1998 Proxy:
This proxy is solicited by the management of PYNG TECHNOLOGIES CORP. (the "Company") for the Annual General Meeting of its shareholders (the "Meeting") to be held on January 27, 1998.
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5. Amendment to Escrow Agreement
Vote FOR 9 AGAINST 10 the ordinary resolution that Section 8(c) of the Escrow Agreement dated for reference July 15, 1992 by and among CIBC Mellon Trust Company (the "Escrow Agent"), the Company, Michael W. Jacobs and Susan Winkler (the "Escrow Agreement") be amended by extending the date by which the shares which are the subject of the Escrow Agreement are to be cancelled from 10 years from the date of the receipt issued by the British Columbia Securities Commission for the Company's first prospectus (which date was May 10, 1988) to not more than 15 years from the date of the receipt issued by the British Columbia Securities Commission for the Company's first prospectus.
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INFORMATION CIRCULAR
THIS INFORMATION CIRCULAR CONTAINS INFORMATION AS AT DECEMBER 15, 1997.
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Amendment to Escrow Agreement
Of the 7,677,856 Common shares issued and outstanding as of November 14, 1997, 3,750,000 Common shares are currently held in escrow pursuant to the terms of an Escrow Agreement dated for reference July 15, 1992 and made among CIBC Mellon Trust Company (the "Escrow Agent"), the Company, Michael W. Jacobs ("Jacobs") and Susan Winkler ("Winkler")(the "Escrow Agreement"). Of the 3,750,000 shares held in escrow (the "Escrow Shares"), 3,550,000 Escrow Shares are owned by Jacobs and 200,000 are owned by Winkler. Jacobs is President and Chief Executive Officer of the Company, its subsidiary Pyng Medical Corp. and its subsidiary Canadian Custom Profiles Ltd. ("CCPL"). Winkler is a director of CCPL. Under the provisions of the Escrow Agreement, all Escrow Shares are subject to cancellation on May 10, 1998, being 10 years from the date of the receipt issued by the British Columbia Securities Commission for the Company's first prospectus. The Escrow Agreement is in the form adopted by the British Columbia Securities Commission in 1989. This form was approved by the shareholders of the Company on December 17, 1992.
The Escrow Shares were originally held pursuant two separate escrow agreements, one entered into on September 30, 1987 (the "Escrow Agreement - Property Shares") and one entered into on November 28, 1987 (the "Escrow Agreement - Principal Shares"). Transfers within escrow have taken place from time to time since the dates the Escrow Agreement - Property Shares and Escrow Agreement - Principal Shares (collectively the "Old Escrow Agreements") were entered into, but the current escrow position is as stated above.
The Company's initial public offering in 1988 raised capital for its wholly?owned subsidiary CCPL which carries on the business of extrusion manufacturing. This is a process whereby a soft malleable material is forced through a die yielding a continuous string of the product in the shape of a die. The end product is used in the construction and building trades industry. CCPL has been operating as a wholly?owned subsidiary of the Company since 1986 on a financially break even basis. 3,000,000 of the Escrow Shares were issued in consideration for the acquisition by the Company of CCPL, under the terms of the Escrow Agreement - Property Shares. 750,000 Escrow Shares were issued for $0.01 per share under the terms of the Escrow Agreement - Principal Shares. All of the Escrow Shares are now held pursuant to the terms of the Escrow Agreement entered into on July 15, 1992.
Under the terms of the Escrow Agreement, all 3,750,000 Escrow Shares will be cancelled on May 10, 1998 unless the term of the escrow is extended. Shareholders are being asked to pass the following resolution:
Resolved as an ordinary resolution that Section 8(c) of the Escrow Agreement dated for reference July 15, 1992 by and among CIBC Mellon Trust Company (the "Escrow Agent"), the Company, Michael W. Jacobs and Susan Winkler (the "Escrow Agreement") be amended by extending the date by which the shares which are the subject of the Escrow Agreement are to be cancelled from 10 years from the date of the receipt issued by the British Columbia Securities Commission for the Company's first prospectus (which date was May 10, 1988) to not more than 15 years from the date of the receipt issued by the British Columbia Securities Commission for the Company's first prospectus.
Both the Vancouver Stock Exchange ("VSE") and the British Columbia Securities Commission ("BCSC") have stated in writing that they have no objection to amending the Escrow Agreement as long as the amendment is approved by the "disinterested shareholders".
The disinterested shareholders are those other than:
A. Jacobs and Winkler;
B. the Company itself;
C. any person or company acting jointly or in concert with Jacobs and/or Winkler;
D. any affiliate of Jacobs and/or Winkler.
The Escrow Shares cannot be transferred or sold without the consent of the Vancouver Stock Exchange until they have been released from escrow. The Escrow Agreement provides that for each $2.66 in cash flow, one share will be released from escrow. The Company has, since 1992, devoted most of its assets and energies towards the development of the Intraosseous Infusion Technology (the "Technology"), and its cash flow has been insufficient to permit a release of any of the Escrow Shares. The Company will need to generate a cash flow of $9,975,000 in order for all of the Escrow Shares to be released from escrow. Cash flow, as defined in the Escrow Agreement, means net income or loss before tax, adjusted to add back the following expenses:
(a) depreciation,
(b) amortization of goodwill and deferred research and development costs, excluding general and administrative costs,
(c) expensed research and development costs, excluding general and administrative costs, and
(d) any other amounts permitted or required by the Executive Director.
The purpose of escrowed shares is to provide principals of British Columbia reporting issuers with a measure of control to facilitate the development of those companies in an orderly fashion, to provide an incentive for them to diligently support the affairs of those companies and to provide an incentive to the principals to contribute management services or fundamental assets to those companies.
Sales of the Company's F.A.S.T.1TM Intraosseous Infusion System (the "System") are anticipated to begin within the next twelve months. The Company's subsidiary, Pyng Medical Corp. ("Pyng Medical") through which the Technology has been developed, has received both FDA and Canadian Health Protection Branch approval to market the System in North America as well as countries that recognize the FDA as the governing regulatory body.
Pyng Medical will start the System marketing process by going to full field trials in selected sites in Canada and the USA. The B.C. Science council has awarded Pyng Medical a $100,000 grant to perform field trials at St. Paul's Hospital, Royal Columbian Hospital and by the B.C. Ambulance Service. The University of Maryland Medical Center in Baltimore agreed to be the lead on all USA field trials. Participating with the University of Maryland Medical Center will reduce the managerial burden of cultivating and interacting with many field trial sites independently and of dealing with a variety of ethical approvals, protocols and objectives. The validity of a multi-center trial is significantly higher because the protocol and procedures are the same at each site. This will give field trials more credibility in the medical and paramedical world and lead to a faster penetration of the market. Further, many other sites where Pyng Medical would like to see the System used will more readily agree now that the University of Maryland Medical Center has agreed to be the leader and coordinator of USA field trials.
Pyng Medical expects that it will take between 3 to 5 months to complete the field trials, correlate the data, and review the results for publication. After the trials are completed, the System will be sold and delivered to paramedic units and emergency hospitals in the military and civilian markets.
There will be a requirement to raise capital to go into production but the Company has already had discussions with several medical corporations which have expressed an interest in the product and investment as well as in sub-contracting production.
In the event that the shareholders fail to approve the proposed amendment to the Escrow Agreement the Escrow Shares will be cancelled on May 10, 1998, the result being that the number of shares outstanding will be reduced from 7,677,856 to 3,927,856. This will have the effect of increasing each shareholder's proportionate interest in the Company; however, it will also have the effect of eliminating Jacobs' incentive to continue to work towards commercialization of the System and his losing control of the Company. Since 1993 the Technology has been enhanced, new stand?alone patents in connection with the technology have been developed and created and both FDA and Canadian Health Protection Board approval to market the System has been obtained. These accomplishments were achieved under the direction of Jacobs. Jacobs has, over the course of the last five years, developed patents compatible with or for use in connection with the Technology and has vended those patents into Pyng Medical for no consideration. Through Pyng Medical, the Company has expended approximately $2 million in research and development of the Technology.
Since 1988, Jacobs has not received any direct compensation from the Company other than options, reimbursement for out-of-pocket expenses and the Escrow Shares.
The directors of the Company recommend that you vote in favour of the resolution. If the resolution is passed, Jacobs will retain the incentive to cause the Company to generate cash flow for the benefit of all shareholders. If the resolution is not passed, the result will likely be the loss of the Company's key senior executive and a consequent delay in bringing the System to market.
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