATE GOVERNANCE
As at December 13, 2002
CORPORATE GOVERNANCE GUIDELINE COMMENTS
------------------------------ --------
1. Board should explicitly assume responsibility for In accordance with the Company Act (British Columbia), the
stewardship of the Company, and specifically for: business of the Company is managed under the direction of its
Board of Directors. The President/Chief Executive Officer (the
"CEO") makes recommendations to the Board of Directors with
respect to matters of corporate policy after discussion, when
appropriate, with other members of Senior Management. The Board
of Directors then makes the decisions which it deems appropriate
and supervises the execution of such decisions and reviews the
results obtained.
a. Adoption of a strategic planning process and The duties of the Board of Directors include the review on an
approval of a strategic plan ongoing basis of the strategic plan of the Company, a discussion
of such plan with the President/CEO, an assessment of the
opportunities and risks identified and approval of the plan.
b. Identification of principal risks, and The Board of Directors' duties include the review of overall
implementing risk managing systems business risks and the Company's practices and policies for
dealing with these risks.
c. Succession planning and monitoring senior The Compensation Committee reviews, reports and, where
management appropriate, provides recommendations to the Board on succession
planning matters and, with the Board of Directors, monitors the
performance of Senior Management.
d. Communications policy It is the duty of each of the Board of Directors, the Audit
Committee and the Chief Financial Officer ("CFO") to review and,
where required, approve statutory disclosure documents prior to
their distribution to shareholders.
In addition, the Company has a shareholder relations process to
respond to shareholder questions and concerns. All communications
from shareholders are referred to the appropriate corporate
officer or investor relations consultant for response,
consideration or action. Management promptly advises the Board of
Directors if any significant issues are raised by shareholders.
In addition, the Company com-
2
municates with its shareholders, securities analysts and media
regularly on developments in its business and results, through
the annual report, quarterly financial statements and reports to
shareholders, press releases and material change reports, when
needed.
e. Integrity of internal control and management The Board of Directors duties include the assessment of the
information systems integrity of the Company's internal controls and information
systems. In addition, the Audit Committee has oversight
responsibility of internal controls and management information
systems.
2. Majority of Directors should be unrelated The Board of Directors is currently composed of five persons. Of
(independent of management and free from any the five Directors, three are "unrelated" under the Guidelines
interest and any business or other relationship and the two others are Senior Officers of the Company. The
which could, or could reasonably be perceived to, Company does not presently have any "significant shareholder" as
materially interfere with the director's ability to that term is defined in the Guidelines.
act with a view to the best interests of the
company, other than interests and relationships
arising from shareholding and the Company has a
significant shareholder, if some Directors should
have no interests in or relationship with either
the Company or the significant shareholder. A
significant shareholder is defined as "a
shareholder with the ability to exercise a majority
of the votes for the election of the board of
directors".
3. The Board is required to disclose, for each Juliet Jones: Related. President and Chief
Director, whether he is related, and how that Executive Officer of the Company.
conclusion was reached.
W.D. Cameron White: Related. Chairman of the
Company.
Vincent Lum. Unrelated.
Alan Hibben. As a nominee of RBC Capital
Partners. Unrelated.
John Derek Douglas. As a nominee of Working
Opportunity Fund (EVCC) Ltd. Unrelated.
The Board is cognizant of the fact that during the past term, Mr.
Douglas was a nominee of a lender, and Mr. White was also a
lender, to the Company of amounts, the repayment of which was
secured by charges on the assets of the Company and its
subsidiaries, but considers that the only "related directors" are
the Directors that are corporate officers or members of
management. No other Directors are felt to have any business or
other interest that could materially interfere with the
Directors' ability to act in the best interests of the Company.
3
4. The board of directors of every corporation should The President/CEO submits to the Executive/Corporate Governance
appoint a committee of directors composed Committee candidates to fill vacancies on the Board of Directors.
exclusively of outside (non-management) directors, If the candidacy is endorsed by the Executive/ Corporate
a majority of whom are unrelated directors, with Governance Committee, it is then submitted for approval to the
the responsibility for proposing to the full board Board of Directors. While there is no formal process for
new nominees to the board and for assessing assessing the Directors on an ongoing basis, the Directors feel
directors on an ongoing basis. free to discuss specific situations from time to time among
themselves and/or with the President/CEO and if need be, steps
are taken to remedy the situation.
The Executive/Corporate Governance Commit-tee is composed of one
member of Senior Management, one related outside Director and one
unrelated outside Director.
5. Implement a process for assessing the effectiveness See Item 4 above.
of the Board, its Committees and individual
Directors.
6. Provide orientation and education programs for new There are no formal orientation or education programs for new
Directors. Directors, however new Directors are provided with information
and documentation relating to the commercial activities of the
Company and the internal organization of the Company. Senior
Management and certain of the Directors also meet with potential
new Directors. The meetings in which new Directors participate as
well as discussions with other Directors and with management
permit new Directors to familiarize themselves rapidly with the
operations of the Company.
7. Consider reducing size of Board, with a view to The Board of Directors is of the view that its size and
improving effective decision making. composition are well suited to the circumstances of the Company
and allow for the efficient functioning of the Board as a
decision-making body.
8. Board should review compensation of Directors in The Compensation Committee of the Board of Directors reviews
light of risks and responsibilities. periodically compensation policies in light of market conditions
and practice and in light of risks and responsibilities.
9. Subject to Guideline 13, committees of the Board The Compensation Committee is composed of two
should generally be composed of outside unrelated outside Directors.
(non-management) Directors, a majority of whom are
unrelated Directors. The Audit Committee is composed of three unrelated
Directors.
The Executive/Corporate Governance Commit-tee is presently
composed of two related Directors and one unrelated outside
Director.
4
10. Board should expressly assume responsibility for, The Board of Directors is responsible for
or assign to a committee the general responsibility developing and monitoring the Company's approach
for, developing the approach to corporate to governance issues and for the Company's
governance issues. response to the Guidelines.
11. a. Define limits to management's
responsibilities by developing position
descriptions for:
(i) the Board: The Board of Directors is, by law, responsible for managing the
business and affairs of the Company. Any responsibility which is
not delegated to either management or a committee remains with
the Board. Except where specifically delegated to management,
generally, all matters of policy and all actions proposed to be
taken which are not ordinary course business require the prior
approval of the Board or of a Board Committee to which approval
authority has been delegated.
(ii) the CEO The corporate objectives which the President/CEO is responsible
for meeting, with the rest of Management placed under her
supervision, and against which she is assessed, are determined by
the strategic plans and the budget as same are approved on an
on-going basis by the Company's Board of Directors.
b. Board should approve CEO's corporate See Item 11(a)(ii).
objectives.
12. Implement structures and procedures to ensure the While there is no formal structure in place to ensure that the
Board to function independently of management. Board can function independently of Management, the Chairman of
the Board of Directors of the Company is not a member of
Management. Furthermore, the Board is free to ask one or more
members of Management to withdraw during certain discussions and
the Directors of the Company would not hesitate to meet without
the presence of the members of Management who are also Directors,
if the circumstances were to so require.
13. a. Establish an Audit Committee with a The roles and responsibilities of the Audit Committee include the
specifically defined mandate. review of the Annual and quarterly financial statements of the
Company. The Audit Committee has direct communication channels
with the external auditors to discuss and review specific issues
as appropriate.
b. All members should be unrelated Directors The Audit Committee is composed of three unrelated
who are financially literate and at least Directors who are financially literate and at
one member should have accounting or related least one member should have accounting or related
financial expertise. financial expertise.
5
14. Implement a system to enable individual Directors Individual Directors could, if required, retain
to engage outside advisors, at the Company's outside advisors at the Company's expense.
expense.
6
SCHEDULE "B"
PEACE ARCH ENTERTAINMENT GROUP INC.
APPROVAL OF SHARE ISSUANCES
"NOW THEREFORE BE IT RESOLVED THAT:
1. The issuance and reservation for issuance of an aggregate 16,196,333 Class B
Subordinate Voting Shares of the Company pursuant to the Private Placement
Financing, Asset Acquisition, Debt Restructuring and Release and Reconstitution
of Loan Guarantee described in the Company's Information Circular dated December
18, 2002 under the heading "Particulars of Matters to be Acted Upon - Approval
of Share Issuances" be and is hereby approved.
2. Any one director or officer of the Company be and is hereby authorized and
directed to execute and deliver under the corporate seal or otherwise all such
deeds, documents, 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."
SCHEDULE "C"
PEACE ARCH ENTERTAINMENT GROUP INC.
APPROVAL OF FUTURE PRIVATE PLACEMENTS
"NOW THEREFORE BE IT RESOLVED THAT:
1. The directors of the Company be and are hereby authorized and directed to
arrange from time to time, one or more private placements in the capital of
the Company, in addition to the "Private Placement Financing and Asset
Acquisition" described in the Company's Information Circular dated December
18, 2002 under the heading "Particulars of Matters to be Acted Upon -
Approval of Share Issuances", subject to the following terms;
(a) all private placement financings will be carried out by the Company 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 Company being issued in an amount exceeding the number of issued
and outstanding shares (in the aggregate) of the Company after giving
effect to the share issuances described under the heading "Particulars
of Matter to be Acted Upon - Approval of Share Issuances - Private
Placement Financing and Asset Acquisition" in the Company's
Information Circular dated December 18, 2002; and
(c) any of the future private placements would be substantially at arm's
length and would not materially affect control of the Company.
2. Any one director or officer of the Company be and is hereby authorized and
directed to execute and deliver under the corporate seal or otherwise all
such deeds, documents, 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."
SCHEDULE "D"
PEACE ARCH ENTERTAINMENT GROUP INC.
AMENDMENTS TO AMENDED SHARE OPTION PLAN
"NOW THEREFORE BE IT RESOLVED THAT:
1. The Company's Amended Share Option Plan be and the same is hereby amended
by deleting the figures "115,950" Class A Multiple Voting Shares and
"650,000" Class B Subordinate Voting Shares from Section 2.03 thereof and
substituting in their place the figures "25,300" Class A Multiple Voting
Shares and, if the Share Issuances described in the Company's Information
Circular dated December 18, 2002 under the heading "Particulars of Matters
to be Acted Upon - Approval of Share Issuances - Private Placement
Financing and Asset Acquisition" are approved, "2,560,000" Class B
Subordinate Voting Shares or failing such approval, "750,000" Class B
Subordinate Voting Shares and such amendments are hereby approved; and
2. Any one director or officer of the Company be and is hereby authorized and
directed to execute and deliver under the corporate seal or otherwise all
such deeds, documents, 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."
PEACE ARCH ENTERTAINMENT GROUP INC.
Suite 500, 56 East 2nd Avenue
Vancouver, B.C., Canada, V5T 1B1
Tel: (604) 681-9308 Fax: (604) 681-3299
THIS PROXY IS SOLICITED BY THE MANAGEMENT OF
PEACE ARCH ENTERTAINMENT GROUP INC.
PROXY FOR THE 2003 ANNUAL GENERAL MEETING OF
MEMBERS TO BE HELD ON MONDAY, 20th JANUARY 2003
The undersigned member of PEACE ARCH ENTERTAINMENT GROUP INC. (hereinafter
called the "Company") hereby appoints Juliet Jones, a director and President and
CEO of the Company or failing her, W.D. Cameron White, a director and Chairman
of the Board of the Company, or in place of the foregoing ______________, as
nominee of the undersigned, to attend and act for and on behalf of the
undersigned at the 2003 Annual General Meeting of Members of the Company to be
held on Monday, 20th January 2003 and at any adjournment thereof and, on a poll,
the shares represented by this proxy are specifically directed to be voted or to
be withheld from voting as indicated below:
1. To appoint KPMG, Chartered Accountants, as Auditors of the Company: In favour:
--------
Withhold Vote:
--------
2. To authorize the directors to fix the remuneration of the Auditors In favour:
--------
Against:
--------
3. To determine the number of directors at five (5): In favour:
--------
Against::
--------
4. (a) To elect as directors all the persons named in 4(b) below: In favour:
--------
Withhold Vote:
--------
OR
(b) To elect as a director:
Juliet Jones In favour:
--------
Withhold vote
--------
Gary Howsam In favour
--------
Withhold vote
--------
Richard K. Watson In favour
--------
Withhold vote
--------
Jamie Brown In favour
--------
Withhold vote
--------
Nelson Thall In favour
--------
Withhold vote
--------
5. To pass a resolution approving the issuance or reservation for issuance
of an aggregate 16,196,333 Class B Subordinate Voting shares of the
Company pursuant to the Private Placement Financing, Asset Acquisition,
Debt Restructuring and Release and Reconstitution of Loan Guarantee
described under the heading "Particulars of Matters to be Acted Upon -
Approval of Share Issuances" in the Company's Information Circular
dated December 18, 2002;
In favour
--------
Against
--------
2
6. To pass a resolution authorizing the directors to arrange from time
to time additional private placements that are substantially at arm's
length, in accordance with The Toronto Stock Exchange guidelines, not
materially affecting control of the Company and not to exceed the
number of issued and outstanding shares in the aggregate of the
Company after giving effect to the share issuances described under
the heading "Particulars of Matters to be Acted Upon - Approval of
Share Issuances - Private Placement Financing and Asset Acquisition"
in the Company's Information Circular dated December 18, 2002;
In favour:
--------
Against:
--------
7. To pass a resolution amending the Company's Amended Share Option Plan
to increase the number of shares of the Company reserved for issuance
thereunder described under the heading "Particulars of Matters to be
Acted Upon - Approval of Amendments to Amended Share Option Plan" in
the Company's Information Circular dated December 18, 2002:
In favour:
--------
Against:
--------
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED OR WITHHELD FROM VOTING ON
ANY BALLOT THAT MAY BE CALLED FOR IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN AND,
IF A CHOICE IS SPECIFIED WITH RESPECT TO ANY MATTER TO BE ACTED UPON, THE SHARES
SHALL BE VOTED OR WITHHELD FROM VOTING ACCORDINGLY. WHERE NO CHOICE IS OR WHERE
BOTH CHOICES ARE SPECIFIED IN RESPECT OF ANY MATTER TO BE ACTED UPON OTHER THAN
THE APPOINTMENT OF AN AUDITOR OR THE ELECTION OF DIRECTORS AND A MANAGEMENT
NOMINEE IS NAMED HEREIN TO ACT AS THE MEMBER'S PROXY, THE SHARES REPRESENTED
HEREBY SHALL, ON ANY BALLOT THAT MAY BE CALLED FOR, BE VOTED IN FAVOUR OF ALL
SUCH MATTERS. THIS PROXY CONFERS UPON THE PERSON NAMED HEREIN AS NOMINEE
DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR VARIATIONS TO MATTERS
IDENTIFIED IN THE NOTICE AND OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING.
The undersigned hereby acknowledges receipt of the Notice of 2003 Annual General
Meeting of Members and the accompanying Information Circular dated December 18,
2002.
If this form of Proxy is not dated by the member in the space below, it is
deemed to bear the date on which it is mailed by the Company to the member.
The undersigned hereby revokes any proxy previously given in respect of the
Meeting.
DATED this ________________ day of ___________________________, 200____.
------------------------------------
Name (Please Print) Number of Shares Held:
------------------------------------
Address
------------------------------------ ---------------------------------------
------------------------------------
Signature
3
NOTES TO FORM OF PROXY
1. IF THE MEMBER DOES NOT WISH TO APPOINT ANY OF THE PERSONS NAMED IN THIS
FORM OF PROXY, HE SHOULD STRIKE OUT THEIR NAMES AND INSERT IN THE BLANK
SPACE THE NAME OF THE PERSON HE WISHES TO ACT AS HIS PROXY. SUCH PERSON
NEED NOT BE A MEMBER OF THE COMPANY.
2. This form of Proxy must be signed by the member or his attorney authorized
in writing or, if the member is a corporation, under the hand of a duly
authorized officer or attorney of the corporation.
3. This form of Proxy, and the power of attorney or other authority, if any,
under which it is signed, or a notarially certified copy thereof, must be
deposited either at the office of the Registrar and Transfer Agent of the
Company, CIBC Mellon Trust Company, Suite 1600, The Oceanic Plaza, 1066
West Hastings Street, Vancouver, B.C., Canada, V6E 3X1 or at the Head
Office of the Company at Suite 500, 56 East 2nd Avenue, Vancouver, B.C.,
Canada, V5T 1B1 not less than one hour prior to the time of the holding of
the Meeting or any adjournment thereof.
RETURN CARD
Dear Shareholder:
If you wish to have your name put on the Supplemental Mailing List of PEACE ARCH
ENTERTAINMENT GROUP INC. (the "Company"), such that you shall be mailed copies
of the Company's interim financial statements in respect of the present fiscal
year, then complete this form and return it to the Company's Head Office at
Suite 500, 56 East 2nd Avenue, Vancouver, B.C., Canada, V5T 1B1.
NAME: (PLEASE PRINT)
----------------------------------------
ADDRESS (INCLUDING POSTAL/ZIP CODE):
----------------------------------------
----------------------------------------
NUMBER AND CLASS OF VOTING
SECURITIES HELD:
----------------------------------------
SIGNATURE:
----------------------------------------