Prospectus (unformatted tables ) Part 11
The following table sets forth information concerning the exercise of options during the financial year ended March 31, 1997, and the value at March 31, 1997 of unexercised in-the-money options held by the executive officers of the Corporation:
Name SecuritiesAcquiredon Exercise(#) Aggregate ValueRealized($) UnexercisedOptions atFinancialYear-End(#)Exercisable/Unexercisable Value ofUnexercisedin-the-MoneyOptions atFinancial Year-End($)Exercisable/Unexercisable(1)
Najmul Hasan SiddiquiPresident and ChiefExecutive Officer nil nil 1,150,000/nil $1,495,000/nil
(1) Based on the closing price on the ASE on March 31, 1997 of $1.86.
Stock Options
In November 1987, the board of directors of Tri-Vision approved and established a stock option plan (the "Stock Option Plan") for the directors, officers and other key employees of the Company. Under the Stock Option Plan, the total number of Common Shares under option may not exceed 10% of the number of currently issued and outstanding Common Shares. The exercise price for each option granted under the Stock Option Plan is determined by the President of the Company (the "Administrator"), subject to the rules of any Canadian stock exchange upon which the Common Shares of the Company are then listed and subject to certain maximum discounts from the market price of the Common Shares at the time of grant. Options granted under the Stock Option Plan must expire no later than five years from the date the options are granted, must be non-transferable, subject to certain exceptions, and are automatically cancelled after a specified period upon an optionee leaving the employment of the Company or otherwise ceasing to qualify under the Stock Option Plan. The Administrator determines the persons to whom options are to be granted under the Stock Option Plan and the number of Common Shares subject to each option so granted, based upon the duties, remuneration, length of service and present and potential contribution of such person and other relevant factors. The number of Common Shares reserved for issuance to any one person under the Stock Option Plan may not exceed 5% of the number of issued and outstanding Common Shares on the date of grant.
On April 17, 1996, options to purchase an aggregate of 3,300,000 Common Shares at $0.56 per share were granted to all of the directors and senior officers of Tri-Vision. Such options expire on April 16, 1998 and were granted pursuant to individual option agreements and not under the Company's Stock Option Plan. As of the date hereof, 1,850,000 options have been exercised by such persons.
On March 4, 1998, the Company granted an option to E. Todd Grunberg, the Vice-President, Marketing and Sales of the Company, to acquire 280,000 Common Shares at an exercise price of $2.45 per share expiring on March 4, 2000. This option was granted pursuant to an individual option agreement and not under the Company's Stock Option Plan.
The following table sets forth a summary of all stock options issued and outstanding as of the date hereof:
Name Date of Grant Number of Common Shares Under Option Exercise Price per Common Share Market Value of Common Shares on the Date of Grant(1) Expiration Date
Executive Officers as a group - four persons April 17, 1996 1,450,000 $0.56 $0.24 April 16, 1998
March 4, 1998 280,000 $2.45 $2.45 March 4, 2000
(1) Based on the closing price on the ASE on the trading day immediately prior to the date of grant.
Employment Arrangements
The Company has entered into an employment contract with E. Todd Grunberg in respect of his employment as Vice-President, Marketing and Sales of the Company. The employment contract provides that Mr. Grunberg will receive an annual base salary and specified bonus (upon meeting certain performance targets) as well as standard Company benefits.
The Company does not have any other formal employment agreements with any of its senior officers. There are no contractual restrictions on the ability of the board to terminate the employment of any of the executive employees of the Company nor are there any provisions with respect to payment upon termination. The Company has entered into agreements (the "Non-Competition Agreements") with each of the senior officers of the Company which provide that the employee shall not (i) compete directly with the Company for a period of three years following termination of employment; (ii) divulge any information received in the course of his or her employment; (iii) solicit or contact any clients of the Company following termination of employment; or (iv) solicit any other employees of the Company during the term of employment.
The Company has also entered into a consulting agreement with Robert de Wit pursuant to which Mr. de Wit has been engaged to provide certain consulting services to the Company in connection with the licensing of the V-Chip Technology. The agreement is for a term of one year expiring on April 13, 1998 and provides for specified equal monthly consulting payments as well as bonuses based upon licence sales concluded (such bonuses not to exceed $300,000 in the aggregate). The agreement may be terminated by either party upon 30 days prior written notice.
Compensation of Directors
The directors of the Company have waived their entitlement to receive fees for attending meetings of the board of directors. Directors are reimbursed for out-of-pocket expenses incurred in the course of carrying out their responsibilities. Stock options have been granted to certain directors of the Company as described above. See "Stock Options". The Company has acquired a directors' and officers' liability insurance policy in the amount of $5 million per occurrence containing standard industry exclusions and deductibles.
CVCD, a company in which Mr. Collings, a director of the Company, and his wife are shareholders, has received certain consulting fees pursuant to the Consulting Agreement. See "The V-Chip Technology - Rights to the V-Chip Technology".
Indebtedness of Directors, Executive Officers and Senior Officers
None of the directors, executive officers or senior officers of the Company and no associates or affiliates of any of the foregoing is currently indebted to the Company or was indebted to the Company at any time since the beginning of the Company's most recently completed financial year.
PRIOR SALES
During the twelve months prior to the date hereof, the Company has not issued any Common Shares except for:
(a) on October 30, 1996, Tri-Vision issued and sold an aggregate of 3,251,000 special warrants ("Special Warrants") at a price of $0.90 per Special Warrant, pursuant to an underwriting agreement (the "Special Warrant Underwriting Agreement") between Tri-Vision and CIBC Wood Gundy Securities Inc. ("CIBC Wood Gundy"), for gross proceeds of $2,925,900. Each Special Warrant entitled the holder to acquire, without payment of additional consideration, one Common Share. An aggregate fee of $234,072 was paid to CIBC Wood Gundy in connection with the sale of the Special Warrants. In addition, Tri-Vision granted to CIBC Wood Gundy non-transferable options (collectively, the "Special Warrant Compensation Options") to acquire, in the aggregate, up to 325,100 Common Shares at an exercise price of $0.90 per share at any time and from time to time until 5:00 p.m. (Toronto time) on October 30, 1998. A receipt for a (final) prospectus filed to qualify the distribution of the Common Shares upon the exercise of the Special Warrants was issued by each of the Ontario Securities Commission and the Alberta Securities Commission on May 30, 1997 and, as a result, 3,251,000 Common Shares were issued to the holders of the Special Warrants on June 9, 1997;
(b) on May 28, 1996, the Company granted options to Century Communications Corporation to purchase up to 337,000 Common Shares at a price of $0.77 per share. Options to acquire 100,000, 100,000 and 137,000 Common Shares were exercised on April 16, 1997, May 9, 1997 and May 21, 1997, respectively;
(c) on June 10, 1997, the Company issued 3,600,000 Common Shares to VCCE in connection with the acquisition of the worldwide rights to the V-Chip Technology. See "The V-Chip Technology - Rights to the V-Chip Technology"; and
(d) on April 17, 1996, the Company granted options to directors and officers of the Company to purchase up to 3,300,000 Common Shares at $0.56 per share. Options to acquire 1,850,000 Common Shares were exercised by directors and officers on February 26, 1998 and March 2, 1998.
TRADING HISTORY
The Common Shares have been listed and posted for trading on the Alberta Stock Exchange (the "ASE") since March 5, 1993. The following table sets forth the volume of sales and the range of high and low prices of the Common Shares on the ASE for the periods indicated:
Year High Low Volume
1996
1st Quarter .35 .25 288,510
2nd Quarter 1.29 .27 3,316,420
3rd Quarter 1.70 .80 2,046,106
4th Quarter 1.49 .85 1,702,265
1997
1st Quarter 5.50 1.40 8,833,751
2nd Quarter 2.45 1.00 1,985,723
3rd Quarter 1.90 1.05 2,109,013
October 1.89 1.30 1,019,510
November 3.35 1.50 6,281,918
December 4.20 2.85 4,138,084
1998
January 3.78 2.45 2,890,498
February 3.00 2.25 1,317,573
March 1-16 3.50 2.28 2,547,549
The closing price on March 16, 1998, the last trading day prior to the pricing of the Public Offering, was $2.70.
OPTIONS AND OTHER COMMITMENTS
As of the date hereof the Company had granted or issued or committed to grant the following options and other commitments to acquire Common Shares:
(i) the options to acquire an aggregate of 1,730,000 Common Shares as described under "Executive Compensation - Stock Options";
(ii) the Special Warrant Compensation Options to purchase an aggregate of 325,100 Common Shares as described under "Prior Sales";
(iii) the Compensation Option to purchase an aggregate of up to 552,000 Common Shares (assuming the Over-Allotment Option is exercised in full) as described under "Plan of Distribution";
(iv) the Over-Allotment Option to purchase an aggregate of 720,000 Common Shares as described under "Plan of Distribution"; and
(v) the Warrants to purchase up to an aggregate of 5,520,000 Common Shares (assuming the Over-Allotment Option is exercised in full) as described under "Details of the Offering".
DESCRIPTION OF SHARE CAPITAL
The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of Special Shares. As of March 16, 1998, 42,757,396 Common Shares and no Special Shares are issued and outstanding.
The following is a summary of the material provisions of the share capital of the Company:
Common Shares
Common Shares carry equal rights in that the holders thereof participate equally, share for share, as to dividends declared by the Board of Directors of the Company out of funds legally available for the payment of such dividends. In the event of the liquidation, dissolution or winding-up of the Company, the holders of the Common Shares would be entitled, share for share, to receive on a pro rata basis, all of the assets of the Company after payment of all of the Company's liabilities and after payment to the holder of Special Shares of the amount payable to them upon liquidation, dissolution or winding-up. The holders of the Common Shares are entitled to receive notice of any meetings of shareholders of the Company and are entitled to attend and vote at such meetings. Common Shares carry one vote per share.
Special Shares
The Special Shares may be issued only for cash and may, if authorized by the board of directors of the Company, be accompanied by warrants to purchase Common Shares on the basis of one warrant for each Special Share. The Special Shares do not carry with them the right to receive any dividend. The Special Shares may not be redeemed by the Company for a period of five years from the date of issuance thereof, without the prior consent of the holders. After the expiry of such five year period, the Company may redeem the Special Shares for a price equal to the amount paid for such shares. In the event of the liquidation, dissolution or winding-up of the Company, the holders of the Special Shares would be entitled to receive from the assets and property of the Company a sum equivalent to the amount paid for the Special Shares, before any payments to the holders of the Common Shares. The holders of the Special Shares are entitled to receive notice of any meetings of shareholders of the Company and are entitled to attend and vote at such meetings. Special Shares carry one vote per share. The number of Special Shares issuable by the Company at any time is limited such that at no time shall more than 500,000 Special Shares be issued and outstanding.
PRINCIPAL SHAREHOLDERS
At the date of this prospectus, the only persons or companies who own of record or who to the knowledge of the Company own beneficially, directly or indirectly, more than 10% of the Common Shares are as follows:
Percentage of the Class
Name and Address Type of Ownership Number of Common Shares Before Offering (1) After Completionof Offering (1)
Najmul Hasan SiddiquiMarkham, Ontario Of record and beneficially 9,314,848 21.8% 19.6%
Qamrul Hasan SiddiqiRichmond Hill, Ontario Beneficially 7,377,311 17.3% 15.5%
Notes:
(1) Without giving effect to the exercise of any outstanding options or warrants, including the Over-Allotment Option. See "Options and Other Commitments".
(2) None of the persons referred to above are "associates" of any of the others as that term is defined in the Securities Act (Ontario).
As of the date hereof, the directors and officers of Tri-Vision, as a group, owned or exercised control or direction over, directly or indirectly, 25,346,494 Common Shares, or 59.3% of the outstanding number of Common Shares, and had options to acquire, in the aggregate, 1,730,000 Common Shares.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
The only material transactions within the past three years in which the directors or officers of the Company or their respective associates or affiliates have or have had an interest that is material to the Company are as follows:
(a) Pursuant to a lease dated May 9, 1994, the Company leased its existing premises at 41 Pullman Court, Scarborough, Ontario from Najmul Hasan Siddiqui, Nazrul Hasan Siddiqi, Qamrul Hasan Siddiqi, Young Kwon Han, Vincent Elinares and Razi Ansari, carrying on business in partnership under the name Tri-Venture Investments (the "TVI Partnership"). Each of the partners of the TVI Partnership is a director and officer of the Company, with the exception of Mr. Elinares, who was, but is no longer, an officer and director of the Company. The lease was for a two year term commencing November 1, 1994 and ending October 31, 1996. The lease was on a net net basis, with annual net rent of $144,000 for the first year and $150,000 for the second year of the lease. The lease has now expired and the Company is continuing to rent the premises on a month to month basis, at a net rent of $15,000 per month. The Company has initiated discussions with the TVI Partnership for the purchase of these premises. No definitive agreements have been entered into with the TVI Partnership respecting this purchase. Any such purchase, if completed, will be subject to all necessary regulatory approvals.
(b) On September 1, 1994, the Company repaid a loan of $200,000 to the TVI Partnership, together with interest of $10,500. The loan was originally advanced on October 15, 1993, and bore interest at the rate of 6% per annum.
(c) On October 14, 1994 the President of the Company, Najmul Hasan Siddiqui, subscribed for 1,564,000 Common Shares for an aggregate subscription price of $391,000 ($0.25 per share).
(d) Pursuant to a licence agreement dated May 9, 1996, CVCD, a company in which Mr. Collings, a director of the Company, and his wife are shareholders, granted to TVE the exclusive Canadian rights to use the V-Chip Technology in television converters, for a twenty year term. On June 10, 1997, VCCE, a wholly-owned subsidiary of CVCD and transferee of the V-Chip Technology and licensee of the patents (if granted) and trade-mark rights from CVCD, granted to TVE the worldwide rights to use the V-Chip Technology in connection with the design, development, manufacture and sale of specified products. The consideration paid to VCCE for the worldwide rights to the V-Chip Technology was comprised of a cash payment of $200,000, a $1,900,000 promissory note payable on the earlier of October 1, 1997 and 10 days after the completion of the next public offering or private placement of securities by TVI (subsequently extended to no later than April 15, 1998), 3,600,000 Common Shares of TVI, and a fee in respect of future product sales containing the V-Chip Technology. In connection with the acquisition of the worldwide rights to the V-Chip Technology, TVE entered into a consulting agreement with CVCD pursuant to which Mr. Collings provided certain consulting services to TVE regarding the V-Chip Technology. See "The V-Chip Technology - Rights to the V-Chip Technology".
(e) Since December 19, 1997, five directors of the Company, namely Najmul Hasan Siddiqui, Nazrul Hasan Siddiqi, Qamrul Hasan Siddiqi, Young Kwon Han and Razi Ansari, advanced funds to the Company in the aggregate amount of $750,000 for working capital purposes. The loans are unsecured, repayable on demand and bear interest at the rate of 1.25% per month. As of March 17, 1998, the Company has repaid $374,000 and $376,000 remains outstanding.
See Notes 11 and 14 to the Consolidated Financial Statements.
DETAILS OF THE OFFERING
The Public Offering consists of Units, each Unit consisting of one Common Share and one Warrant. Each whole Warrant will entitle the holder thereof to purchase one Common Share at a price of $3.00 per share on or before 5:00 p.m. (Toronto time) on the first business day which is 180 days following the closing of the Public Offering. The Common Shares and Warrants comprising the Units will be immediately separable at the closing of the Public Offering and no certificates representing the Units will be issued. Certificates representing the Common Shares and Warrants comprising the Units will be available at closing.
The Company has allocated $0.01 of the offering price for each Unit to the Warrant forming part of that Unit, which allocation the Company believes to be reasonable. This allocation is not binding on Revenue Canada.
The Warrants will be transferable and issued in registered form under, and be governed by, an indenture to be dated as of the closing date of the Public Offering (the "Warrant Indenture") between the Company and Equity Transfer Services Inc. (the "Warrant Agent"). The Company has appointed the principal transfer office of the Warrant Agent in Toronto as the location at which Warrants may be surrendered for exercise, exchange or transfer.
The Warrant Indenture will provide for adjustment in the number of Common Shares issuable upon the exercise of the Warrants and/or the subscription price per Common Share in the event of (a) the subdivision or consolidation of the Common Shares, (b) the issue of a stock dividend on Common Shares or other distribution of Common Shares or securities convertible into Common Shares (other than a "dividend paid in the ordinary course", as defined in the Warrant Indenture), (c) the issue of rights, options or warrants to purchase Common Shares or securities convertible into Common Shares at less than 95% of the "current market price" (as defined in the Warrant Indenture) of the Common Shares, and (d) the distribution to all or substantially all the holders of Common Shares of shares of any class other than Common Shares or of rights, options or warrants (other than those referred to in (c) above) to acquire Common Shares or securities convertible into Common Shares or property or other assets of the Company or of evidences of indebtedness or of assets (other than a "dividend paid in the ordinary course", as defined in the Warrant Indenture). The Warrant Indenture will also provide for adjustment in the class and/or number of securities issuable upon exercise of the Warrants and/or subscription price per security in the event of (a) any reclassification of the Common Shares, (b) an amalgamation, merger or consolidation of the Company with another entity, or (c) the transfer of all or substantially all of the assets of the Company.
No adjustment in the exercise price or the number of Common Shares purchasable upon exercise of the Warrants will be made unless the cumulative effect of such adjustment or adjustments would change the subscription price under a Warrant by at least 1% or the number of Common Shares purchasable upon the exercise of a Warrant by at least one one-hundredth of a Common Share.
The Company will also covenant in the Warrant Indenture that, during the period in which the Warrants are exercisable, it will give public notice of certain stated events at least 21 days prior to the record date or effective date, as the case may be, of such event.
No fractional Common Shares will be issuable upon the exercise of any Warrants. Holders of Warrants will not have any voting or pre-emptive rights or any other rights which a holder of Common Shares would have.
The rights of the holders of Warrants may be modified upon the passing of a resolution at a meeting of the holders of Warrants by approval of holders entitled to purchase not less than 66% of the aggregate number of Common Shares which may be purchased pursuant to all the Warrants then outstanding represented at the meeting or rendered by instruments in writing signed by the holders entitled to purchase not less than 66% of the aggregate number of Common Shares which may be purchased pursuant to all the Warrants then outstanding.
Subject to certain exceptions, the Warrants may not be exercised within the United States or by or for the account or benefit of any U.S. person (as defined in Regulation S under the 1933 Act (as defined below)) and no certificate evidencing any Common Share issuable upon exercise of a Warrant will be delivered to any address in the United States or to or for the account or benefit of any U.S. person. See "Plan of Distribution".
The Company will disclose the exercise of any Warrants to the applicable securities commissions or similar regulatory authorities having legislation requiring notice thereof in order that sales of Common Shares acquired pursuant to the exercise of Warrants will not generally be subject to the prospectus requirements of such legislation.
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