INFORMATION CIRCULAR
This circular is provided in connection with the solicitation by Management of New Island Resources Inc. (the "Corporation") of proxies for the Annual Meeting of Shareholders of the Corporation (the "Meeting") to be held on the 12th day of December, 2008, at 11.00 a.m. (local time) in the Columbus Suite, The Fairmont Hotel, St. John's, NL.
Management does not contemplate a solicitation of proxies otherwise than by mail. The cost thereof will be borne by the Corporation.
The persons named in the enclosed form of proxy (“Proxy”) are directors of the Corporation. A shareholder has the right to designate a person (who need not be a shareholder) other than the management designees to represent him or her at the Meeting. Such right may be exercised by striking out the names of the management designees and inserting in the space provided for that purpose the name of the person to be designated.
If this Proxy is to be utilized, it must be dated and signed by the shareholder or the shareholder's attorney authorized in writing or, if the shareholder is a corporation, under its corporate seal by an officer or attorney thereof duly authorized with proof of such authorization attached. If this Proxy is not dated in the space provided, it will be deemed to bear the date on which it was mailed. A proxy is valid only at the Meeting in respect of which it is given or any adjournment thereof if completed and delivered to CIBC Mellon Trust Company in the envelope provided, or deposited at the office of the Corporation, Suite 602 TD Place, 140 Water Street, St. John's, Newfoundland A1C 6H6 not less than 48 hours (excluding Saturdays, Sundays, and holidays) before the time for the holding of the Meeting or any adjournment thereof.
A shareholder has the power to revoke a Proxy at any time insofar as it has not been exercised. In addition to revocation in any other manner permitted by law, a Proxy may be revoked in writing executed by the shareholder or the shareholder's attorney authorized in writing, with proof of such authorization attached, and deposited either (a) at the registered office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, at which the Proxy is to be used, or (b) with the chairman of the Meeting on the day of the Meeting, or any adjournment thereof.
Common shares represented by proxy in favour of management nominees shall be voted on any ballot at the Meeting, and where the shareholder specified a choice with respect to any matter to be acted upon, the shares shall be voted on any ballot in accordance with the specification so made.
IN THE ABSENCE OF SUCH SPECIFICATION, SHARES WILL BE VOTED IN FAVOUR OF THE MATTERS TO BE ACTED UPON. THE PERSONS APPOINTED UNDER THE INSTRUMENT OF PROXY FURNISHED BY THE CORPORATION ARE CONFERRED WITH DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR VARIATIONS OF THOSE MATTERS SPECIFIED IN THE PROXY AND NOTICE OF ANNUAL AND SPECIAL MEETING. AT THE TIME OF PRINTING THIS INFORMATION CIRCULAR, MANAGEMENT OF THE CORPORATION KNOWS OF NO SUCH AMENDMENT, VARIATION OR OTHER MATTER.
ADVICE TO BENEFICIAL SHAREHOLDERS
Shareholders who do not hold their Common Shares in their own name (referred to herein as “Beneficial Shareholders”) are advised that only Proxies from shareholders of record can be recognized and voted upon at the Meeting. The Proxy supplied to Beneficial Shareholders is substantially similar to that provided to registered shareholders. However, its purpose is limited to instructing the registered shareholder (usually a brokerage house) how to vote on behalf of the Beneficial Shareholder. Every intermediary (brokerage house) has its own mailing procedure and provides its own return instructions, which should be carefully followed.
All references to shareholders in this Management Information Circular and the accompanying Proxy and Notice of Meeting are to shareholders of record unless specifically stated otherwise.
The Record Date has been set for November 7, 2008. The date for determination of the shareholders entitled to receive Notice of the Meeting or any adjournment thereof shall be as of the Record Date. Any shareholder of record as at the close of business of the transfer agent of the Corporation in Calgary, Alberta, on the Record Date, who either personally attends the Meeting or has completed and delivered a Form of Proxy in the manner and subject to the provisions set out in the heading APPOINTMENT AND REVOCATION OF PROXIES will be entitled to vote or to have his or her shares voted at the Meeting, except to the extent that a shareholder has transferred his or her shares after that day and the transferee of those shares produces proof that he or she owns the shares and demands not later than ten days before the Meeting that his or her name be included in the list before the Meeting, in which case the transferee shall be entitled to vote these shares at the Meeting.
As at the date hereof, 47,227,365 common shares without nominal or par value of the Corporation are issued and outstanding - each such share carrying the right to one vote at the Meeting.
To the knowledge of the Directors and Senior Officers of the Corporation, no person or company beneficially owns, directly or indirectly, or exercises control or direction over, voting shares carrying more than 10% of the voting rights attached to the common shares except Newfoundland Goldbar Resources Inc., of St. John's, Newfoundland, which beneficially owns 3,010,687 common shares representing 6.37% of all issued and outstanding shares of the Corporation. Atlantis Corporation Limited of St. John's, Newfoundland, together with its wholly-owned subsidiary, Atlantis Technologies Limited, holds 3,204,875 common shares representing 6.79% of all the issued and outstanding shares of the Corporation. Mr. Harold L. Wareham is a Director of Newfoundland Goldbar Resources Inc. and is Chairman and CEO of Atlantis Corporation Limited.
Management is not aware of any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, of any person who has been a director or executive officer at any time since the beginning of the last financial year, of any proposed nominee for election as a director, or of any associates or affiliates of any of these individuals, in any matter to be acted on at the Meeting.
Each Director of the Corporation is elected and holds office until the next Annual Meeting of the shareholders unless that person ceases to be a Director prior to that date. Management does not contemplate that any of the nominees will be unable to serve as a director. In the absence of instructions to the contrary, the shares represented by proxy will be voted for the nominees herein listed.
The Management nominees for the Board of Directors and information concerning them as furnished by the individual nominees are as follows:
|
Name and Address |
Office |
Principal Occupation |
Date First appointed as a Director (MM/DD/YY) |
Common Shares Beneficially Owned as of Record date |
|
Eric K. Jerrett(1) Bay Roberts, NL |
|
Past President of E.K. Jerrett & Associates Ltd. - retired |
07/03/94 |
112,500 |
|
Harold L. Wareham St. John’s, NL |
-- |
Chairman & CEO of Atlantis Corporation Limited |
11/11/91 |
180,039 |
|
James P. O’Reilly(1) St. Catharines, ON |
-- |
President, Baumgartl & Associates Limited |
12/14/05 |
20,000 |
|
Leo P. Power St. John’s, NL |
-- |
Businessman |
01/02/07 |
50,000 |
|
Samuel Walters(1) St. John’s, NL |
-- |
Retired VP Royal Bank of Canada |
12/14/07 |
240,000 |
(1)Member of Audit Committee
All of the proposed nominees for Directors are ordinarily resident in Canada.
Definitions: For the purpose of this Information Circular:
“Chief Executive Officer” or “CEO” of the company means an individual who served as chief executive officer of the Company or acted in a similar capacity during the most recently completed financial year;
“Chief Financial Officer” or “CFO” of the company means an individual who served as chief financial officer of the Company or acted in a similar capacity during the most recently completed financial year;
“Named Executive Officer” or “NEO” means any of the following individuals:
a) each CEO;
b) each CFO;
c) each of the Company’s three most highly compensated executive officers, other than the CEO and CFO, who were serving as executive officers at the end of the most recently completed financial year, and whose total compensation exceeded $150,000;
d) any other individuals for whom disclosure would have been provided under (c) above, except that the individual was not serving as an officer of the Company at the end of the most recently completed financial year.
“Long Term Incentive Plan” or “LTIP” means any plan providing compensation intended to motivate performance over a period greater than one financial year. LTIPs do not include option or SAR plans or plans for compensation through shares or units that are subject to restrictions on resale.
“Options” includes all options, share purchase warrants and rights granted by a company or its subsidiaries as compensation for employment services or office.
“Stock Appreciation Right” or “SAR” means a right to receive cash or an issue or transfer of securities based wholly or in part on changes in the trading price of publicly traded securities.
Compensation of Named Executive Officers
The Corporation had two Named Executive Officers during the fiscal year ended June 30, 2008, namely Harold L. Wareham and Lisa D. Hodge. The following table contains information relating to the compensation paid to the Named Executive Officers. None of the other executive officers received a salary and bonus exceeding $150,000 during the fiscal year ended June 30, 2008.
Summary Compensation Table – Named Executive Officers
|
Name and Principal Position |
Year |
Annual Compensation |
Long Term Compensation |
All Other Compen- sation ($) |
||||
|
Salary ($) |
Bonus ($) |
Other Annual Compen-sation ($) |
Awards |
Payouts |
||||
|
Securities Under Options/ SARs Granted (#) |
Restricted Shares Or Share Units ($) |
LTIP Payouts ($) |
||||||
|
Harold Wareham President & CEO |
2008 2007 2006 |
105,000 50,000 Nil |
20,000 Nil Nil |
Nil Nil Nil |
Nil Nil 500,000 |
Nil Nil Nil |
Nil Nil Nil |
Nil Nil Nil |
|
Lisa Hodge CFO |
2008 2007 2006 |
55,000 25,000 Nil |
5,000 Nil Nil |
Nil Nil Nil |
Nil 75,000 25,000 |
Nil Nil Nil |
Nil Nil Nil |
Nil Nil Nil |
Long Term Incentive Plan
The Corporation does not have a long term incentive plan for the Named Executive Officers.
Options and SARs
Options/SAR Grants During the Most Recently Completed Financial Year
The following options were granted to the Named Executive Officers during the most recently completed financial year pursuant to the Corporation’s Stock Option Plan.
|
Named Executive Officer Name |
Securities under Options/SARs Granted (#) |
% of Total Options/SARs Granted to Employees in Financial Year |
Exercise or Base Price ($/Security) |
Market Value of Securities Underlying Options/SARs on the Date of Grant ($/Security) |
Expiration Date (MM/DD/YY) |
|
Harold L. Wareham CEO |
200,000 |
15.4% |
$0.13 |
$0.17 |
12/14/2012 |
|
Lisa D. Hodge CFO |
50,000 |
3.85% |
$0.13 |
$0.17 |
12/14/2012 |
No options were exercised by the Named Executive Officers during the most recently completed financial year.
Termination of employment, change in responsibility and employment contracts
Employment contracts are in place with respect to the services of the Named Executive Officers and the Corporate Secretary. In the event of a change of control or change of head office outside the Province of Newfoundland, within a two year period of such change, the CEO may elect to receive a payment of three times annual salary and the CFO and Corporate Secretary may elect to receive a payment of two times annual salary.
Compensation of directors
The Corporation pays an annual retainer to each director of $5,000, paid quarterly, as well as a fee for meeting attendance. The following amounts were paid to directors during the fiscal year ended June 30, 2008.
|
Name of Director |
Annual Retainer Paid $ |
Meeting Fees Paid $ |
|
Eric K. Jerrett |
3,750 |
2,000 |
|
Harold L. Wareham |
3,750 |
1,500 |
|
James P. O’Reilly |
3,750 |
3,500 |
|
Leo P. Power |
3,750 |
1,500 |
|
Samuel Walters |
2,500 |
2,000 |
|
William Warren |
1,250 |
1,000 |
(1) William Warren ceased to be a director on December 14, 2007
The directors are also reimbursed for expenses incurred in carrying out their duties as directors and are granted incentive stock options pursuant to the Corporation’s Stock Option Plan. During the year ended June 30, 2008 the following stock options were granted to non-employee directors of the Corporation: Eric Jerrett – 200,000 options; James O’Reilly – 200,000 options; Samuel Walters – 200,000 options and Leo Power – 200,000 options. Stock options were also granted to the following Advisory Board members: Baxter Kean – 100,000 options; Stephen Piercey – 100,000 options.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Equity Compensation Plan Information
The Stock Option Plan is the only equity compensation plan adopted by the Corporation. The following table sets out information with respect to the options outstanding under the Plan as at June 30, 2008, the Corporation’s most recently completed financial year.
|
Plan Category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans |
|
Stock Option Plan approved by security holders |
3,525,000 |
$0.18 |
1,197,737 |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As of October 7, 2008, the aggregate indebtedness to the Corporation and its subsidiaries of all officers, directors, and employees and former executive officers, directors and employees was nil.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Mr. Harold Wareham is President and controlling shareholder of Atlantis Corporation Limited. During the year ended June 30, 2008, the Corporation paid an aggregate of $48,000 to Atlantis Corporation Limited for rent, accounting, secretarial and administrative services.
Shareholders will be asked to approve the appointment of Deloitte & Touche LLP as Auditors of the Corporation for the ensuing year at remuneration to be set by the Directors.
CORPORATE GOVERNANCE
The following is the disclosure required by Form 58-101F2 of National Instrument 58-101 Disclosure of Corporate Governance Practices.
Board of Directors
The Board of Directors presently has five members, four of whom are independent. The definition of independence used by the Company is that used by the Canadian Securities Administrators as set out in section 1.4 of Multilateral Instrument 52-110 Audit Committees (“MI 52-110”). A director is “independent” if he has no direct or indirect material relationship with the Company. A “material relationship” is a relationship which could, in the view of the Board of Directors, be reasonably expected to interfere with the exercise of the directors’ independent judgement. Criteria for determining material relationships are outlined in section 1.4 of MI 52-110.
Eric Jerrett, James O’Reilly, Leo Power and Samuel Walters are considered to be independent directors. Harold Wareham is not considered to be independent as he is management of the Company.
The Board believes that the principal objective of the Company is to generate economic returns with the goal of maximizing shareholder value, and that this is to be accomplished by the Board through the stewardship of the Company. In fulfilling its stewardship function, the Board’s responsibilities will include strategic planning, appointing and overseeing management, risk identification and management, environmental oversight, overseeing financial and corporate issues. Directors are involved in the supervision of management.
Other Directorships
The following directors of the Company are also directors of other reporting issuers:
|
Current Director/Nominee |
Directorships of Other Reporting Issuers |
|
Eric Jerrett |
Newfoundland Goldbar Resources Inc. |
|
Harold Wareham |
Newfoundland Goldbar Resources Inc. |
|
Leo Power |
Crosshair Exploration & Mining Corp. Newfoundland Goldbar Resources Inc. |
Orientation and Continuing Education
New Directors of the Company are provided with pertinent information about the Company including written information about the duties and obligations of directors, the business and operations of the Company and documents from recent Board meetings. Specific details of the orientation of each new director are tailored to that individual’s needs and areas of interest.
The Company also provides continuing education to directors by way of management presentations to ensure that their knowledge and understanding of the Company’s business remains current. The Company’s financial and legal advisers are also available to the Company’s directors.
Ethical Business Conduct
The Company has adopted a Corporate Code of Conduct (the “Code”), which is intended to document the principles of conduct and ethics to be followed by the Company’s directors, officers and employees. The purpose of the Code is to:
§ Promote integrity and deter wrongdoing
§ Promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest.
§ Promote avoidance of absence of conflicts of interest.
§ Promote full, fair, accurate, timely and understandable disclosure in public communications made by the Company.
§ Promote compliance with applicable governmental laws, rules and regulations.
§ Promote a safe and healthy work environment
§ Promote equal opportunity employment and deter discrimination
§ Promote and provide a mechanism for the prompt, internal reporting of departures from the Code
§ Promote accountability for adherence to the Code
§ Provide guidance to the Company’s directors, officers and employees to help them recognize and deal with ethical issues
§ To help foster a culture of integrity, honesty and accountability throughout the Company.
A copy of the Code of Conduct is available from the Company’s offices. In the Board’s regular meetings, the Board considers the Company’s operations and business activities in light of the Code of Conduct. The Board expects management to operate the business of the Company in a manner that enhances shareholder value and is consistent with the highest level of integrity.
Nomination of Directors
The Company does not have a formal process or committee for proposing new nominees for election to the Board of Directors. The nominees are generally the result of recruitment efforts by the Board members, including both formal and informal discussions among Board members.
Compensation
The Company does not have a compensation committee. Compensation to directors and officers of the Company are approved by the Board of Directors.
Other Board Committees
Standing committees of the Board are the Corporate Governance Committee and the Audit Committee.
Assessments
There is no formal committee with the responsibility for assessing the effectiveness of the Board, its committees or individual directors. Board members are subject to the terms disclosed in the Corporate Code of Conduct and the Charter of the Board of Directors.
AUDIT COMMITTEE
The following is disclosure required by Form 52-110F2 of MI 52-110.
General
The Audit Committee is a committee of the Board, the primary function of which is to assist the Board in fulfilling its financial oversight responsibilities, which will include monitoring the quality and integrity of the Company’s financial statements and the independence and performance of the Company’s external auditor, acting as liaison between the Board and the Company’s external auditor, reviewing the financial information that will be publicly disclosed and reviewing all audit processes and the systems of internal controls management and the Board have established.
Audit Committee Charter
The Board has adopted an Audit Committee Charter, which sets out the Audit Committee’s mandate and responsibilities. The Audit Committee’s Charter is attached to this Information Circular as Appendix “A”.
Composition
The Audit Committee consists of the following directors:
|
Name of Member |
Independent (1) |
Financially Literate (2) |
|
Eric Jerrett |
Yes |
Yes |
|
James O’Reilly |
Yes |
Yes |
|
Samuel Walters |
Yes |
Yes |
Notes
(1) As per MI 52-110, “Independent” means that the member has no direct or indirect material relationship with the issuer.
(2) As per MI 52-110, “Financially Literate” means that the member is able to read and understand financial statements and the associated accounting issues relevant to the issuer.
Audit Committee Oversight
Since the commencement of the Company’s most recently completed financial year, there have been no recommendations of the Audit Committee to nominate or compensate an external auditor which was not adopted by the Board.
Reliance on Certain Exemptions
Since the commencement of the Company’s most recently completed financial year, the Company has not relied on the exemption in section 2.4 (De Minimis Non-audit Services) of MI 52-110 or an exemption from MI 52-110, in whole or in part, granted under Part 8 (Exemptions) of MI 52-110.
Pre-Approval Policies and Procedures
The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services, however, as provided for in MI 52-110 the Audit Committee must pre-approve all non-audit services to be provided to the Company or its subsidiaries, unless otherwise permitted by MI 52-110.
External Auditor Service Fees (By Category)
|
Financial Year Ending |
Audit Fees (1) |
Audit Related Fees (2) |
Tax Fees (3) |
All Other Fees (4) |
|
June 30, 2008 |
$33,900 |
20,900 |
0 |
0 |
|
June 30, 2007 |
$32,500 |
$7,900 |
0 |
$1,750 |
Notes:
(1) The aggregate fees billed by the Company’s auditor for audit fees
(2) The aggregate fees billed for assurance and related services by the Company’s auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not disclosed in the ‘Audit Fees’ column.
(3) The aggregate fee billed for professional services rendered by the Company’s auditor for tax compliance, tax advice and tax planning.
(4) The aggregate fees billed for professional services other that those listed in the other three columns.
Exemption
Pursuant to section 6.1 of MI 52-110, the Company is exempt from the requirements of Part 3 Composition of the Audit Committee and Part 5 Reporting Obligations of MI 52-110 because it is a venture issuer.
Pursuant to Policy 4.4 of the TSX Venture Exchange (the “Policy”), Corporations that have a rolling stock option plan reserving a maximum of 10% of the issued and outstanding shares of the Corporation must receive yearly shareholder approval of the Stock Option Plan (the “Plan”). Accordingly, shareholders are being requested to approve the Plan, attached as Appendix “B”, and authorize the Board of Directors to grant options in the capital stock of the Corporation pursuant to and in accordance with the provisions of the Plan.
OTHER MATTERS
Management knows of no other matters to come before the meeting of shareholders 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 judgement of the persons voting the shares presented by the proxy.
ADDITIONAL INFORMATION
Additional information relating to the Corporation is available on SEDAR at www.sedar.com. To request copies of the Corporation’s financial statements and MD&A, shareholders may send their request in writing to New Island Resources Inc., Suite 602 TD Place, 140 Water Street, St. John’s, NL A1C 6H6, or by telephone at 709-576-7711, fax 709-576-2236. Financial information is provided in the Corporation’s comparative financial statements and MD&A for its most recently completed financial year.
EFFECTIVE DATE
Unless otherwise stated, information contained herein is given as of the 7h day of November, 2008.
CERTIFICATE
The contents of and the sending of this Information Circular have been approved by the Directors of the Corporation.
The foregoing contains no untrue statements of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made.
Dated as of the 7th day of November 2008.
“Harold L. Wareham”
Harold L. Wareham
Appendix “A”
NEW ISLAND RESOURCES INC.
This Charter establishes the responsibilities of the Audit Committee (“Committee”) of the Board of Directors (“Board”) of New Island Resources Inc. (“New Island”). The Committee’s primary responsibility is for the oversight, integrity and fair presentation of New Island’s financial reporting. This responsibility includes the monitoring of New Island’s systems of internal controls, risk and risk management policies and the quality and integrity of all financial and public disclosure documents. The Committee is also responsible to act as liaison between the Board and the external auditor as well as reporting on the independence and performance of the external auditor.
The Committee shall consist of a minimum of two members, all of whom shall be directors of the Company and meet the requirements for independence as defined in Multilateral Instrument 52-110 Audit Committees. Members of the Committee and the Chair of the Audit Committee will be appointed by the Board for a one-year term and may serve any number of consecutive terms
Committee members must meet the criteria for being financially literate which is defined as having the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
The Committee will have the authority, independent of the Board and management, to retain counsel, advisors or consultants as required in the course of discharging its duties. The Committee will have unrestricted access to the Company’s records, full cooperation of its employees and will communicate directly with the Company’s external auditor.
The Committee will meet no less than 4 times per year, at least once during each quarter and additional meetings will be called if deemed necessary. Members of the Committee may attend meetings by conference call. The CEO, CFO, and other directors or officers, may be invited to attend and participate in meetings at the discretion of the Committee. Minutes of the meetings will be recorded to accurately reflect the business of the meeting and will detail any decisions reached. Copies of the minutes will be available to the Board, CEO, CFO and external auditors.
Ø Review this charter on an annual basis and when deemed necessary, make recommendations to the Board to modify it.
Ø Maintain free and open communications between directors, officers, management and the external auditors of the Company.
Ø Assess managements systems of internal control and obtain reasonable assurance that such systems are reliable and operating effectively for the Company. This will include testing of controls and review of same with management and the external auditor.
Ø Review and assess any proposed changes in major accounting policies or controls.
Ø Review any significant matters identified during audits or quarterly reviews.
Ø Establish procedures for the receipt and treatment of complaints received regarding accounting, internal controls, or auditing matters and also for the confidential, anonymous submission by employees of concerns regarding questionable accounting matters.
Ø Review and assess the Company’s financial risk exposures and the processes in place for the management and control of those risks.
Ø Review and approve for presentation to the Board and dissemination to the public, all material financial information required to be disclosed according to securities laws and stock exchange regulations. This will include all quarterly and annual financial statements, management discussion and analysis, news releases or any other document containing information extracted from the financial statements.
Ø Review the Company’s financial reporting procedures and internal controls to ensure adequate procedures are in place for the review of the Company’s disclosure of financial information extracted or derived from its financial statements, other than the disclosure described in the previous paragraph and must periodically assess the adequacy of those procedures.
The external auditor must report directly to the Audit Committee. The Audit Committee is responsible for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditors report or performing other audit, review or attest services, including resolution of disagreements with management and the external auditor regarding financial reporting.
Duties of the Audit Committee concerning its relationship with the external auditor include:
Ø Review and discussion with the external auditor of any relationships or services that may affect the objectivity or independence of the external auditor and obtaining a written notice from the external auditor each year confirming their independence.
Ø Establishing that the external auditor must report directly to the Audit Committee and meeting with the external auditor, independent of management, on a regular basis.
Ø Recommending to the Board that the external auditor be nominated for the purpose of issuing an auditors report or performing other audit or review services.
Ø Recommending to the Board the compensation for the external auditor
Ø Pre-approving all non-audit services to be provided by the external auditor, together with estimated fees. Non-audit services include but are not limited to: bookkeeping related to the Company’s accounting records or financial statements, financial information systems design and implementation, appraisal or valuation services, fairness opinions, management functions, human resources, legal services, tax planning and consulting. The Committee may delegate the authority for pre-approval of non-audit services to one or more of its independent directors but delegation may not be made to management. The pre-approval of any non-audit service by a designated independent committee member must be presented to the Audit Committee at its first scheduled meeting following the pre-approval.
Ø Reviewing with the external auditor and if necessary, legal counsel, any matters that would have a material effect upon the financial position of the Company and the manner in which they are disclosed in the financial statements.
Procedure for receipt of Complaints and Submissions Relating to Accounting Matters
Any director, officer or employee who has any concern or complaint regarding accounting, internal accounting controls, questionable auditing or accounting matters or potential violations of law may make an anonymous submission to any member of the Audit Committee. All complaints or submissions, as well as the identity of the complainant will be kept confidential and a record of any complaints or submission will be kept for five years. The Audit Committee, upon receipt of a submission or complaint will discuss the matters presented and take any action that the Audit Committee might deem appropriate.
Limitation on the Oversight Role of the Audit Committee
Nothing in this Charter is intended, or may be construed, to impose on any member of the Committee a standard of care or diligence that is in any way more onerous or extensive than the standard to which all members of the Board are subject.
Each member of the Committee shall be entitled, to the fullest extent permitted by law, to rely on the integrity of those persons and organizations within and outside the Corporation from whom he or she receives financial and other information, and the accuracy of the information provided to the Corporation by such persons or organizations.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Corporation’s financial statements and disclosures are complete and accurate and in accordance with generally accepted accounting principles in Canada and applicable rules and regulations. These are the responsibility of management and the external auditors.
Appendix “B”
NEW ISLAND RESOURCES INC.
STOCK OPTION PLAN
1. Purpose of Plan
The purpose of this plan (the "Plan") is to develop the interest of bona fide Officers, Directors, Employees, Management Company Employees, and Consultants of New Island Resources Inc. and its subsidiaries (collectively, the "Corporation") in the growth and development of the Corporation by providing them with the opportunity through stock options to acquire an increased proprietary interest in the Corporation.
2. Administration
The Plan shall be administered by the Board of Directors of the Corporation, or if appointed, by a special committee of Directors appointed from time to time by the Board of Directors of the Corporation (such committee, or if no such committee is appointed, the Board of Directors of the Corporation, is hereinafter referred to as the "Committee") pursuant to rules of procedure fixed by the Board of Directors.
3. Granting of Options
The Committee may from time to time designate bona fide Directors, Officers, Employees, Management Company Employees and Consultants of the Corporation (or in each case their personal holding companies) (collectively, the "Optionees"), to whom options ("Options") to purchase common shares ("Common Shares") of the Corporation may be granted, and the number of Common Shares to be optioned to each, provided that:
(a) the total number of Common Shares issuable pursuant to the Plan shall not exceed 10% of the issued and outstanding Common Shares, subject to adjustment as set forth herein, and further subject to the applicable rules and regulations of all regulatory authorities to which the Corporation is subject, including the TSX Venture Exchange (the "Exchange");
(b) the number of Common Shares reserved for issuance, within a one-year period, to any one Optionee shall not exceed 5% of the Outstanding Common Shares;
(c) the number of Common Shares reserved for issuance, within a one-year period, to any one Consultant of the Corporation may not exceed 2% of the Outstanding Common Shares;
(d) the aggregate number of Common Shares reserved for issuance, within a one-year period, to Employees or Consultants conducting Investor Relations Activities may not exceed 2% of the Outstanding Common Shares; and
(e) unless the Plan has been approved by the shareholders of the Corporation at a meeting thereof by a majority of the votes cast at the meeting, other than votes attaching to securities beneficially owned by Insiders of the Corporation to whom Common Shares may be issued pursuant to the Plan, and Associates of any such Insiders:
(i) the maximum number of Common Shares reserved for issuance pursuant to Options granted to Insiders at any time may not exceed 10% of the number of Outstanding Common Shares;
(ii) the maximum number of Common Shares which may be issued to Insiders, within a one-year period, may not exceed 10% of the number of Outstanding Common Shares; and
(iii) the maximum number of Common Shares which may be issued to any one Insider and the Associates of such Insider, within a one-year period, may not exceed 5% of the number of Outstanding Common Shares;
provided that for the purposes of paragraphs (i), (ii), and (iii) above, an entitlement granted prior to the grantee becoming an Insider may be excluded in determining the number of Common Shares issuable to Insiders.
4. Vesting
The Committee may, in its sole discretion, determine the time during which Options shall vest and the method of vesting.
5. Exercise Price
The exercise price of any Option shall be fixed by the Committee when such Option is granted, provided that such price shall not be less than the Discounted Market Price of the Common Shares, or such other price as may be determined under the applicable rules and regulations of all regulatory authorities to which the Corporation is subject, including the Exchange.
In the event that the Corporation proposes to reduce the exercise price of Options granted to an Optionee who is an Insider of the Corporation at the time of the proposed amendment, said amendment shall not be effective until disinterested shareholder approval has been obtained in respect of the exercise price reduction.
6. Option Terms
The period during which an Option is exercisable shall, subject to the provisions of the Plan requiring acceleration of rights of exercise, be such period as may be determined by the Committee at the time of grant, but in no event shall any Option be exercisable more than 5 years from the date of the grant. Each Option shall, among other things, contain provisions to the effect that the Option shall be personal to the Optionee and shall not be assignable or transferable. In addition, each Option shall provide that:
(a) upon the death of the Optionee, the Option shall terminate on the date determined by the Committee, which date shall not be later than the earlier of the expiry date of the Option and one year from the date of death (the "Termination Date");
(b) if the Optionee shall no longer be a Director or Officer of, be in the employ of, or be providing ongoing management or consulting services to the Corporation, the Option shall terminate on the earlier of the expiry date of the Option and the expiry of the period (the "Termination Date"), not in excess of 90 days prescribed by the Committee at the time of grant, following the date that the Optionee ceases to be a Director, Officer or Employee of the Corporation, or ceases to provide ongoing management or consulting services to the Corporation, as the case may be; and
(c) if the Option is granted to an Optionee who is engaged in Investor Relations Activities on behalf of the Corporation, the Option shall terminate on the earlier of the expiry date of the Option and the expiry of the period (the "Termination Date"), not in excess of 30 days prescribed by the Committee at the time of grant, following the date that the Optionee ceases to provide ongoing Investor Relations Activities;
provided that the number of Common Shares that the Optionee (or his heirs or successors) shall be entitled to purchase until the Termination Date shall be the number of Common Shares which the Optionee was entitled to purchase on the date of death or the date the Optionee ceased to be an Officer, Director or Employee of, or ceased providing ongoing management or consulting services to, the Corporation, as the case may be.
7. Exercise of Option
Subject to the provisions of the Plan, an Option may be exercised from time to time by delivery to the Corporation at its head office, or such other place as may be specified by the Corporation, of a written notice of exercise specifying the number of Common Shares with respect to which the Option is being exercised and accompanied by payment in full of the purchase price of the Common Shares then being purchased.
8. Mergers, Amalgamation and Sale
If the Corporation shall become merged (whether by plan of arrangement or otherwise) or amalgamated within or with another corporation or shall sell the whole or substantially the whole of its assets and undertakings for shares or securities of another corporation, the Corporation shall, subject to this Section 8, make provision that, upon exercise of an Option during its unexpired period after the effective date of such merger, amalgamation or sale, the Optionee shall receive such number of shares of the continuing successor corporation in such merger or amalgamation or the securities or shares of the purchasing corporation as the Optionee would have received as a result of such merger, amalgamation or sale if the Optionee had purchased the shares of the Corporation immediately prior thereto for the same consideration paid on the exercise of the Option and had held such shares on the effective date of such merger, amalgamation or sale and, upon such provision being made, the obligation of the Corporation to the Optionee in respect of the Common Shares subject to the Option shall terminate and be at an end and the Optionee shall cease to have any further rights in respect thereof.
9. Termination of Option in the Event of Take-Over Bid
In the event a take-over bid (as defined in the Securities Act (Alberta), which is not exempt from the take-over bid requirements of Part 13 (132(1) of the Securities Act (Alberta) (or its replacement or successor provisions) shall be made for the Common Shares of the Corporation, the Corporation may in the agreement providing for the grant of Options herein provide that the Corporation may require the disposition by the Optionee and the termination of any obligations of the Corporation to the Optionee in respect of any Options granted by paying to the Optionee in cash the difference between the exercise price of unexercised Options and the fair market value of the securities to which the Optionee would have been entitled upon exercise of the unexercised Options on such date, which determination of fair market value shall be conclusively made by the Committee, subject to approval by the stock exchanges upon which the Common Shares are then listed, if required by such exchanges. Upon payment as aforesaid, the Options shall terminate and be at an end and the Optionee shall cease to have any further rights in respect thereof.
10. Alterations in Shares
Appropriate adjustments in the number of Common Shares optioned and in the Exercise Price, as regards Options granted or to be granted, may be made by the Committee in its discretion to give effect to adjustments in the number of Common Shares of the Corporation resulting subsequent to the approval of the Plan by the Committee from subdivisions, consolidations or reclassifications of the Common Shares of the Corporation, the payment of stock dividends by the Corporation, or other relevant changes in the capital of the Corporation.
11. Option Agreements
A written agreement will be entered into between the Corporation and each Optionee to whom an Option is granted hereunder, which agreement will set out the number of Common Shares subject to Option, the exercise price, provisions as to vesting and expiry, and any other terms approved by the Committee, all in accordance with the provisions of this Plan. The agreement will be in such form as the Committee may from time to time approve, or authorize the officers of the Corporation to enter into, and may contain such terms as may be considered necessary in order that the Option will comply with this Plan, any provisions respecting Options in the income tax or other laws in force in any country or jurisdiction of which the person to whom the Option is granted may from time to time be a resident or citizen, and the rules of any regulatory body having jurisdiction over the Corporation.
12. Regulatory Authorities Approvals
The Plan shall be subject to the approval, if required, of any stock exchange on which the Common Shares are listed for trading. Any Options granted prior to such approval shall be conditional upon such approval being given, and no such Options may be exercised unless such approval, if required, is given.
13. Amendment or Discontinuance of the Plan
The Committee may amend or discontinue the Plan at any time, provided that no such amendment may, without the consent of the Optionee, alter or impair any Option previously granted to an Optionee under the Plan, and provided further that any amendment to the Plan will require the prior consent of the Exchange, or such other or additional stock exchange on which the Common Shares are listed for trading.
14. Common Shares Duly Issued
Common Shares issued upon the exercise of an Option granted hereunder will be validly issued and allotted as fully paid and non-assessable upon receipt by the Corporation of the Exercise Price therefor in accordance with the terms of the Option, and the issuance of Common
Shares thereunder will not require a resolution or approval of the Board of Directors of the Corporation.
15. Definitions
(a) In this Plan, capitalized terms used herein that are not otherwise defined herein shall have the meaning ascribed thereto in the Corporate Finance Manual of the Exchange, and in particular, in policies 1.1 and 4.4 of said Corporate Finance Manual.
(b) "Outstanding Common Shares" at the time of any share issuance or grant of Options means the number of Common Shares that are outstanding immediately prior to the share issuance or grant of Options in question on a non-diluted basis, or such other number as may be determined under the applicable rules and regulations of all regulatory authorities to which the Corporation is subject, including the Exchange.
16. Effective Date
This Plan is effective from December 18, 2003.