ENVOY COMMUNICATIONS GROUP INC.
LETTER OF TRANSMITTAL
TO: COMPUTERSHARE TRUST COMPANY OF CANADA
The undersigned hereby represents and warrants that the undersigned is the
owner of the number of common shares ("Common Shares"), of Envoy Communications
Group Inc. ("Envoy") which shares are represented by the share certificate(s)
described below and delivered herewith and the undersigned has good title to
the shares represented by the said certificate(s), free and clear of all liens,
charges and encumbrances, and has full power and authority to herewith deposit
such shares.
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Certificate Number Number of Shares Registered in the Name of
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The above-listed share certificates are hereby surrendered in exchange for
certificates representing Common Shares of Envoy on the basis of one (1)
Common Share of Envoy for (3) three Common Shares of Envoy. Where the exchange
results in a fractional share, the number of Envoy Common Shares will be
rounded to the nearest whole Common Share.
The undersigned authorizes and directs Computershare Trust Company of Canada
to issue a certificate for Envoy to which the undersigned is entitled as
indicated below and to mail such certificate to the address indicated below
or, if no instructions are given, in the name and to the address if any, of
the undersigned as appears on the share register maintained by Envoy.
Name (please print) ___________________________________________________________
Address _______________________________________________________________________
City _________________________ Province ____________ Postal Code ______________
Telephone (Office) _________________________ (Home) __________________________
Social Insurance Number _______________________________________________________
Tax Identification Number _____________________________________________________
Date: ___________________________
Signature of Shareholder ______________________________________________________
INSTRUCTIONS
Use of Letter of Transmittal
----------------------------
Each shareholder holding share certificate(s) of Envoy Communications
Group Inc. ("Envoy") must send or deliver this Letter of Transmittal duly
completed and signed together with the share certificate(s) described herein
to Computershare Trust Company of Canada (the "Trust Company") at the office
listed below. The method of delivery to the Trust Company is at the option
and risk of the shareholder, but if mail is used, registered mail is
recommended.
Share certificate(s) registered in the name of the person by whom (or on whose
behalf) the Letter of Transmittal is signed need not be endorsed or accompanied
by any share transfer power of attorney.
Share certificate(s) not registered in the name of the person by whom (or on
whose behalf) the Letter of Transmittal is signed must be endorsed by the
registered holder thereof or deposited together with share transfer power of
attorney properly completed by the registered holder. Such signature must be
guaranteed by an "Eligible Institution", or in some other manner satisfactory
to the Trust Company.
An "Eligible Institution" means a Canadian schedule 1 chartered bank, a major
trust company in Canada, a member of the Securities Transfer Agent Medallion
Program (STAMP), a member of the Stock Exchanges Medallion Program (SEMP) or
a member of the New York Stock Exchange Inc Medallion Signature Program (MSP).
Members of these programs are usually members of a recognized stock exchange
in Canada and the United States, members of the Investment Dealers Association
of Canada, members of the National Association of Securities Dealers or banks
and trust companies in the United States.
Where the Letter of Transmittal is executed on behalf of a corporation,
partnership or association, or by an agent, executor, administrator, trustee,
guardian or any person acting in a representative capacity, the Letter of
Transmittal must be accompanied by satisfactory evidence of the
representative's authority to act.
Envoy reserves the right, if it so elects in its absolute discretion, to
instruct the Trust Company to waive any defect or irregularity contained in
any Letter of Transmittal received by it.
Lost Share Certificates
-----------------------
If a share certificate has been lost or destroyed, the Letter of Transmittal
must be completed as fully as possible and forwarded to the Trust Company
together with a letter stating the loss. The Trust Company will respond with
the replacement requirements, which must be properly completed and returned
prior to effecting the exchange.
Miscellaneous
-------------
Additional copies of the Letter of Transmittal may be obtained from The Trust
Company at the office listed below. Any questions should be directed to
Computershare Trust Company of Canada at 1-800-663-9097 or by e-mail to
caregistryinfo@computershare.com.
By Mail: P.O. Box 7021
31 Adelaide St E
Toronto, ON M5C 3H2
Attn: Corporate Actions
By Hand or Courier: 100 University Avenue
9th Floor
Toronto, ON M5J 2Y1
Attn: Corporate Actions
ENVOY COMMUNICATIONS GROUP INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held on
JUNE 27, 2002
and
MANAGEMENT INFORMATION CIRCULAR
MAY 20, 2002
ENVOY COMMUNICATIONS GROUP INC.
26 Duncan Street
Toronto, Ontario
M5V 2B9
NOTICE OF SPECIAL MEETING
TAKE NOTICE that the Special Meeting of Shareholders of ENVOY COMMUNICATIONS
GROUP INC. (the "Corporation") will be held at 300 Bayview Avenue, Toronto,
Ontario, on Thursday, June 27, 2002 at 11:00 a.m. (Toronto time) for the
following purposes:
(a) to consider and, if thought advisable, to approve, with or without
variation, the Special Resolution (the full text of which is set out in the
accompanying Management Information Circular) amending the Articles of the
Corporation to consolidate the issued and outstanding Common Shares of the
Corporation on the basis set out in the accompanying Management Information
Circular;
(b) to consider and, if thought advisable, to approve, with or without
variation, the Private Placement Resolution (the full text of which is set out
in the accompanying Management Information Circular) relating to the issuance,
in the twelve-month period commencing June 27, 2002, of a number of Common
Shares by private placement that exceeds 25% of the Corporation's issued and
outstanding share capital; and
(c) to transact such other business as may properly come before the Meeting
or any adjournment thereof.
A Management Information Circular and form of proxy accompany this Notice.
Shareholders who are unable to attend the Meeting, or any adjournment thereof,
in person are requested to date and sign the enclosed form of proxy. A proxy
will not be valid unless it is deposited at the offices of Computershare Trust
Company of Canada, 100 University Avenue, 11th Floor, Toronto, Ontario, M5J 2Y1
on or before 11:00 a.m. (Toronto time) on the second business day preceding
the Meeting or 48 hours (excluding Saturdays, Sundays and holidays) before
any adjournment of the Meeting.
- - - - - - - - - -
DATED May 20, 2002.
By Order of the Board of Directors
-------------------------------------
Geoffrey B. Genovese
President and Chief Executive Officer
ENVOY COMMUNICATIONS GROUP INC.
MANAGEMENT INFORMATION CIRCULAR
Solicitation of Proxies
-----------------------
This Management Information Circular is furnished in connection with the
solicitation of proxies by management of ENVOY COMMUNICATIONS GROUP INC.
(the "Corporation") for the Special Meeting of Shareholders to be held at
300 Bayview Avenue, Toronto, Ontario, on Thursday, June 27, 2002 at 11:00 a.m.
(Toronto time) or any adjournment thereof (the "Meeting"). It is expected
that the solicitation will be primarily by mail, but proxies may also be
solicited personally, by advertisement or by telephone, by regular employees
of the Corporation without special compensation, or by the Corporation's
transfer agent, Computershare Trust Company of Canada, at nominal cost. The
cost of solicitation by management will be borne by the Corporation.
Appointment of Proxies
----------------------
If a shareholder cannot attend the Meeting but wishes to vote on the
resolutions, the shareholder should sign, date and deliver the enclosed form
of proxy to Computershare Trust Company of Canada, 100 University Avenue, 11th
Floor, Toronto, Ontario, M5J 2Y1 on or before 11:00 a.m. (Toronto time) on the
second business day preceding the Meeting or 48 hours (excluding Saturdays,
Sundays and holidays) before any adjournment of the Meeting. THE PERSONS NAMED
IN THE ENCLOSED FORM OF PROXY ARE DIRECTORS AND/OR OFFICERS OF THE CORPORATION.
A SHAREHOLDER GIVING A PROXY CAN STRIKE OUT THE NAMES OF THE NOMINEES PRINTED
IN THE ACCOMPANYING FORM OF PROXY AND INSERT THE NAME OF ANOTHER NOMINEE IN
THE SPACE PROVIDED, OR THE SHAREHOLDER MAY COMPLETE ANOTHER FORM OF PROXY.
A proxy nominee need not be a shareholder of the Corporation. A shareholder
giving a proxy has the right to attend, or appoint someone else to attend as
his or her proxy, at the Meeting and the proxy earlier submitted can be
revoked in the manner described below under "Revocability of Proxies".
Voting of Proxies
-----------------
The shares represented by a properly executed proxy will be voted or withheld
from voting in accordance with the directions given in the proxy. If the
shareholder giving the proxy wishes to confer a discretionary authority with
respect to any item of business, then the space opposite the item must be left
blank. IF NO CHOICE IS SPECIFIED IN THE PROXY, AND THE NOMINEE IS PROPOSED
BY MANAGEMENT, THE NOMINEE WILL VOTE THE SHARES REPRESENTED BY THE PROXY IN
FAVOUR OF EACH ITEM LEFT BLANK. The enclosed form of proxy confers
discretionary authority upon the persons named in the proxy. The discretionary
authority so granted may be exercised with respect to amendments or variations
to matters which may properly come before the Meeting, unless the shareholder
deletes the discretionary authority from the proxy. As at the date of this
Management Information Circular, management of the Corporation is not aware
of any such amendment or variation or any other matter to come before the
Meeting other than those referred to in the accompanying Notice of Meeting.
However, if any other matters that are not now known to management should
properly come before the Meeting, the shares represented by proxies given in
favour of management nominees will be voted on such matters in accordance
with the best judgment of such nominees.
Revocability of Proxies
-----------------------
A shareholder who has given a proxy has the power to revoke it by either
depositing an instrument in writing signed (in writing or by electronic
signature) by the shareholder or the shareholder's duly authorized attorney
or by transmitting by telephonic or electronic means a revocation signed by
electronic signature, which instrument or revocation must be delivered to the
Registered Office of the Corporation at 26 Duncan Street, Toronto, Ontario,
M5V 2B9 at any time up to and including the last business day preceding the
day of the Meeting or to the Chair of the Meeting on the day of the Meeting
at any time prior to its use. A shareholder may also revoke a proxy by
personal appearance at the Meeting prior to the hour of commencement of the
Meeting or in any other manner permitted by law.
Electronic Signature
--------------------
A shareholder or the shareholder's duly authorized attorney may sign by
electronic signature a proxy, revocation of proxy or a power of attorney
authorizing the creation of either of them, if the means of electronic
signature permits a reliable determination that the document was created or
communicated by or on behalf of the shareholder or the attorney, as the case
may be.
Interest of Certain Persons in Matters to be Acted Upon
-------------------------------------------------------
No director or officer, past or present, nor any person on behalf of whom this
solicitation is made or any of their respective associates has any interest,
direct or indirect, in any matter to be acted upon at the Meeting, except that
such persons may be indirectly involved in the normal business of the Meeting
or the general affairs of the Corporation.
Voting Shares and Principal Shareholders
----------------------------------------
There are 20,426,550 common shares (the "Common Shares") of the Corporation
outstanding and entitled to vote at the Meeting. Each Common Share carries
one vote.
Any shareholder of record as at the close of business on May 20, 2002 is
entitled to vote the Common Shares registered in his or her name at that date
except to the extent that such shareholder has subsequently transferred any of
such Common Shares and the transferee of those Common Shares establishes his
or her ownership of such Common Shares and demands, not later than 10 days
before the Meeting, that his or her name be included in the list of
shareholders entitled to vote at the Meeting. In such case, the transferee
is entitled to vote such Common Shares at the Meeting.
To the best of the knowledge of the directors and senior officers of the
Corporation, no shareholder, directly or indirectly, holds or exercises
control over more than 10% of the outstanding Common Shares of the
Corporation except as follows:
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Name Number of Common Shares Percentage
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CDS & Co. (1)
P.O. Box 1038 Stn A 16,544,797 81.00%
25 The Esplanade
Toronto, Ontario
M5W 1G5
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Cede & Co. (1)
P.O. Box 29 2,761,393 13.52%
Bowling Green Station
New York, NY
USA 10274
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NOTE:
(1) The individual beneficial owners of the Common Shares are not known by the
Corporation's management.
SPECIAL BUSINESS OF THE MEETING
-------------------------------
SPECIAL RESOLUTION - Amendment to the Corporation's Articles to consolidate
its Common Shares.
The Common Shares of the Corporation are listed and quoted for trading on the
NASDAQ SmallCap market ("NASDAQ"). Pursuant to the requirements of NASDAQ, to
remain eligible for continued inclusion in NASDAQ a security must have a bid
price of at least US$1.00 per share. On March 19, 2002, the Corporation
received written notification from NASDAQ Stock Market, Inc. that its Common
Shares have failed to maintain a minimum bid price of US$1.00 over the
previous thirty consecutive trading days as required for continued listing on
NASDAQ as set forth in the NASDAQ rules. The Corporation is required to regain
compliance with this requirement by September 16, 2002. The closing bid price
of the Common Shares of the Corporation on NASDAQ on May 20, 2002 was US$0.38.
As the bid price of the Common Shares of the Corporation continues to be below
the US$1.00 minimum bid price, the Board of Directors of the Corporation has
determined that, in order to ensure the continued qualification of the
Corporation's Common Shares for listing on NASDAQ, it would be in the best
interests of the Corporation and its shareholders to effect a consolidation of
the issued and outstanding Common Shares of the Corporation on a basis of one
(1) new Common Share for each three (3) Common Shares presently issued and
outstanding.
It is the intention of the Corporation to file Articles of Amendment giving
effect to the consolidation of the Common Shares following approval thereof by
the shareholders at the Meeting. The effective date of the consolidation of
the Common Shares will be the date of issuance of the Certificate of Amendment
by the Director under the Business Corporations Act (Ontario) and such date is
referred to as the "Effective Date". On the Effective Date, the Common Shares
of the Corporation will be consolidated on the basis described above
The Board of Directors has determined that the passing of the Special
Resolution, the full text of which is attached to this Management Proxy
Circular, is in the best interests of the Corporation and shareholders and
unanimously recommends that shareholders vote in favour of the Special
Resolution. Unless otherwise specified by the shareholder, the persons named
in the enclosed form of proxy will vote in favour of the Special Resolution.
The Special Resolution may be implemented if two-thirds of the votes
represented at the Meeting are cast in favour of its adoption.
In anticipation of the approval of the Special Resolution by the shareholders
at the Meeting, a letter of transmittal containing instructions with respect
to the surrender of the Corporation's share certificates is enclosed for use
by shareholders in exchanging their share certificates. Upon return of a
properly completed letter of transmittal, together with share certificates
for pre-consolidation Common Shares of the Corporation, certificates for an
appropriate number of consolidated Common Shares will be issued. No
certificate representing fractional Common Shares of the Corporation will be
issued. In the event the consolidation results in a registered shareholder of
the Corporation otherwise becoming entitled to a fractional Common Share, an
adjustment will be made to the nearest full Common Share.
PRIVATE PLACEMENT RESOLUTION - Advance Shareholder Approval for the Issuance
of a Number of Shares by Private Placement That Exceeds 25% of the
Corporation's Issued and Outstanding Share Capital
The Corporation, from time to time, investigates opportunities to raise
financing on advantageous terms. It expects to undertake one or more
financings over the next year and expects that some of them may be structured
as private placements. Under the rules of The Toronto Stock Exchange, the
aggregate number of shares of a listed company which are issued or made
subject to issuance (i.e. issuable under a share purchase warrant or option
or other convertible security) by way of one or more private placement
transactions during any particular six-month period must not exceed 25% of
the number of shares outstanding (on a non-diluted basis) prior to giving
effect to such transactions (the "TSX 25% Rule"), unless there has been
shareholder approval of such transactions.
The application of the TSX 25% Rule may restrict the availability to the
Corporation of funds which it may wish to raise in the future by private
placement of its securities.
In particular, management of the Corporation considers it to be in the best
interests of the Corporation to solicit private placement funds for working
capital and its operations. The Toronto Stock Exchange has a working practice
that it will accept advance approval by shareholders in anticipation of
private placements that may exceed the TSX 25% Rule, provided such private
placements are completed within 12 months of the date such advance shareholder
approval is given.
THE CORPORATION'S ISSUED AND OUTSTANDING SHARE CAPITAL IS CURRENTLY 20,426,550
COMMON SHARES (6,808,850 COMMON SHARES ON A POST-CONSOLIDATED BASIS) AND THE
CORPORATION PROPOSES THAT THE MAXIMUM NUMBER OF SHARES WHICH EITHER WOULD BE
ISSUED OR MADE SUBJECT TO ISSUANCE UNDER ONE OR MORE PRIVATE PLACEMENTS IN THE
TWELVE MONTH PERIOD COMMENCING ON JUNE 27, 2002 WOULD NOT EXCEED 15,000,000
COMMON SHARES (5,000,000 COMMON SHARES ON A POST-CONSOLIDATED BASIS), OR 73.43%
OF THE CORPORATION'S ISSUED AND OUTSTANDING SHARES AS AT MAY 20, 2002.
Any private placement proceeded with by the Corporation under the advance
approval being sought at the Meeting will be subject to the following
additional restrictions:
(i) it must be substantially with parties at arm's length to the Corporation;
(ii) it cannot materially affect control of the Corporation;
(iii) it must be completed within a twelve-month period following the date the
shareholder approval is given; and
(iv) it must comply with the private placement pricing rules of The Toronto
Stock Exchange which currently require that the issue price per Common
Share must not be lower than the closing market price of the Common
Shares on The Toronto Stock Exchange on the trading day prior to the
date notice of the private placement is given to The Toronto Stock
Exchange (the "Market Price"), less the applicable discount as follows:
Market Price Maximum Discount
$0.50 or less 25%
$0.51 to $2.00 20%
Above $2.00 15%
(For these purposes, a private placement of unlisted convertible securities
is deemed to be a private placement of the underlying listed securities at an
issue price equal to the lowest possible price at which the securities are
convertible by the holders thereof).
In any event, The Toronto Stock Exchange retains the discretion to decide
whether or not a particular placement is "substantially" at arm's length or
will materially affect control, in which case, specific shareholder approval
may be required.
In anticipation that the Corporation may enter into one or more private
placements in the next twelve months that will result in it issuing and/or
making issuable such number of its Common Shares, taking into account any
shares that may be issued upon exercise of any warrants, options or other
rights granted in connection with the private placements, that will exceed
the TSX 25% Rule, shareholders will be asked to consider and to approve, with
or without variation, the Private Placement Resolution, the full text of
which is attached to this Management Proxy Circular. The Private Placement
Resolution, if approved, would authorize the issuance by the Corporation, in
one or more private placements in the twelve-month period commencing June 27,
2002, such number of securities that would result in the Corporation issuing
or making issuable 15,000,000 Common Shares (5,000,000 Common Shares on a
post-consolidated basis) aggregating up to 73.43% of the number of issued and
outstanding Common Shares as at May 20, 2002, subject to the restrictions
described above.
The Board of Directors has determined that the passing of the Private
Placement Resolution is in the best interests of the Corporation and
shareholders and unanimously recommends that shareholders vote in favour of
the Private Placement Resolution. In the event the Private Placement
Resolution is not passed, The Toronto Stock Exchange will not approve any
private placements that result in the issuance or possible issuance of a
number of shares which exceed the TSX 25% Rule, without specific shareholder
approval. Such restriction could impede the Corporation's timely access to
required funds on favourable terms. Accordingly, in the absence of contrary
instructions, the persons named in the enclosed form of proxy intend to vote
for the Private Placement Resolution.
To be effective, the Private Placement Resolution requires approval by a
majority of the votes cast by shareholders that vote in respect of the Private
Placement Resolution.
Other Matters
-------------
Save for the matters referred to in this Management Information Circular,
management of the Corporation knows of no other matters intended to be brought
before the Meeting. If any matters which are not now known to management
shall properly come before the Meeting, the proxy given pursuant to this
solicitation by management will be voted on such matters in accordance with
the best judgment of the person voting the proxy, in the event such
discretionary authority is provided in the proxy.
CORPORATE GOVERNANCE
--------------------
The following describes the Corporation's corporate governance practices with
specific reference to the guidelines contained in the Report of the TSX
Committee on Corporate Governance in Canada (the "TSX Report").
Mandate of the Board
--------------------
The Board of Directors (the "Board") holds meetings whenever appropriate to
oversee the conduct of the Corporation's business and monitor and evaluate
the day-to-day management of the Corporation. With respect to risk management
activities, the Board is presented, at each meeting, reports on operations,
financial status, material contracts and litigation.
In addition to the Board's statutory responsibilities under the Business
Corporations Act of Ontario, the Board's "stewardship" responsibilities
include the following: (a) assessing the principal risks arising from or
incidental to the business activities of the Corporation; (b) appointing all
senior executives of the Corporation and, through the Compensation Committee
of the Board, developing and implementing the executive compensation policies
and reviewing the performance of senior executives with reference to the
Corporation's policies, stated budget and other objectives; (c) overseeing the
Corporation's policies regarding public communications, investor relations and
shareholder communications; and (d) monitoring and assessing, through the
Audit Committee of the Board, the scope, implementation and integrity of the
Corporation's internal information, audit and control systems.
The Corporation has delegated the responsibility for monitoring the
effectiveness of the Corporation's internal information systems to the Audit
Committee of the Board. The Audit Committee is also responsible for reviewing
and appraising the soundness, adequacy and application of financial and other
operating controls, determining the extent of compliance with established
policies, plans and procedures and ascertaining the reliability and timeliness
of management data developed within the organization.
Composition of the Board
------------------------
The articles of the Corporation provide that there shall be a Board of not
less than 3 or more than 10 directors. There are currently six directors of
the Corporation, two of whom are "inside" and "related" directors and four of
whom are "outside" directors (as such terms are defined in the TSX Report).
Geoffrey B. Genovese, the President and Chief Executive Officer of the
Corporation, and Donald Watt, the Chairman of the Corporations wholly-owned
subsidiary, Watt International Inc., are the "inside" and "related" directors.
Hugh Aird, David Hull and Eric Demirian are the "outside" and "unrelated"
directors of the Corporation. John H. Bailey is an outside director but, as
counsel who provides ongoing legal services to the Corporation, may be
considered to be a "related" director. The Board intends to periodically
examine its size and constitution to ensure responsible corporate governance
and effective corporate management.
Governing Committees
--------------------
The directors have established the Audit Committee and the Compensation
Committee to focus resources and expertise in certain areas of the Board's
mandate.
-- Audit Committee
The Board has delegated to the Audit Committee of the Board responsibility for
ensuring management has designed and implemented an effective management
system and for reviewing internal information, audit, control and management
systems. The Audit Committee is comprised of three directors, Hugh Aird, Eric
Demirian and John H. Bailey. The TSX Report recommends that all members of the
Audit Committee should be "outside" directors. Although John H. Bailey is an
"outside" director, he may be considered a "related" director (see above).
However, the Board has waived the independence requirements for John H.
Bailey, as it believes that his presence on the Audit Committee facilitates
the remaining members' understanding of industry and related issues and is in
the best interests of the Corporation
The Audit Committee is responsible for reviewing the Corporation's annual
consolidated financial statements and reporting to the Board in connection
therewith. The Audit Committee is also responsible for monitoring the
Corporation's internal controls and information gathering systems and dealing
with the Corporation's external auditors. On February 22, 2000, the Audit
Committee adopted a formal written audit committee charter, which specifies
the auditor's accountability to the Board and the authority and
responsibilities of the Audit Committee.
-- Compensation Committee
The Compensation Committee is comprised of three directors, David Hull,
Hugh Aird and John H. Bailey, all of whom are "outside" directors. The
Compensation Committee reviews, administers and monitors the Corporation's
executive compensation plans, policies and programs, including the
compensation of all executive officers and, if requested by the President
and Chief Executive Officer, reviews the compensation of any other officer or
senior employee.
-- Corporate Governance Committee
The Board has not, as yet, established a Corporate Governance Committee as
recommended in the TSX Report and believes that the matters ordinarily
considered by such a committee are effectively administered by the Board's
"outside" and "unrelated" directors. Although, at present, the Board has
determined this to be the most practical approach to responsible corporate
governance, the Board will continue to evaluate this determination as
circumstances dictate.
Expectations of the Board
-------------------------
The Board expects management of the Corporation to report to the Board in a
comprehensive, accurate and timely fashion on the business and affairs of the
Corporation generally and on specific matters that it considers to have
material consequences for the Corporation and its shareholders. Management
is expected to continually develop and review the Corporation's strategic plan
to make the decisions necessary to give effect to the plan; to adhere to the
Corporations' operational policies; and to monitor the Corporation's financial
performance in comparison to the annual budget, with the ultimate goal of
enhancing shareholder value.
Shareholder Communication
-------------------------
The objective of the Corporation's shareholder communication policy is to
ensure open and timely exchange of information relating to the Corporation's
business, affairs and performance, subject to the requirements of applicable
securities legislation and other statutory and contractual obligations
limiting the disclosure of such information. Information material to the
Corporation's business is released through news wire services, the general
media, telephone conferences and shareholder mailings, thereby ensuring
timely dissemination. Additionally, individual queries, comments or
suggestions can be made at any time directly to the Corporation's secretarial
department located at its head office.
EXECUTIVE COMPENSATION
----------------------
Summary Executive Compensation
------------------------------
The following table sets forth all compensation for the fiscal years ended
September 30, 1999, 2000 and 2001 paid to the President and Chief Executive
Officer of the Corporation and the four other most highly compensated officers
who served as executive officers of the Corporation (the "Named Executive
Officers"):
Annual Compensation
-------------------------------------------------------------------------------
Name and Year Salary($) Bonus($) Other
Principal Annual
Position Compensation ($)
-------------------------------------------------------------------------------
Geoffrey B. 2001 356,250 - 685,000 (6)
Genovese Chairman 2000 300,000 - 175,000 (6)
and C.E.O. 1999 300,000 - 250,000 (6)
-------------------------------------------------------------------------------
J. Joseph Leeder 2001 238,767 170,000 -
Vice President 2000 195,800 40,000 -
and Chief 1999 (1) 131,250 - -
Financial Officer
-------------------------------------------------------------------------------
Brian Goodall 2001 350,000 5 - -
President, 2000 350,000 5 - -
Hampel 1999 (2) 316,346 5 - -
-------------------------------------------------------------------------------
Stephen Miller 2001 (3) 162,917
Vice President, 2000 - - -
Marketing and 1999 - - -
Corporate
Communications
-------------------------------------------------------------------------------
Chetan Mathur 2001 487,488 - -
C.E.O., 2000 (4) 121,872 - -
Sage 1999 - - -
Information
Consultants Inc.
-------------------------------------------------------------------------------
Long Term Compensation
-------------------------------------------------------------------------------
Awards Payouts
-------------------------------------------------------------------------------
Name and Securities Restricted LTIP All
Principal Under Option/ Shares or Payout Other
Position SARs Granted Restricted ($) Compensation
(#) Share Units ($)
($)
-------------------------------------------------------------------------------
Geoffrey B. 2001 - - -
Genovese Chairman 2000 150,000 - -
and C.E.O. 1999 100,000 - -
-------------------------------------------------------------------------------
J. Joseph Leeder 2001 - - -
Vice President 2000 50,000 - -
and Chief 1999 (1) 200,000 - -
Financial Officer
-------------------------------------------------------------------------------
Brian Goodall 2001 - - -
President, 2000 - - -
Hampel 1999 (2) 100,000 - -
-------------------------------------------------------------------------------
Stephen Miller 2001 (3) 25,000 - -
Vice President, 2000 - - -
Marketing and 1999 - - -
Corporate
Communications
-------------------------------------------------------------------------------
Chetan Mathur 2001 - - -
C.E.O., 2000 (4) - - -
Sage 1999 - - -
Information
Consultants Inc.
-------------------------------------------------------------------------------
NOTE:
(1) Mr. Leeder became an executive officer of the Corporation on November 15,
1998. The information is provided for all executive compensation paid
from that date to September 30, 1999.
(2) Mr. Goodall became an executive officer of the Corporation's subsidiary,
Hampel Stefanides, Inc., on November 6, 1998, the date on which this
subsidiary was acquired by the Corporation. The information is provided
for all compensation paid from that date to September 30, 1999.
(3) Mr. Miller became an executive officer of the Corporation on October 16,
2000. The information is provided for all executive compensation paid
from that date to September 30, 2001.
(4) Mr. Mathur became an executive officer of the Corporation's subsidiary,
Sage Information Consultants Inc., on June 1, 2000, the date on which
this subsidiary was acquired by the Corporation. The information is
provided for all executive compensation paid from that date to
September 30, 2000.
(5) Mr. Goodall's compensation is stated and paid in United States dollars.
On May 17, 2002, the Bank of Canada noon rate of exchange for the
conversion of one United States dollar into Canadian dollars was $1.5424
(Cdn $1.00 equals US $0.6483).
(6) This amount was paid to a corporation related to Mr. Genovese and
includes $75,000 as an annual management fee and the balance as a fee
for successful completion of acquisitions by and the credit facility for
the Corporation.
The Corporation does not provide any pension, retirement plan or other
remuneration for its directors or officers that constitutes an expense to the
Corporation, nor are there any plans or arrangements in respect of compensation
received or that may be received by executive officers in the Corporation's
most recently completed or current fiscal year to compensate such officers in
the event of the termination of employment or a change in control of the
Corporation.
Stock Option Plan
-----------------
The Corporation has established a Stock Option Plan pursuant to which options
to purchase Common Shares and stock appreciation rights ("SARs") may be
granted to directors, officers, employees or certain consultants to the
Corporation or any of its subsidiaries, as determined by the Board, at prices
to be fixed by the directors, subject to limitations imposed by any Canadian
stock exchange on which the Common Shares are listed for trading and any other
regulatory authority having jurisdiction in such matters. The Common Shares
subject to each option shall become purchasable at such time or times as may
be determined by the directors. SARs may only be granted in conjunction with
an option and, when exercised, entitle the holder to receive an amount equal
in value to the excess of the market value of the Common Shares over the
price of the related option. The excess amount is payable in Common Shares
having a market value equal to such excess. Options are non-assignable and
non-transferable by the option-holder and shall be exercisable during the
option-holder's lifetime only by the option-holder. SARs are non-transferable
and terminate when the related option terminates.
The maximum number of Common Shares currently reserved for issuance upon
exercise of options under the Stock Option Plan is 4,000,000 Common Shares.
As at September 30, 2001, options to purchase 2,679,500 Common Shares have
been granted and are outstanding under the Stock Option Plan, options to
purchase 101,000 Common Shares have been exercised under the Stock Option Plan
and options to purchase 340,000 Common Shares have been forfeited or cancelled
under the Stock Option Plan. There are no SARs outstanding under the Stock
Option Plan. The aggregate number of Common Shares reserved for issuance to
any one individual under the Stock Option Plan may not exceed 5% of the issued
and outstanding Common Shares.
Options Granted During Most Recent Fiscal Year
----------------------------------------------
The following table sets forth options granted under the Stock Option Plan to
the Named Executive Officers of the Corporation in the most recently completed
fiscal year:
-------------------------------------------------------------------------------
Name Shares Under Percentage of Total Date of
Options Granted Options Granted to Grant
(#) Employees in
Financial Year
-------------------------------------------------------------------------------
Stephen Miller 25,000 (1) 3.2% Jan.24, 2001
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Name Exercise Price Market Value of Expiry Date
($/Security) Shares Underlying
Options on date
of Grant
($/Security)
-------------------------------------------------------------------------------
Stephen Miller $6.20 $4.80 Jan.23, 2006
-------------------------------------------------------------------------------
NOTE:
(1) These options vest at the rate of _ on each of the first three
anniversaries of the date of the grant.
Aggregate Options Exercised During Most Recent Fiscal Year
----------------------------------------------------------
The following table sets out for Named Executive Officers information relating
to options exercised by them during the most recent fiscal year and the value
of unexercised options held by them as at the end of the most recent fiscal
year.
-------------------------------------------------------------------------------
Name Number of Shares Aggregate Value
Acquired on Exercise Realized ($)
-------------------------------------------------------------------------------
Geoffrey B. Genovese - -
-------------------------------------------------------------------------------
J. Joseph Leeder - -
-------------------------------------------------------------------------------
Brian Goodall - -
-------------------------------------------------------------------------------
Stephen Miller - -
-------------------------------------------------------------------------------
Chetan Mathur - -
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Name Unexercised Options Value of Unexercised
Aggregate Value In-the Money Options
At FY-End (#) at FY-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable (1)
-------------------------------------------------------------------------------
Geoffrey B. Genovese 450,000/-- 0/--
-------------------------------------------------------------------------------
J. Joseph Leeder 150,000/100,000 0/0
-------------------------------------------------------------------------------
Brian Goodall 50,000/50,000 0/0
-------------------------------------------------------------------------------
Stephen Miller --/25,000 --/0
-------------------------------------------------------------------------------
Chetan Mathur --/-- --/--
-------------------------------------------------------------------------------
NOTE:
(1) The closing price of the Common Shares of the Corporation on The Toronto
Stock Exchange on September 28, 2001 was $2.16.
Employment Contracts and Termination Agreements
-----------------------------------------------
The Corporation, its wholly owned subsidiary, Hampel Stefanides, Inc.
("Hampel"), and Sage Information Consultants Inc. ("Sage") have entered into
employment contracts with the Named Executive Officers.
Effective May 1, 2002, Geoffrey B. Genovese has agreed to act as the
Corporation's President and Chief Executive Officer at an annual base salary
of $550,000, together with a discretionary bonus based on the achievement of
agreed upon criteria established from time to time by the Compensation
Committee. During the period from February 1, 2002 to September 30, 2002,
Mr. Genovese has agreed to a 10% reduction in his base salary. This agreement
provides for a severance payment equivalent to $300,000 plus an amount equal
to two times the total remuneration and other compensation paid to Mr. Genovese
and his management company during the 12 month period preceding termination,
if Mr. Genovese's employment is terminated, without cause, by the Corporation.
An annual fee of $150,000 is also payable to Mr. Genovese's management company
pursuant to a management agreement with the Corporation. The management
agreement has a fixed term ending on September 30, 2003.
Effective April 30, 2002, Tom Wright stepped down as President and Chief
Operating Officer of the Corporation. Mr. had agreed to act as the
Corporation's President and Chief Operating Officer, effective October 1, 2001,
at an annual base salary of $400,000, together with a discretionary bonus
based on the achievement of agreed upon criteria established from time to
time by the Compensation Committee. During the period from February 1, 2002
to September 30, 2002, Mr. Wright had agreed to a 10% reduction in his base
salary. This agreement provided for a severance payment equivalent to up to
18 months base salary and benefits if his employment was terminated, without
cause, by the Corporation or 24 months if his employment was terminated,
without cause, by the Corporation following a change of control of the
Corporation.
Joseph Leeder has agreed to act as the Corporation's Vice President and Chief
Financial Officer at an annual base salary of $300,000, together with a
discretionary bonus based on the achievement of agreed upon criteria
established from time to time by the Chief Executive Officer. During the
period from February 1, 2002 to September 30, 2002, Mr. Leeder has agreed to
a 10% reduction in his base salary. This agreement provides for a severance
payment equivalent to his base salary for a period of three months for each
year of employment (to a maximum of six months), if Mr. Leeder's employment
is terminated, without cause, by the Corporation, and for a period of twelve
months, if Mr. Leeder's employment is terminated, without cause, by the
Corporation within six months of a change of control of the Corporation.
Effective April 15, 2002, Stephen Miller stepped down as Vice President,
Marketing and Corporate Communications of the Corporation. Mr. Miller had
agreed to act as the Corporation's Vice President, Marketing and Corporate
Communications, at an annual base salary of $170,000, together with a
discretionary bonus of up to 25% of his base salary. This agreement provided
for a severance payment equivalent to his base salary for a period of six
months, if his employment was terminated by the Corporation.
Effective May 1, 2002, Brian Goodall stepped down as President of Hampel.
Mr. Goodall had agreed to act as Hampel's President at an annual base salary
of US$350,000. This agreement had a fixed term of 4 years ending on
September 30, 2002.
Effective February 15, 2002, Chetan Mathur stepped down as Chief Executive
Officer of Sage. Mr. Mathur had agreed to act as Sage's Chief Executive
Officer at an annual base salary of US$325,000. This agreement had a fixed
term of 4 years ending on June 1, 2004.
Indebtedness of Directors and Senior Officers
---------------------------------------------
Since the beginning of the last completed fiscal year, there has been no
indebtedness to the Corporation or its subsidiaries by any director, officer,
proposed nominee for election as a director or associate of any such person.
Composition of the Compensation Committee
-----------------------------------------
The Corporation established a Compensation Committee in December, 1997.
The Compensation Committee is comprised of its Chairman, David Hull (an
outside, unrelated director), Hugh Aird (an outside, unrelated director) and
John H. Bailey (an outside director and legal counsel to the Corporation).
The Compensation Committee is responsible for the review, administration and
monitoring of the Corporation's executive compensation plans, policies and
programs, including the compensation of the President and Chief Executive
Officer and, if requested by the President, the review of the compensation
of any other officer or senior employee.
Report on Executive Compensation
--------------------------------
During the fiscal year ended September 30, 2001, the Corporation's executive
compensation program was intended to be consistent with the Corporation's
business plans, strategies and goals while taking into account various factors
and criteria including competitive factors and the Corporation's performance.
The Corporation's executive compensation program was intended to provide an
appropriate overall compensation package that would permit the Corporation to
attract and retain highly qualified and experienced senior executives and to
encourage superior performance by the Corporation. The Corporation's
compensation policies were intended to motivate individuals to achieve and
then to award compensation based on corporate and individual results.
Compensation ranges designed to recognize level of responsibility, experience
and performance were based on survey data compiled by external consultants
periodically examined to ensure that the compensation awarded by the
Corporation was competitive and adequate.
The compensation of the executive officers consists of a base salary, bonus
and participation in the Corporation's Stock Option Plan. Individual
performance is recognized by measuring the achievement of specific objectives
that are related to concrete, measurable elements in each executive officer's
performance and/or functional area of responsibility. Base salary and bonuses
accounted for approximately 100% of cash compensation. Base salary levels
were based on responsibility, experience, knowledge and on internal equity
criteria and external pay practices. As noted above, in appropriate
circumstances, cash compensation may be augmented by the payment of bonuses
with the intention that overall compensation be more closely aligned to an
individuals' performance or the profitability of the business unit for which
the individual is accountable. The Stock Option Plan is intended to provide
long term rewards linked directly to the market value of the Common Shares of
the Corporation. Options were granted under the Stock Option Plan based on
the level of executive responsibility and compensation practices at
competitive market rates.
Compensation for the Chief Executive Officer was intended to reflect a fair
evaluation of overall performance and was intended to be competitive with
levels of compensation of comparable corporations. The analysis of the CEO's
performance was based on actual performance, performances relative to
anticipated plans and the effectiveness and appropriateness of strategies
designed to address those factors.
Presented by the Compensation Committee
David Hull (Chair)
Hugh Aird
John H. Bailey
Performance Graph
-----------------
The following graph compares the Corporation's cumulative total shareholder
return (assuming an investment of $100 on October 1, 1996) on the Common
Shares of the Corporation during the period October 1, 1996 to October 1, 2001
with the cumulative return of the TSE 300 Stock Index during the same period.
Dividends declared on Common Shares of the Corporation are assumed to be
reinvested. The Common Share price performance as set out in the graph does
not necessarily indicate future price performance.
Comparison of Cumulative Total Return Between
---------------------------------------------
Common Shares and TSE 300 Stock Index
-------------------------------------
1996 through 2001
-----------------
-------------------------------------------------------------------------------
For the
Fiscal Year 1996 1997 1998 1999 2000 2001
-------------------------------------------------------------------------------
Corporation $100.00 $153.18 $181.36 $300.00 $370.45 $100.00
-------------------------------------------------------------------------------
TSE 300 $100.00 $132.18 $102.03 $130.05 $194.72 $127.57
-------------------------------------------------------------------------------
Compensation of Directors
-------------------------
Certain directors, who are not officers of the Corporation or any of its
affiliates, are compensated for their services as directors and members of a
committee through a combination of annual and meeting attendance fees. Each
of Messrs Aird and Demirian are entitled to receive an annual director's fee
of $20,000.00. In addition, each of Messrs. Aird, Demirian and Hull are
entitled to receive a fee of $500.00 for each Board meeting and $1,000.00 for
each committee meeting attended. No compensation is paid to the other
directors for their services as directors or members of a committee. Directors
are also entitled to participate in the Corporation's Stock Option Plan.
Directors' and Officers' Liability Insurance
--------------------------------------------
The Corporation maintains liability insurance for the benefit of the directors
and officers of the Corporation and its subsidiaries against liability
incurred by them in their respective capacities. The current annual policy
limit is $10,000,000. Under the policy, individual directors and officers are
reimbursed for losses incurred in their capacities as such, subject to a
deductible of $250,000 for securities claims suits arising in the United
States and $50,000 for all other claims. The deductible is the responsibility
of the Corporation. The annual premium of $95,000 was paid by the Corporation.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
No director or senior officer of the Corporation, no proposed management
nominee for election as a director of the Corporation, no shareholder holding
more than 10% of the votes attached to the shares of the Corporation and no
associate or affiliate of any of the foregoing had any material interest,
direct or indirect, in any transaction since October 1, 2000 or in any
proposed transaction that has materially affected or will materially affect
the Corporation or any of its affiliates.
DIRECTORS' APPROVAL
The contents and the sending of this Management Information Circular have
been approved by the directors of the Corporation.
DATED May 20, 2002.
-------------------------------------
Geoffrey B. Genovese
President and Chief Executive Officer
SPECIAL RESOLUTION -
Amendment to the Corporation's Articles to consolidate its Common Shares.
RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The Articles of the Corporation be amended to consolidate the issued common
shares of the Corporation on the basis of one (1) new common share for each
three (3) common shares presently issued and outstanding.
2. No fractional shares shall be issued upon the aforesaid consolidation and
in the event that the consolidation results in a shareholder otherwise
becoming entitled to a fractional common share, an adjustment shall be
made to the nearest full common share.
3. Any director or officer of the Corporation be and is hereby authorized to
file Articles of Amendment to effect the foregoing resolution with the
Director under the Business Corporations Act (Ontario) and to do all such
further acts and things necessary or desirable to carry out the terms of
the foregoing resolution.
PRIVATE PLACEMENT RESOLUTION -
Advance Shareholder Approval for the Issuance of a Number of Shares by
Private Placement That Exceeds 25% of the Corporation's Issued and
Outstanding Share Capital
RESOLVED THAT the issuance by the Corporation in one or more private
placements during the twelve-month period commencing June 27, 2002 of up to
15,000,000 common shares (up to 5,000,000 post-consolidation common shares),
being 73.43% of the number of the Corporation's issued and outstanding common
shares as at May 20, 2002, as more particularly described in and subject to
the restrictions described in the Corporation's Management Information
Circular dated May 20, 2002, is hereby approved.
ENVOY COMMUNICATIONS GROUP INC.
PROXY
SOLICITED BY THE MANAGEMENT OF THE CORPORATION
for the Special Meeting of Shareholders
This proxy is being solicited on behalf of the management of ENVOY
COMMUNICATIONS GROUP INC. (the "Corporation") in connection with the special
meeting of shareholders (the "Meeting") of the Corporation to be held on
Thursday, June 27, 2002 at 11:00 a.m. (Toronto time) and any adjournment
thereof.
The undersigned shareholder of the Corporation hereby appoints Geoffrey B.
Genovese of Toronto, Ontario or, failing him, John H. Bailey of Mississauga,
Ontario or instead of either of them ________________________ as proxy, with
power of substitution to attend, vote and otherwise act for the undersigned
at the Meeting and at any adjournment thereof as follows:
(a) VOTE FOR (________) or AGAINST (________) (or, if not specified, VOTE
FOR) the Special Resolution (the full text of which is setout in the
accompanying Management Information Circular) amending the Articles of the
Corporation to consolidate the issued common shares of the Corporation on the
basis of three existing common shares to be consolidated into one new common
share;
(b) VOTE FOR (________) or AGAINST (________) (or, if not specified, VOTE
FOR) the Private Placement Resolution (the full text of which is set out in
the accompanying Management Information Circular) relating to the issuance,
in the twelve-month period commencing June 27, 2002, of a number of common
shares by private placement that exceeds 25% of the Corporation's issued and
outstanding share capital;
and in their discretion to vote on amendments or variations to the matters
referred to above or to any other matters identified in the Notice of Meeting
or such other matters as may properly come before the Meeting including any
adjournment thereof. As at the date of the accompanying Management
Information Circular, management of the Corporation knows of no such
amendments, variations or other matters to come before the Meeting. The
undersigned hereby revokes any proxy previously given in respect of the
Meeting.
Each shareholder has the right to appoint a person (who need not be a
shareholder of the Corporation) other than the persons specified above to
attend and act on his or her behalf at the Meeting. Such right may be
exercised by inserting the name of the person to be appointed in the space
provided, or by completing another proper form of proxy.
DATED this day of , 2002
-------------- ---------------
(Signature of Shareholder)
---------------------------------------------------
(Name of Shareholder - Please Print)
-----------------------------------------
Notes:
1. An undated proxy is deemed to bear the date it was mailed on behalf of
the management of the Corporation. A proxy must be executed in writing or by
electronic signature by the shareholder or his, her or its attorney duly
authorized in writing or by electronic signature. A shareholder or a duly
authorized attorney may sign, by electronic means, a proxy or a power of
attorney authorizing the creation of a proxy, if the means of electronic
signature permits a reliable determination that the document was created or
communicated by or on behalf of the shareholder or the attorney, as the case
may be.
2. To be effective, this form of proxy or another form of proxy must be
properly executed and returned in the enclosed envelope or, if signed
electronically, transmitted by telephonic or electronic means in order that
it is received on or before 11:00 a.m. (Toronto time) on the second business
day preceding the Meeting or 48 hours (excluding Saturdays, Sundays and
holidays) before any adjournment of the Meeting.
ENVOY COMMUNICATIONS GROUP INC.
26 Duncan Street
Toronto, Ontario
M5V 2B9
Supplementary Mailing List Form
-------------------------------
Return Card
-----------
National Policy No. 41 adopted by Canadian Securities Regulators allows
an exemption to the Corporation from sending unaudited interim financial
statements to shareholders. If you wish to receive the Corporation's
unaudited interim financial statements, you must complete this form and
forward it, either with your proxy or separately, to our transfer agent:
COMPUTERSHARE TRUST COMPANY OF CANADA
100 University Avenue
11th Floor
Toronto, Ontario
M5J 2Y1
The undersigned certifies that the undersigned is the owner of securities of
Envoy Communications Group Inc. and requests that the undersigned be placed
on the supplementary mailing list of Envoy Communications Group Inc. for its
interim financial statements.
Dated
-----------------------------
Name
-------------------------------------------------------------------------
Address
----------------------------------------------------------------------
----------------------------------------------------------------------
Signature
--------------------------------------------------------------------
Name and Title of Person Signing if Different from Name Above
----------------------------------------------------------------------
CUSIP: 293986105