UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 or 15d-16
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF APRIL, 2006
COMMISSION FILE NUMBER 000-13727
PAN AMERICAN SILVER CORP.
Suite 1500, 625 Howe Street Street
Vancouver, British Columbia, Canada V6C 2T6
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F Form 40-F X
------ ------
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
------ ------
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-________.
PAN AMERICAN
SILVER CORP.
NOTICE OF
2006 ANNUAL GENERAL MEETING
------------
INFORMATION CIRCULAR
TABLE OF CONTENTS
NOTICE OF ANNUAL GENERAL MEETING.................................................................................ii
INFORMATION CIRCULAR..............................................................................................1
Solicitation of Proxies......................................................................................1
Appointment of Proxyholder...................................................................................1
Revocation of Proxy..........................................................................................2
Voting by Non-Registered Shareholders........................................................................2
Voting of Proxies............................................................................................3
Exercise of Discretion.......................................................................................3
Voting Securities and Principal Holders of Voting Securities.................................................4
Quorum and Votes Necessary...................................................................................4
Particular Matters to be Acted Upon..........................................................................4
Appointment of Auditors..................................................................................4
Election of Directors....................................................................................5
Approval of Amendment of Articles and Notice of Articles.................................................6
Corporate Governance.........................................................................................9
Composition of the Board.................................................................................9
Board Committees........................................................................................10
Summary of Attendance of Directors......................................................................13
Code of Ethical Conduct.................................................................................13
Directors' and Officers' Liability Insurance................................................................13
Executive Compensation......................................................................................14
Summary Compensation Table..............................................................................14
Long-Term Incentive Plan................................................................................15
Stock Options...........................................................................................15
Termination of Employment, Change in Responsibilities and Employment Contracts..........................17
Compensation Committee..................................................................................17
Report on Executive Compensation........................................................................18
Compensation of Directors...............................................................................19
Equity Compensation Plan Information....................................................................20
Plan Category...........................................................................................20
Performance Graph.......................................................................................21
Interest of Insiders in Material Transactions...............................................................21
Management Contracts........................................................................................21
Interest of Certain Persons in Matters to be Acted Upon.....................................................21
Other Matters...............................................................................................21
Additional Information......................................................................................22
Approval of this Circular...................................................................................22
APPENDIX "A" - Proposed Resolutions ............................................................................A-1
APPENDIX "B" - Amended Articles and Notice of Articles..........................................................B-1
APPENDIX "C" - Corporate Governance Disclosure..................................................................C-1
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PAN AMERICAN SILVER CORP.
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the annual general meeting (the "Meeting")
of the shareholders of PAN AMERICAN SILVER CORP. (the "Company") will be held
in the Vancouver Room of the Metropolitan Hotel, 645 Howe Street, Vancouver,
British Columbia on Wednesday, May 3, 2006 at 2:00 p.m. (Vancouver time) for
the following purposes:
1. to receive and consider the consolidated financial statements of the
Company for the financial year ended December 31, 2005, together with
the auditors' report thereon;
2. to reappoint Deloitte & Touche LLP, Chartered Accountants, as auditors
of the Company to hold office until the next annual general meeting;
3. to authorize the directors of the Company to fix the remuneration to
be paid to the auditors of the Company;
4. to elect directors of the Company;
5. to consider and, if thought appropriate, to pass a special resolution
(the "Amendment of Articles and Notice of Articles Resolution")
approving certain amendments to the articles and notice of articles of
the Company under the Business Corporations Act (British Columbia),
the complete text of which is set out in Appendix "B" to the attached
Information Circular for the Meeting;
6. to consider amendments to or variations of any matter identified in
this Notice of Meeting; and
7. to transact such further and other business that does not have a
material effect on the business of the Company as may be properly
brought before the Meeting or any and all adjournments thereof.
Accompanying this Notice of Meeting are: (i) an Information Circular;
(ii) an Instrument of Proxy and Notes thereto; and (iii) a reply card for use
by shareholders who wish to receive the Company's interim financial statements.
If you are a registered shareholder and are unable to attend the
Meeting in person, please date and execute the accompanying form of proxy and
deposit it with Computershare Investor Services Inc., Attention: Stock Transfer
Services, 100 University Avenue, 9th Floor, Toronto, Ontario, Canada, M5J 2Y1
not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the
Meeting or any adjournment thereof.
If you are a non-registered shareholder and receive these materials
through your broker or through another intermediary, please complete and return
the materials in accordance with the instructions provided to you by your
broker or such other intermediary. If you are a non-registered shareholder and
do not complete and return the materials in accordance with such instructions,
you may lose the right to vote at the Meeting.
If you have any questions about the procedures to be followed to
qualify to vote at the Meeting or about obtaining and depositing the required
form of proxy, you should contact Computershare Investor Services Inc. by
telephone (toll free) at 1-800-564-6253.
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This Notice of Meeting, the Information Circular, the Instrument of
Proxy and notes thereto and the reply card are first being sent to shareholders
of the Company on or about March 29, 2006.
DATED at Vancouver, British Columbia, this 21st day of March, 2006.
BY ORDER OF THE BOARD
/s/ ROBERT PIROOZ
ROBERT PIROOZ,
General Counsel and Secretary
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[GRAPHIC OMITTED]
PAN AMERICAN
SILVER CORP.
INFORMATION CIRCULAR
Solicitation of Proxies
This Information Circular is furnished in connection with the
solicitation by the management of PAN AMERICAN SILVER CORP. (the "Company") of
proxies to be voted at the annual general meeting of the shareholders of the
Company to be held at 2:00 p.m. (Vancouver time) on Wednesday, May 3, 2006, in
the Vancouver Room of the Metropolitan Hotel, 645 Howe Street, Vancouver,
British Columbia, and any adjournments thereof (the "Meeting").
Management's solicitation of proxies will be conducted by mail and may
be supplemented by telephone or other personal contact to be made without
special compensation by directors, officers and employees of the Company or by
the Company's registrar and transfer agent. The Company may retain other
persons or companies to solicit proxies on behalf of management, in which event
customary fees for such services will be paid. All costs of solicitation will
be borne by the Company.
Unless the context otherwise requires, references herein to "Pan
American" mean the Company and its subsidiaries. The principal executive office
of the Company is located at 1500 - 625 Howe Street, Vancouver, British
Columbia, Canada, V6C 2T6. The telephone number is (604) 684-1175 and the
facsimile number is (604) 684-0147. The Company's website address is
www.panamericansilver.com. The information on that website is not incorporated
by reference into this Information Circular. The registered and records office
of the Company is located at 900 Waterfront Centre, 200 Burrard Street,
Vancouver, British Columbia, Canada, V7X 1T2.
Unless otherwise indicated, all currency amounts stated in this
Information Circular are stated in the lawful currency of the United States.
The date of this Information Circular is March 21, 2006, and it is
first being sent to shareholders on or about March 29, 2006.
Appointment of Proxyholder
The persons named in the accompanying form of proxy for the Meeting
are directors or officers of the Company, or both. A shareholder has the right
to appoint some other person, who need not be a shareholder, to represent the
shareholder at the Meeting by striking out the names of the persons designated
in the accompanying form of proxy and by inserting that other person's name in
the blank space provided.
The instrument appointing a proxyholder must be signed in writing by
the shareholder, or such shareholder's attorney authorized in writing. If the
shareholder is a corporation, the instrument appointing a proxyholder must be
in writing signed by an officer or attorney of the corporation duly authorized
by resolution of the directors of such corporation, which resolution must
accompany such instrument. An instrument of proxy will only be valid if it is
duly completed, signed, dated and received at the office of the Company's
registrar and transfer agent, Computershare Investor Services Inc., 100
University Avenue, 9th Floor, Toronto, Ontario, Canada, M5J 2Y1, Attention:
Stock Transfer Department, not less than 48 hours (excluding Saturdays, Sundays
and holidays) before
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the time set for the holding of the Meeting, unless the Chairman of the Meeting
elects to exercise his discretion to accept proxies received subsequently.
If you have any questions about the procedures to be followed to vote
at the Meeting or about obtaining, completing and depositing the required form
of proxy, you should contact Computershare Investor Services Inc. by telephone
(toll free) at 1-800-564-6253.
Revocation of Proxy
A shareholder may revoke a proxy by delivering an instrument in
writing executed by the shareholder or by the shareholder's attorney authorized
in writing, or where the shareholder is a corporation, by a duly authorized
officer or attorney of the corporation, either at the registered office of the
Company at any time up to and including the last business day preceding the day
of the Meeting, or with the consent of the Chairman of the Meeting on the day
of the Meeting, before any vote in respect of which the proxy is to be used
shall have been taken. A shareholder may also revoke a proxy by depositing
another properly executed instrument appointing a proxyholder bearing a later
date with the Company's registrar and transfer agent in the manner described
above, or in any other manner permitted by law.
Voting by Non-Registered Shareholders
Only registered shareholders or persons they appoint as their
proxyholders are permitted to attend and/or vote at the Meeting. However, in
many cases, common shares in the capital of the Company (the "Shares")
beneficially owned by a holder (a "Non-Registered Holder") are registered
either:
(a) in the name of an intermediary (an "Intermediary") that the
Non-Registered Holder deals with in respect of the Shares,
such as a bank, trust company, securities dealer or broker or
trustee or administrator of self-administered RRSPs, RRIFs,
RESPs or similar plans; or
(b) in the name of a depository (such as The Canadian Depository
for Securities Limited) of which the Intermediary is a
participant.
In accordance with the requirements of applicable securities laws, the Company
has distributed copies of the Notice of Meeting, this Information Circular and
the form of proxy (collectively, the "Meeting Materials") to the depositories
and Intermediaries for onward distribution to Non-Registered Holders.
Intermediaries are required to forward Meeting Materials to
Non-Registered Holders, unless a Non-Registered Holder has waived the right to
receive them. Very often, Intermediaries will use service companies, such as
ADP Canada or ADP, to forward the Meeting Materials to Non-Registered Holders.
Non-Registered Holders who have not waived the right to receive Meeting
Materials will either:
(a) receive, as part of the Meeting Materials, a voting
instruction form which must be completed, signed and
delivered by the Non-Registered Holder in accordance with the
directions provided by the Intermediary on the voting
instruction form (which may in some cases permit the
completion of the voting instruction form by telephone or
through the internet); or
(b) be given a form of proxy which has already been signed by the
Intermediary (typically by a facsimile, stamped signature),
which is restricted to the number of Shares beneficially
owned by the Non-Registered Holder but which is otherwise
uncompleted. This form of proxy need not be signed by the
Non-Registered Holder. In this case, the Non-Registered
Holder who wishes to
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submit a proxy should otherwise properly complete this form
of proxy and deposit it as described above.
The purpose of these procedures is to permit Non-Registered Holders to
direct the voting of the Shares they beneficially own. Should a Non-Registered
Holder who receives either a proxy or a voting instruction form wish to attend
and vote at the Meeting in person (or have another person attend and vote on
behalf of the Non-Registered Holder), the Non-Registered Holder should strike
out the names of the persons named in the accompanying proxy and insert the
Non-Registered Holder's (or such other person's) name in the blank space
provided or, in the case of a voting instruction form, follow the corresponding
instructions on the form. In either case, Non-Registered Holders should
carefully follow the instructions of their Intermediary or its service company.
In addition, there are two kinds of beneficial owners - those who
object to their name being made known to the issuers of securities which they
own (called "OBOs", for Objecting Beneficial Owners) and those who do not
object to the issuers of the securities they own knowing who they are (called
"NOBOs", for Non-Objecting Beneficial Owners). Up until September 2002, Issuers
(including the Directors and Officers of the Corporation) had no knowledge of
the identity of any of their beneficial owners including NOBOs. Subject to the
provision of National Instrument 54-101, Communication with Beneficial Owners
of Securities of Reporting Issuers ("NI 54-101"), however, after September 1,
2002 issuers could request and obtain a list of their NOBOs from intermediaries
via their Transfer Agents. Prior to September 1, 2004, issuers could obtain
this NOBO list and use it for specific purposes connected with the affairs of
the corporation, except for the distribution of proxy-related materials
directly to NOBOs. This was the first stage of the implementation of NI 54-101.
Effective for shareholder meetings taking place on or after September 1, 2004
issuers can obtain and use this NOBO list for distribution of proxy-related
materials directly (not via ADP) to NOBOs. This is the second stage of the
implementation of NI 54-101.
The Company has decided to take advantage of those provisions of NI
54-101 that permit it to directly deliver proxy-related materials to its NOBOs.
As a result NOBOs can expect to receive a scannable Voting Instruction Form
("VIF") from our Transfer Agent, Computershare Investor Services Inc. (or
Computershare Investor Services Inc as the case might be) ("Computershare").
These VIFs are to be completed and returned to Computershare in the envelope
provided or by facsimile. In addition, Computershare provides both telephone
voting and internet voting services, as described on the VIF itself which
contain complete instructions. Computershare will tabulate the results of the
VIFs received from NOBOs and will provide appropriate instructions at the
Meeting with respect to the shares represented by the VIFs they receive.
Voting of Proxies
Shares represented by properly executed proxies will be voted or
withheld from voting in accordance with the instructions of the shareholder on
any ballot that may be called for and, if the shareholder specifies a choice
with respect to any matter to be acted upon at the Meeting, the Shares
represented by such proxies will be voted accordingly. If no choice is
specified, the persons designated in the accompanying form of proxy will vote
FOR all matters proposed by management at the Meeting. If for any reason the
instructions of a shareholder in a proxy are uncertain as they relate to the
election of directors, the proxyholder will not vote the Shares represented by
that proxy for any director.
Exercise of Discretion
The accompanying form of proxy when properly completed and delivered
and not revoked confers discretionary authority upon the persons appointed
proxy thereunder to vote with respect to amendments or variations of matters
identified in the Notice of Meeting, and with respect to other matters which
may properly come before the Meeting. In the event that amendments or
variations to matters identified in the Notice of Meeting are properly brought
before the Meeting or any further or other business is properly brought before
the Meeting, it is the
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intention of the persons designated in the accompanying form of proxy to vote
in accordance with their best judgment on such matters of business. At the date
of this Information Circular, management of the Company knows of no such
amendment, variation or other matter which may be presented to the Meeting.
Voting Securities and Principal Holders of Voting Securities
The Company is authorized to issue 100,000,000 common shares without
par value of which 67,693,101 fully paid and non-assessable Shares are issued
and outstanding as of March 6, 2006. The holders of Shares are entitled to one
vote for each Share held. The Company has no other classes of voting
securities.
Any holder of record of Shares at the close of business on Monday,
March 6, 2006 and any holder of record of the Company's outstanding 5.25%
convertible unsecured senior subordinated debentures at the close of business
on March 6, 2006 will be entitled to receive notice of the Meeting. Any such
shareholder who either personally attends the Meeting or has completed and
delivered a form of proxy in the manner and subject to the provisions described
above shall be entitled to vote or to have his or her Shares voted at the
Meeting. The failure of any shareholder to receive the Notice of Meeting does
not deprive such shareholder of his or her entitlement to vote at the Meeting.
To the knowledge of the directors and senior officers of the Company,
no person beneficially owns, directly or indirectly, or exercises control or
direction over, more than ten percent of the issued and outstanding Shares as
at March 6, 2006.
Quorum and Votes Necessary
Under the Company's Articles, the quorum for the transaction of
business at the Meeting consists of one shareholder, or one proxyholder
representing a shareholder or shareholders, holding not less than one-twentieth
of the issued Shares entitled to be voted at the Meeting.
With respect to the proposed reappointment of the Company's auditors
and the authorization of the board of directors of the Company (the "Board") to
fix the remuneration to be paid to the Company's auditors, the Business
Corporations Act (British Columbia) and the Company's Memorandum and Articles
require that shareholders approve the proposed actions by ordinary resolution.
An ordinary resolution means that the resolution must be approved by not less
than a simple majority of the votes cast by the shareholders of the Company who
voted in person or by proxy at the Meeting.
With respect to the proposed amendments to the Company's articles and
notice of articles, the Business Corporations Act (British Columbia) and the
Company's articles and notice of articles require that shareholders approve the
proposed actions by special resolution. A special resolution must be approved
by not less than 3/4 of the votes cast by the shareholders of the Company who
voted in person or by proxy at the Meeting.
Particular Matters to be Acted Upon
Appointment of Auditors
Unless otherwise instructed, the accompanying form of proxy will be
voted for: (a) the reappointment of Deloitte & Touche LLP, Chartered
Accountants, of Vancouver, British Columbia, as the auditors of the Company to
hold office until the close of the next annual general meeting of the Company;
and (b) the authorization of the Board to fix the remuneration to be paid to
the auditors of the Company. Deloitte & Touche LLP were first appointed
auditors of the Company on October 26, 1993.
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Election of Directors
The Board has determined that eight directors will be elected at the
Meeting for the ensuing year.
The term of office of each of the present directors expires at the
close of the Meeting. Persons named below will be presented for election at the
Meeting as management's nominees and the persons named in the accompanying form
of proxy intend to vote for the election of these nominees. In the absence of
instructions to the contrary, the accompanying form of proxy will be voted for
the nominees herein listed. Management does not contemplate that any of these
nominees will be unable to serve as a director, but if that should occur for
any reason prior to the Meeting, the persons named in the accompanying form of
proxy reserve the right to vote for another nominee in their discretion, unless
the shareholder has specified in the accompanying form of proxy that such
shareholder's Shares are to be withheld from voting on the election of
directors. Each director elected will hold office until the close of the next
annual general meeting of the Company or until his successor is elected or
appointed, unless his office is earlier vacated in accordance with the articles
of the Company or with the provisions of the Business Corporations Act (British
Columbia).
The following table sets out the names of management's nominees for
election as directors, the municipality and province or state in which each is
ordinarily resident, all offices of the Company now held by each of them, each
nominee's principal occupation, business or employment, the period of time for
which each nominee has served as a director of the Company and the number of
shares of the Company or any of its subsidiaries beneficially owned by each
nominee, directly or indirectly, or over which each nominee exercises control
or direction as at March 6, 2006.
Principal Occupation, Number of
Name, Residence and Position Business or Employment Director Since Shares Held
--------------------------------- ---------------------------- ------------------ -------------------
ROSS J. BEATY (4) Chairman of the Company; Sept. 30, 1988 1,900,557(5)
Vancouver, B.C. formerly Chief Executive
Chairman Office of the Company.
GEOFFREY A. BURNS (4) President and Chief Executive July 1, 2003 13,648
North Vancouver, B.C. Officer of the Company;
President, Chief Executive Officer and formerly Chief Financial
Director Officer of Coeur d'Alene Mines
Corporation
WILLIAM A. FLECKENSTEIN(3) (4)(8) President of Fleckenstein May 9, 1997 223,584(6)
Seattle, Washington Capital, Inc. (investment
Director counselling firm)
MICHAEL LARSON(4) Business Manager of Cascade November 29, 1999 3,329,040(7)
Seattle, Washington Investment, LLC (a private
Director investment company)
MICHAEL J.J. MALONEY (1)(2)(3)(4) Private Investor Sept. 11, 1995 to 25,000
Seattle, Washington November 29, 1999;
Director re-elected May 15, 2000
PAUL B. SWEENEY(1) (4) Private Investor; formerly August 6, 1999 5,040
Surrey, B.C. Vice President and Chief
Director Financial Officer of Canico
Resource Corp.
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Principal Occupation, Number of
Name, Residence and Position Business or Employment Director Since Shares Held
--------------------------------- ---------------------------- ------------------ -------------------
JOHN M. WILLSON (1)(2)(4) Retired since April 2000; April 4, 2002 7,040
Vancouver, B.C. formerly Chief Executive
Director Officer of Placer Dome Inc.
JOHN H. WRIGHT (4) Retired since July 2003; Sept. 30, 1988 20,040(5)
Vancouver, B.C. formerly President and Chief
Director Operating Officer of the
Company
---------------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Governance Committee.
(4) Member of the Environmental Committee.
(5) Messrs. Beaty and Wright each hold directly, in trust for the Company,
one share in the capital of Pan American Silver S.A.C. Mina
Quiruvilca, an indirect subsidiary of the Company.
(6) Mr. Fleckenstein holds a portion of these Shares directly,
a portion indirectly and exercises control or direction over a
portion on behalf of a fund.
(7) Mr. Larson exercises control or direction over 3,320,000 Shares on
behalf of Cascade Investment LLC.
(8) Independent lead director.
The information as to the municipality and province or state of
residence, principal occupation, business or employment and the number of
shares beneficially owned by each nominee or over which each nominee exercises
control or direction set out in the above table is not within the knowledge of
the directors or senior officers of the Company and has been furnished by the
individual nominees as at March 6, 2006.
Approval of Amendment of Articles and Notice of Articles
Background to Proposed Amendments
On March 29, 2004, the government of British Columbia repealed the
Company Act (the "Company Act") and adopted, as a replacement, the Business
Corporations Act (the "Business Corporations Act"). This new legislation is
intended to make British Columbia's corporate laws more consistent with
corporate laws in other Canadian and U.S. jurisdictions and to provide British
Columbia companies with greater flexibility in determining their governance
structures.
Removal of Pre-Existing Company Provisions
------------------------------------------
Every "Pre-existing Company" incorporated under the old Company Act is
automatically subject to the "Pre-existing Company Provisions" of the Business
Corporations Act. The Pre-existing Company Provisions provide for continuity
between the old and new legislation by continuing the application to
Pre-Existing Companies of certain provisions of the old Company Act which are
not contained in the Business Corporations Act. The Company has the option of
no longer being subject to these Pre-existing Company Provisions, if
shareholders approve such a change.
At the Meeting, shareholders of the Company will be asked to consider
and, if thought appropriate, to pass a special resolution (the "Removal of PCPs
Resolution") to remove the application of the Pre-Existing Company Provisions
to the Company. The removal of the Pre-existing Company Provisions will require
an amendment to the Company's notice of articles which currently states that
the Company is subject to the Pre-existing Existing Company Provisions.
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Since the Company is a public company, only two of the Pre-Existing
Company Provisions are applicable to the Company: (1) the requirement under the
Company Act that special resolutions be approved by not less than 3/4 of the
votes cast in person or by proxy at a meeting of shareholders; and (2) the
requirement under the Company Act that, subject to certain exceptions,
acquisitions by the Company of its own Shares must be made on a proportionate
basis to all shareholders holding the same class or series of shares that are
subject to the offer.
If the shareholders pass the Removal of PCPs Resolution, any
subsequent special resolutions submitted to the shareholders for approval will
only require approval by ? rather than 3/4 of votes cast by shareholders on the
resolution. The Company is required to seek approval by special resolution of
the shareholders for major corporate changes including the approval of
amendments to the Company's authorized share capital, certain types of
amalgamation and arrangement transactions and the continuance of the Company
out of the jurisdiction of the Business Corporations Act. The lower threshold
for approval of special resolutions permitted under the Business Corporations
Act will make it easier for the Company to obtain shareholder approval for, and
to give effect to, such corporate changes. A decrease in the approval threshold
is desirable if you wish to make it easier for the Company to give effect to
such changes, but may not be desirable if you disagree with a particular change
or believe that a greater level of approval should be obtained before giving
effect to such a change. Many other Canadian corporate statutes, including the
Canada Business Corporation Act, require only a ? majority to approve a special
resolution.
If the shareholders pass the Removal of PCPs resolution and the New
Articles and Notice of Articles Resolution (described below), the Company will
no longer be required, in making offers to purchase its Shares, to make such
offers on a proportionate basis to all shareholders. The existing exceptions to
the proportionate purchase requirement do, in many cases, allow the Company to
acquire shares on a non-proportionate basis. However, the Company believes that
the requirement to acquire Shares on a proportionate basis may be overly
restrictive in future transactions, where the ability to purchase some but not
all of the shares may be necessary or desirable.
For the reasons described above, the Board is recommending that
shareholders vote in favour of the Removal of PCPs Resolution. In the event
that the Removal of PCPs Resolution is not approved by the requisite majority
at the Meeting, the Company will continue to be subject to the Pre-Existing
Company Provisions and all special resolutions will continue to require
approval by 3/4 of the votes cast in person or by proxy at a meeting of the
shareholders.
Additional Proposed Changes to Articles
---------------------------------------
With the repeal of the Company Act and its replacement with the
Business Corporations Act, the articles of the Company require certain minor
amendments to replace references to the Company Act with references to the
Business Corporations Act, to update terminology to reflect the terms used in
the Business Corporations Act and to update certain administrative matters that
differ under the new Business Corporations Act. For example, management of the
Company recommends that the articles be amended to:
o remove references to the "Memorandum of the Company", which
no longer exists under the Business Corporations Act, or,
where appropriate, to replace such references with a
reference to the Company's "Notice of Articles";
o replace all references to "members" with a reference to
"shareholders", to reflect the new terminology used in the
Business Corporations Act;
o replace all references to "register of members" with a
reference to "central securities register", to reflect the
new terminology of the Business Corporations Act;
o replace the "Disclosure of Interest of Directors" provisions,
which contain references to specific sections of the Company
Act and, unlike the Business Corporations Act, do not apply
to officers, with similar disclosure of interest provisions
which apply to both directors and senior officers and
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reflect certain administrative requirements under the
Business Corporations Act regarding the deposit of written
disclosure in the Company's records office;
o delete the provision which requires the Company to acquire
its Shares on a proportionate basis from all shareholders,
for the same reasons described above under "Removal of
Pre-Existing Company Provisions";
o update the indemnity provisions so that indemnification of
directors and officers is no longer "subject to the Company
Act", which required the Company to obtain court approval of
such indemnities, but is "Subject to the Business
Corporations Act", which gives the Company the right to
indemnify current and former directors and officers of the
Company and its affiliates (each an "eligible party") without
seeking court approval, and to otherwise amend the indemnity
provisions of the Articles to reflect the following
limitations on indemnities provided for under the Business
Corporations Act:
o the Company will not be entitled to indemnify an
eligible party in respect of an "eligible
proceeding" where that eligible party: (a) did not
act honestly and in good faith with a view to the
best interests of the Company; and (b) did not have
reasonable grounds for believing that their conduct
was lawful; and
o the Company will not be entitled to indemnify an
eligible party where the person bringing the
proceeding against the eligible party is the Company
or an associated corporation; and
o remove the reference to the requirement under the Company Act
to publish advance notice of the election of directors in the
newspaper, which is no longer required under the Business
Corporations Act.
In addition to the changes above, the Company has elected at this time
to take advantage of the flexibility of the new Business Corporations Act and
propose the following further amendments to the articles:
o any significant change of the business of the
Company, disposition of all or substantially all of
the assets of the Company or a merger or plan of
arrangement involving the Company must be approved
by a special resolution requiring 2/3 of the votes
cast by shareholders on the resolution;
o the quorum required for the transaction of business
at a meeting will be increased from one
shareholder, or proxyholder representing a
shareholder, holding not less than one-twentieth of
the issued shares entitled to be voted at the
meetings, to two individuals who are shareholders,
or proxyholders representing shareholders, holding
not less than one-quarter of the issued shares
entitled to be voted at the meetings; and
o the chair of the Board does not have a second or
casting vote at any meeting of the directors of the
Company, nor does the chair have a casting vote in
the case of an equality of votes upon a resolution
submitted for approval at an annual general meeting
of shareholders.
In addition to the changes above, the Company has elected at this time
to take advantage of the flexibility of the new Business Corporations Act and
proposes the following further amendment to the notice of articles:
o the authorized share capital of the Company will be
increased from 100,000,000 Shares to 200,000,000
Shares.
-8-
The Company has elected to increase its authorized share capital as
aforementioned in order to ensure it has reasonable commercial flexibility to
take advantage of growth opportunities in a timely manner, while setting a
maximum authorized share capital that would effectively require that any
significant transactions are properly placed before the Shareholders for
approval. Without this increase in authorized share capital, the Company may
not be able to compete effectively for acquisitions with other mining industry
participants who are not subject to such capital restraints.
At the Meeting, shareholders of the Company will be asked to consider
and, if thought appropriate, to pass a special resolution (the "New Articles
and Notice of Articles Resolution") to delete and cancel the existing articles
of the Company and to adopt articles and notice of articles substantially in
the form attached hereto as Appendix "B" as the new articles and notice of
articles (the "New Articles and Notice of Articles") of the Company. The New
Articles and Notice of Articles Resolution is annexed as Resolution No. 1 of
Appendix "A" to this Information Circular.
If the New Articles and Notice of Articles Resolution is not approved,
the Company will continue to operate under the existing articles and will,
where possible, interpret the existing Articles in light of the new provisions
of the Business Corporations Act.
For full particulars of the changes, please refer to the full text of
the proposed New Articles and Notice of Articles which are attached as Appendix
"B" to this Information Circular.
Corporate Governance
The Board is required to supervise the management of the business and
affairs of the Company. In February 1996 the Board adopted a formal written
mandate which defined its stewardship responsibilities. This mandate was
revised, amended and restated in April 2003, March 2005 and again in November,
2005, in light of the adoption of Multilateral Instrument 52-110 - Audit
Committees, National Instrument 58-101 - Disclosure of Corporate Governance
Practices ("NI 58-101") and National Instrument 58-201 - Corporate Governance
Guidelines ("NI 58-201" and, together with NI 58-101, the "Corporate Governance
Disclosure Rules") as well as the provisions of the Sarbanes-Oxley Act of 2002
and proposed changes to the Nasdaq's corporate governance requirements.
The Board believes that good corporate governance is important to the
effective performance of the Company and plays a significant role in protecting
shareholders' interests and maximizing shareholder value.
Both the Corporate Governance Disclosure Rules and the Nasdaq rules
have established guidelines for effective governance of listed companies. The
Board is of the view that the Company's system of corporate governance meets or
exceeds these guidelines.
The Company's corporate governance practices are compared with the NI
58-101 guidelines for effective corporate governance in Appendix "C" to this
Information Circular.
Composition of the Board
The Board currently consists of eight directors, six of whom, William
A. Fleckenstein, Michael Larson, Michael J.J. Maloney, Paul B. Sweeney, John M.
Willson and John H. Wright, qualify as unrelated directors under the TSX
Guidelines, Multilateral Instrument 52-110 - Audit Committees and are
independent of management and free from any interest and any business or other
relationship which could, or could reasonably be perceived to, materially
interfere with their ability to act in the best interests of the Company. Five
of these directors also qualify as independent directors under Nasdaq rules,
but Mr. Wright is not yet independent under these rules by virtue of
-9-
previously serving as President and Chief Operating Officer of the Company from
1998 until July 2003. Mr. Wright will qualify as an independent under Nasdaq
rules in July 2006. Ross J. Beaty and Geoffrey A. Burns are related directors
who are not independent due to their management position with the Company.
Board Committees
The Board has established four committees: the Audit Committee, the
Compensation Committee, the Health, Safety and Environment Committee and the
Nominating and Governance Committee. Each committee operates in accordance with
the Board's formal written mandate which defines its stewardship
responsibilities. Committee members are appointed annually following the
Company's annual general meeting.
The following is a description of the composition and mandate for each
of the committees of the Board.
Audit Committee
The Audit Committee is composed of three directors, all of whom are
unrelated directors for the purposes of the Corporate Governance Disclosure
Rules and all of whom are independent directors for purposes of the Nasdaq
rules. The Chairman of the Audit Committee is Paul B. Sweeney. All members of
the Audit Committee are financially literate. The Company considers "financial
literacy" to be the ability to read and understand a company's fundamental
financial statements, including a company's balance sheet, income statement and
a cash flow statement. Mr. Sweeney has significant employment experience in
finance and accounting - he previously served as the Chief Financial Officer of
Canico Resource Corp., Manhattan Minerals Corp. and Sutton Resources Ltd. - and
has the requisite professional certification in accounting, as a member of the
Certified General Accountants Association of British Columbia, to meet the
criteria of a financial expert within the meaning of section 407 of the
Sarbanes-Oxley Act of 2002.
The Audit Committee assists the Board in its oversight functions as
they relate to the Company's accounting, financial reporting, auditing, risk
management and internal controls. The Audit Committee has the following duties
and responsibilities: (a) assisting the Board in fulfilling its fiduciary
responsibilities relating to the Company's accounting and reporting practices;
(b) reviewing the audited financial statements of the Company and recommending
whether such statements should be approved by the Board; (c) reviewing and
approving unaudited interim financial statements of the Company; (d) reviewing
and approving the Company's MD&A and any press releases related to the annual
and interim financial statements or any MD&A before the Company discloses this
information; (e) recommending to the Board the firm of independent auditors to
be nominated for appointment by shareholders at each annual general meeting of
the Company and, where appropriate, the removal of the Company's independent
auditors; (f) recommending to the Board the compensation to be paid to the
independent auditors; (g) reviewing the scope and adequacy of audits to be
conducted by the Company's independent auditors; (h) adopting and annually
reassessing the formal terms of reference for the Company's independent
auditors; (i) monitoring and evaluating the independence and performance of the
Company's independent auditors; (j) overseeing the work of the Company's
independent auditors, including the resolution of disagreements between
management and the independent auditors regarding financial reporting; (k)
pre-approving all non-audit services to be provided to the Company by its
independent auditors prior to the commencement of such services; (l) reviewing
all post-audit management letters containing the recommendations of the
Company's independent auditors and management's response or follow-up thereto;
(m) reviewing, monitoring and periodically assessing the integrity, adequacy
and timeliness of the Company's financial reporting and disclosure practices;
(n) monitoring the Company's compliance with legal and regulatory requirements
related to financial reporting and disclosure; (o) monitoring and evaluating
the adequacy of the Company's internal accounting and audit procedures; (p)
reviewing and approving the Company's hiring policies regarding partners,
employees and former partners and employees of the independent auditor; (q)
reviewing and ensuring the acceptability of the Company's accounting
principles; (r) identifying the principal financial risks of the Company; (s)
overseeing management's reporting on internal controls and ensuring that
management has designed and implemented an effective system of internal
controls; (t) establishing procedures
-10-
for the receipt, retention, confidentiality and treatment of complaints
received by the Company regarding accounting, internal accounting controls or
auditing matters and the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing matters; (u)
annually reviewing and reassessing the adequacy of the duties and
responsibilities of the Audit Committee set out in the Board's formal written
mandate; and (v) any other matters that the Audit Committee feels are important
to its mandate or that the Board chooses to delegate to it. The Audit Committee
is empowered to instruct and retain independent counsel or other advisors, set
the pay and compensation for any such advisors and communicate directly with
the independent auditors, as it determines necessary to carry out its duties,
at the expense of the Company. Additional information relating to the Audit
Committee is contained in Appendix "A" of the Company's Annual Information Form
dated March 30, 2006.
The Audit Committee has prohibited the use of the Company's
independent auditors for the following non-audit services:
o bookkeeping or other services related to the accounting records
or financial statements of the Company;
o financial information systems design and implementation, except
for services provided in connection with the assessment, design
and implementation of internal account controls and risk
management controls;
o appraisal or valuation services, fairness opinions or
contribution-in-kind reports, where the results of any valuation
or appraisal would be material to the Company's financial
statements or where the accounting firm providing the appraisal,
valuation, opinion or report would audit the results;
o actuarial services;
o internal audit outsourcing services;
o management functions or human resources functions;
o broker-dealer, investment advisor or investment banking services;
o legal services; and
o expert services unrelated to audits.
As described above under the heading "Particular Matters to be Acted
Upon - Appointment of Auditors", the auditors of the Company are Deloitte &
Touche LLP. Fees paid or accrued by the Company and its subsidiaries for audit
and other services provided by Deloitte & Touche LLP and its related entities
during the years ended December 31, 2005 and 2004 were as follows:
Year ended December 31, Year ended December
2005 (CDN$) 31, 2004 (CDN$)
-----------------------------------------------------
Audit Fees............................................ $347,900 $187,084
Audit Related Fees.................................... 3,000 --
Tax-Related Fees...................................... 57,000 3,826
Other Fees............................................ nil 122,593
--- -------
Total: $407,900 $314,403
-------------------
The Audit Committee approved all non-audit services provided by
Deloitte & Touche LLP to the Company in 2005 and 2004.
-11-
Compensation Committee
The Compensation Committee is comprised of two directors, both of whom
are independent directors for the purposes of both the Corporate Governance
Disclosure Rules and the Nasdaq rules. The Chairman of the Compensation
Committee is John M. Willson. The Compensation Committee determines the salary
and benefits of the executive officers of the Company, determines the general
compensation structure, policies and programs of the Company, administers the
Company's Stock Option Plan, and delivers an annual report to shareholders on
executive compensation.
Health, Safety and Environment Committee
The Health, Safety and Environment Committee consists of all eight
directors (which represents all of the members of the Board), six of whom are
independent directors for the purposes of the Corporate Governance Disclosure
Rules and five of whom are independent directors for purposes of the Nasdaq
rules. The Chairman of the Health, Safety and Environment Committee, Ross J.
Beaty, is a related director. The Company recognizes that proper care of the
environment and the health and safety of its employees is integral to its
existence, its employees, the communities in which is operates and all of its
operations. Accordingly, the Company has directed its operating subsidiaries to
conduct all operations in an environmentally ethical manner having regard to
local laws, requirements and policies (the "Global Statement") and to the
Company's Health and Safety Policy and Environmental Policy (the "HSE
Policies"). The Company's operating subsidiaries have responsibility for
compliance with the Global Statement and the HSE Policies, and in connection
therewith, are committed to, inter alia: (i) complying with applicable
environmental laws and regulations of the countries and regions in which they
operate; (ii) exploring, designing, constructing, operating and closing mining
and processing operations by utilizing effective and proven practices that
minimize potentially harmful environmental impacts; (iii) educating employees
regarding environmental matters and potential work environment hazards, and how
to implement accident prevention programs; (iv) conducting regular reviews and
reporting findings to management and the Board to ensure complete and
transparent corporate wide knowledge of the Company's environmental
performance; (v) ensuring that emergency response plans are in place at each
operation to protect against unforeseen events that may harm the environment;
(vi) developing, operating and auditing environmental management systems at
each of the Company's operations that meet or exceed those in use by other peer
companies; (vii) providing a safe work environment by minimizing and/or
eliminating hazards; (viii) providing for annual audits of health and safety
programs; (ix) developing and operating health and safety management programs
at each of the Company's operations. The Health, Safety and Environment
Committee ensures that an audit is made, not less than annually, of all
exploration, construction, exploitation, remediation and mining activities
undertaken by the Company's operating subsidiaries to assess consistency with
the Global Statement.
Nominating and Governance Committee
The Nominating and Governance Committee consists of two directors,
both of whom are independent directors for the purposes of both the Corporate
Governance Disclosure Rules the Nasdaq rules. The Chairman of the Nominating
and Governance Committee is Michael J.J. Maloney. The Nominating and Governance
Committee: oversees the effective functioning of the Board; oversees the
relationship between the Board and management of the Company; ensures that the
Board can function independently of management at such times as is desirable or
necessary; assists the Board in providing efficient and effective corporate
governance for the benefit of shareholders; identifies possible nominees for
the Board; and reviews the qualifications of possible nominees for, and current
members, of the Board. The Nominating and Governance Committee also annually
reviews and makes recommendations to the Board with respect to: (i) the
independence of each director; (ii) the competencies, skills and experience
that each existing director should possess; (iii) the appropriate size and
composition of the Board; (iv) the appropriateness of the committees of the
Board, their mandates and responsibilities and the allocation of directors to
the committees; (v) the appropriateness of the terms of the mandate and
responsibilities of the Board;
-12-
(iv) the compensation of the directors of the Company in light of time
commitments, comparative fees, risks and responsibilities; and (v) the
directorships, if any, held by the Company's directors and officers in other
corporations.
Summary of Attendance of Directors
The following table sets out the attendance of directors at Board
meetings and meetings of the committees of the Board of which they were members
during the year ended December 31, 2005:
Nominating Health,Safety
and and Independent
Director Board Audit Compensation Governance Environment Board Only
-------- ----- ----- ------------ ---------- ----------- -----------
5 meetings 4 meetings 6 meetings 1 meeting 5 meetings 2 meetings
ROSS J. BEATY 5 - - - 5 -
GEOFFREY A. BURNS 5 - - - 5 -
WILLIAM A. FLECKENSTEIN 5 - - 1 5 2
MICHAEL LARSON 5 - - - 5 2
MICHAEL J.J. MALONEY 5 4 6 1 5 2
PAUL B. SWEENEY 5 4 - - 5 2
JOHN M. WILLSON 5 4 6 - 5 2
JOHN H. WRIGHT 5 - - - 5 2
Code of Ethical Conduct
As part of its stewardship responsibilities, in February of 2003, the
Board adopted formal "Standards of Ethical Conduct" which were designed to
deter wrong-doing and to promote honest and ethical conduct and full, accurate
and timely disclosure. These standards were revised, amended and restated as a
"Code of Ethical Conduct" (the "Code") in November of 2005 in light of the
adoption of NI 58-201 and NI 58-101. The Code is applicable to all the
Company's directors, officers and employees. The full text of the Code is
available free of charge to any person upon request from the General Counsel
and Secretary of the Company at 1500 - 625 Howe Street, Vancouver, British
Columbia, Canada, V6C 2T6, Telephone: (604) 684-1175. The Board monitors
compliance with the Code and is responsible for the granting of any waivers
from the Code to directors or executive officers. Disclosure will be made by
the Company of any waiver from the requirements of the Code granted to the
Company's directors or executive officers in the Company's quarterly report
that immediately follows the grant of such waiver.
Directors' and Officers' Liability Insurance
The Company maintains two Directors' and Officers' Liability Insurance
Policies covering a period of one year from August 31, 2005 (the "Policy Year")
with an aggregate limit on liability of $10,000,000 to cover the directors and
officers of the Company and its subsidiaries, individually and as a group. The
insured company would bear the first $200,000 of any loss, except in the cases
of losses arising in connection with US securities related claims where the
insured company would bear the first $350,000 of any loss.
The Company paid aggregate premiums of $275,000 for such insurance for
the Policy Year.
-13-
Executive Compensation
Summary Compensation Table
The following table sets forth a summary of the total compensation
paid to, or earned by, the Company's Chairman, Chief Executive Officer, the
Company's Chief Financial Officer and the three other most highly paid
executive officers of the Company and any of its subsidiaries (each a "Named
Executive Officer") during the three most recently completed financial years.
Summary Compensation Table
Annual Compensation Long-Term Compensation
---------------------------------------- ------------------------------
Awards
Number of
Number of Bonus Shares
Shares Subject to
Name and Other Annual Under Option Resale All Other
Principal Position Year Salary Bonus Compensation Granted Restrictions (3) Compensation (4)
------------------------ -------- ----------- ----------- -------------- ------------- ----------------- ----------------
ROSS J. BEATY 2005 156,080 32,414 - 14,000 1,179 77,963
Chairman 2004 130,616 56,672 - - - -
2003 127,266 38,565(1) - - - -
GEOFFREY A. BURNS 2005 225,093 39,392 - - 1,638 108,281
President and Chief 2004 230,500 70,343 - - - -
Executive Officer 2003 154,600 38,565(1) 27,570(2) 320,000 - -
A. ROBERT DOYLE 2005 158,613 39,328 - - 954 63,063
Chief Financial Officer 2004 144,139 36,632 - 120,000 - -
ANDRES DASSO 2005 201,600 42,310 - 14,000 1,098 72,576
Executive Director of 2004 192,000 53,280 - - -
Pan American Silver 2003 160,000 29,343(1) - - - -
Peru, S.A.
STEVEN BUSBY 2005 185,630 51,781 - - 1,116 73,805
Senior Vice President, 2004 163,655 50,120 - - - -
Project Development & 2003 65,625 20,823(1) - 200,000 - -
Technical Services
ANDREW POOLER 2005 165,500 35,348 - - 901 59,580
Senior Vice President, 2004 157,500 50,120 - - - -
Mining Operations 2003 52,500 16,190(1) - 200,000 - -
-------------------
(1) Represents the cash value of Shares issued in connection with a share
bonus to certain senior officers of the Company or its subsidiaries in
respect of the year ended December 31, 2003. These Shares were only issued
following regulatory and shareholder approval.
(2) Represents consulting fees paid by the Company to Mr. Burns, prior to him
becoming a senior officer of the Company.
(3) Represents the number of bonus Shares earned by certain senior officers
in respect of the year ended December 31, 2005 and which were granted out
of the Stock Option Plan on January 3, 2006. These bonus Shares are
subject to a no trading legend of 2 years, and will be eligible for
trading on January 3, 2008. The aggregate number of bonus Shares earned by
Company employees for 2005 was 14,449, with a total value of 318,406.
(4) Represents the cash value of stock options earned during 2005. Such stock
options will be granted out of the Stock Option Plan in 2006 and will vest
over a three year period beginning in 2006.
-14-
Long-Term Incentive Plan
The long-term incentive plan was approved by the Board on December 9,
2005 (the "Long-Term Incentive Plan"). No options, Shares or other securities
are issued under the Long-Term Incentive Plan. Under the terms of the Long-Term
Incentive Plan, guidance is provided regarding the grant of stock options and
Shares under the Stock Option Plan (defined below under "Stock Options") and
previous stock option plans to those holding senior and corporate management
positions with the Company.
The Long-Term Incentive Plan was designed to create a sense of
ownership by the key employees of the Company and to link the compensation of
such employees with the performance of the Company. This plan provides a
formula for calculating the incentive target for each eligible employee of the
Company. Targets are based on an employee's salary and are directly dependent
on the employees' responsibilities and contribution with regard to the
long-term performance of the Company.
Stock Options
The current stock option and stock bonus plan (the "Stock Option
Plan") governing the Company's issuance of stock options and bonus shares was
established by the Board on March 31, 2005 (and approved by shareholders on
April 28, 2005)and is given effect in conjunction with the Company's Long-Term
Incentive Plan. The Stock Option Plan contemplates (i) the granting of options
to purchase Shares and/or (ii) the direct issuance of bonus Shares to executive
officers, directors and "Service Providers" of the Company. A "Service
Provider" is defined as: (a) an employee of the Company or any of its
subsidiaries; (b) any other person or company engaged to provide ongoing
management or consulting services for the Company or for any entity controlled
by the Company; and (c) any person who is providing ongoing management or
consulting services to the Company or to any entity controlled by the Company
indirectly through a company that is a Service Provider.
The purpose of granting such options and/or bonus shares is to assist
the Company in attracting, retaining and motivating executive officers,
directors and Service Providers and to more closely align the personal
interests of such executive officers, directors and Service Providers to those
of the shareholders. The Stock Option Plan is intended to be competitive with
the benefit programs of other companies in the mining industry.
The Stock Option Plan complies with the rules set forth for such plans
by the TSX and Nasdaq.
The term of any options granted under the Stock Option Plan will be at
the discretion of the Board, but will not be in excess of ten years in
accordance with the rules and policies of any stock exchange or securities
market on which Shares are listed. Any grant of options under the Stock Option
Plan will be within the discretion of the Board. In addition, the Stock Option
Plan gives authority to the Board, in its sole discretion, to allot, issue and
deliver up to a total of 50,000 common shares in each calendar year. The
maximum number of Shares which may be issued pursuant to options granted or
bonus Shares issued under the Stock Option Plan may be equal to, but will not
exceed at any time, 10% of the total number of the issued and outstanding
common shares in the capital of the Company as of the grant-date on a
non-diluted basis. In addition, the number of Shares issuable under the Stock
Option Plan to any one optionee or in the aggregate to insiders of the Company
must not, when combined with all of the Company's previously established or
proposed share compensation arrangements, exceed 5% and 10%, respectively, of
the total number of issued and outstanding Shares on a non-diluted basis. The
number of Shares which may be issuable under the Stock Option Plan, together
with all the Company's other previously established or proposed share
compensation arrangements, within a one year period: (i) to insiders of the
Company in aggregate, shall not exceed 10% of the outstanding issue; and (ii)
to one optionee who is an insider of the Company or any associates of such
insider, shall not exceed 5% of the outstanding issue. The exercise price of
options granted under the Stock Option Plan will be set as the weighted average
trading price of Shares on the TSX or Nasdaq, as the Board may select, for the
five trading days (in which at least one board lot of the Shares were traded)
prior to the
-15-
date the option was granted. Under the Stock Option Plan, options are
non-assignable and non-transferable. The options granted under the Stock Option
Plan will terminate on the earlier of the expiry date of the options or 30 days
after termination of employment, office or the date the individual ceases to be
a Service Provider, where the reason for termination of the individual was
otherwise than for cause or by reason of death or disability. In the event of
termination for cause, the options granted under the Stock Option Plan will
terminate immediately upon the date which the individual ceases to be a
director, officer or Service Provider. In the event the individual ceases to be
a director, officer or Service Provider due to death or disability, the options
granted under the Stock Option Plan will terminate upon the earlier of the
expiry date and 12 months after the date of death or disability. The Stock
Option Plan also contains an adjustment mechanism to alter, as appropriate, the
option price or number of shares issuable under the Stock Option Plan upon a
share reorganization, corporate reorganization or other such event not in the
ordinary course of business which alters share price or number of Shares
outstanding. As at March 6, 2006 there were options outstanding under the Stock
Option Plan to acquire up to 1,141,227 Shares.
The Company provides no financial assistance to facilitate the
purchase of Shares to directors, officers or employees who hold options granted
under the Stock Option Plan.
The following table sets forth information concerning options granted
to the Named Executive Officers during the Company's most recently completed
financial year. No stock appreciation rights are outstanding and it is
currently intended that none be issued.
Option Grants During the Most Recently Completed Financial Year
% of Total Conversion/ Market Value of
Number of Options Granted Exercise Securities Underlying
Securities to Employees in Price Options on the Date of
Name Under Options Financial Year ($/Security) Grant ($/Securities) Expiry Date
--------------------- ---------------- ----------------- ------------- ---------------------- --------------
ROSS J. BEATY 14,000 16 15.37 15.26 July 27, 2010
Chairman
ANDRES DASSO 14,000 16 15.37 15.26 July 27, 2010
Executive Director of
Pan American Silver
Peru, S.A.
The following table sets forth information concerning the exercise of
options under the Stock Option Plan during the financial year ended December
31, 2005 and the value at December 31, 2005 of unexercised in-the-money options
under the Stock Option Plan held by each of the Named Executive Officers.
Option Exercises During the Most Recently Completed Financial Year
Unexercised Options Value of Unexercised
at Financial Year in- the-Money Options
Securities End at Financial Year End
Acquired Aggregate Realized Exercisable/ Exercisable ($)/
Name on Exercise alue ($) Unexercisable Unexercisable ($)
-------------------------- ------------------- --------------------- ------------------- -----------------------
ROSS J. BEATY 100,000 1,033,288 155,000 / 14,000 2,247,395 / 80,993
Chairman
-16-
Unexercised Options Value of Unexercised
at Financial Year in- the-Money Options
Securities End at Financial Year End
Acquired Aggregate Realized Exercisable/ Exercisable ($)/
Name on Exercise alue ($) Unexercisable Unexercisable ($)
-------------------------- ------------------- --------------------- ------------------- -----------------------
GEOFFREY A. BURNS 80,000 845,409 10,000 / 80,000 111,543 / 1,142,118
President and Chief Executive
Officer
A. ROBERT DOYLE 30,000 90,831 0 / 60,000 0 / 465,477
Chief Financial Officer
ANDRES DASSO nil nil 5,000 / 14,000 50,625 / 80,993
Executive Director of Pan
American Silver Peru, S.A.
STEVEN BUSBY 30,000 286,062 30,000 / 50,000 317,646 / 685,519
Senior Vice President,
Project Development &
Technical Services
ANDREW POOLER 40,000 510,435 0 / 50,000 0 / 501,317
Senior Vice President, Mining
Operations
Termination of Employment, Change in Responsibilities and Employment Contracts
Of the Named Executive Officers, Geoffrey A. Burns, the Company's
President and Chief Executive Officer; Robert Doyle, the Company's Chief
Financial Officer; Andrew Pooler, the Company's Senior Vice-President of Mine
Operations; and Steven L. Busby, the Company's Senior Vice President of Project
Development and Technical Services are currently engaged under employment
contracts. Each of these contracts is for an indefinite term and each provides
for a base salary, discretionary bonus, grant of stock options, vacation time,
and various benefits including life, disability, medical and dental insurance.
Each contract further provides for reimbursement of reasonable employment
related expenses, including a one-time reimbursement for moving expenses. In
addition to these terms, the employment contract of Geoffrey A. Burns provided
for a signing bonus and the use of a parking stall. The employment contracts
also provide for termination payments in certain circumstances. In the event of
termination without just cause, all four of the employment contracts provide
for a termination payment equal to one year's annual salary (and in the case of
Geoffrey A. Burns, plus one month's salary for each fully completed year of
continuous employment with the Company). For Robert Doyle, Andrew Pooler, and
Steven L. Busby, their contracts further provide that if they resign within six
months of any person acquiring 50% of the outstanding Shares or acquiring
sufficient Shares to replace the majority of the Company's Board with such
person's nominees, they are entitled to a termination payment equal to one
years' annual salary together with benefits for a twelve-month period. For
Geoffrey A. Burns, his contract provides that a resignation under the same
circumstances entitles him to a termination payment equal to two years' annual
salary together with benefits for a twelve-month period.
Compensation Committee
The Company has a compensation committee comprised of the following
directors: John M. Willson and Michael J.J. Maloney. The Chairman of the
compensation committee is John M. Willson. The duties and responsibilities of
the Compensation Committee are set out in this Information Circular under the
heading "Corporate Governance - Board Committees - Compensation Committee".
-17-
Report on Executive Compensation
The Company's compensation structure is designed to reward performance
and to be competitive with the compensation arrangements of other Canadian
mining companies with international operations of similar size and scope of
operations. The structure complies with the Company's statement of Compensation
Philosophy which was adopted in February 2005. Each executive officer's
position is evaluated to establish skill requirements and level of
responsibility and this evaluation provides a basis for internal and external
comparisons of positions. In addition to industry comparables, the Board and
the Compensation Committee consider a variety of factors when determining both
compensation policies and programs and individual compensation levels. These
factors include the long-term interests of the Company and its shareholders,
overall financial and operating performance of the Company and the Board's and
the Compensation Committee's assessment of each executive's individual
performance and contribution towards meeting corporate objectives. Executive
officer compensation is composed of four major components: base salary,
participation in the Company's Annual Incentive Plan, participation in the
Stock Option Plan and extended group benefits.
Base salary ranges are determined following a review of market data
for similar positions in Canadian mining companies with international
operations of comparable size and scope of operations. The salary for each
executive officer's position is then determined having regard for the
incumbent's responsibilities, individual performance factors, overall corporate
performance, potential for advancement, and the assessment of the Board and the
Compensation Committee of such matters as are presented by management. For
2005, the Company increased the base salary of a number of its executive
officers, including the Chairman, President and CEO, Senior Vice President,
Operations, Senior Vice President, Projects and the CFO, in recognition of the
Company's continued growth in both production and silver reserves and
resources, the strong performance of the Company's share price and in light of
compensation trends among comparable resource companies.
The second component of the executive officers' compensation is an
annual cash or share bonus earned under the guidelines of the Company's Annual
Incentive Plan. In light of a recommendation from the Compensation Committee,
the Board may grant executive officers cash or share bonuses. To date the
performance criteria and objectives considered by the Compensation Committee
and the Board for determining the availability of such bonuses include Pan
American's performance primarily measured against its annual budget as approved
by the Board and each executive officer's individual targets, set based on each
position's relative responsibilities, accountabilities and contribution. For
2005, the Company agreed to pay an aggregate cash bonus of $551,000 to 18
senior managers and executive officers of the Company and certain of its
subsidiaries predominantly in consideration of the Company's outstanding
improvement in safety with a 62% reduction in lost time accidents,
accomplishments in project development through feasibility and construction
efforts, and successes in exploration which have significantly more than
replaced all ounces mined and increased total proven and probable reserves, For
2004, the Company paid $520,877 to 16 senior executive officers as a bonus. The
Compensation Committee and the Board will next consider the issuance of cash or
share bonuses to executive officers and employees at or about the end of the
Company's next financial year.
The third component of the executive officers' compensation is
granting of stock options and issuance of bonus Shares. The Compensation
Committee or the Board, subject to approval by regulatory authorities, may from
time to time grant stock options and bonus Shares to executive officers. This
is intended to help attract and retain employees by providing them with an
opportunity to participate in the future success of the Company and to align
the interest of the employee with those of the Company and its shareholders.
The Company's Long-Term Incentive Program provides guidance regarding
an annual grant of options and bonus Shares to those holding senior and
corporate management positions by providing a formula for calculating the
incentive target for each eligible employee that is based on a percentage of
base salary. Seventy five percent of the Long-Term Incentive Plan target will
be made available as options and the remaining 25% will be made available as
-18-
common shares of the Company. The Long-Term Incentive Program is based on
individual performance measures, is reviewed annually and participation is
limited to key management positions having responsibility for influencing the
policy and strategy of the Company.
As of December 31, 2005, options were last granted in July 2005 to a
total of 11 employees, who consisted of senior management that had not received
options since December 2002 and newly hired senior personnel. In the past,
options were generally granted to newly hired executive officers at the time of
their initial employment. The Company had placed strong reliance on stock
options in terms of the total compensation of its executive officers in keeping
with overall compensation trends in the Canadian mining industry and to
conserve the Company's cash. However, since the implementation of the Long-Term
Incentive Plan in 2005, the practice of granting options upon hire has been
curtailed.
The fourth component of the executive officers' compensation is
extended group benefits. The Company makes available an array of quality group
benefit alternatives to address employee health and other needs, and those of
their dependents.
The Company's compensation practices will be regularly monitored by
the Compensation Committee and will be modified as required, to ensure it
maintains its competitiveness and that it appropriately recognizes growth and
change within the organization.
Mr. Geoffrey A Burns, the President and Chief Executive Officer of the
Company, has a current base salary of $262,500 (Mr. Burns' compensation is paid
in Canadian dollars. His compensation in United States currency is $225,093,
using a United States/Canadian dollar rate of exchange as at December 21, 2005
of Cdn$1.00 = US$0.8575). The overall base salary compensation for Mr. Burns is
determined on the basis of a review of market data for similar positions in
Canadian mining companies with international operations of comparable size and
scope of operations. For the year ended December 31, 2005, the compensation
committee determined that Mr. Burns' bonus was based on the same factors as
described for the Annual Incentive Plan, in addition to considerations for
growth in production, reserves and resources, and for reaching record levels of
revenue and cash flows from operating activities.
JOHN M. WILLSON
MICHAEL J.J. MALONEY
Compensation of Directors
Each non-executive director of the Company receives annual
compensation, starting on the date of the annual general meeting at which he or
she is elected or re-elected as a director and ending on the date immediately
prior to the date of the Company's next annual general meeting, of either:
(i) common shares in the capital of the Company having a value of
US$70,000 based on the 10-day weighted average of the
Company's common stock on the Nasdaq National Market
immediately prior to the annual general meeting; or
(ii) options to purchase common shares in the capital of the
Company having a value of US$70,000, according to the
Black-Scholes formula. The exercise price of such options
will be equal to the weighted average trading price of the
Company's common stock the Nasdaq National Market on the five
trading days (on which at least one board lot of the commons
shares was traded) prior to the annual general meeting. The
options will vest immediately and will expire ten years after
the date on which they were granted.
-19-
In 2005, each of the directors received common shares in the capital
of the Company pursuant to subsection (i) above. In addition to the annual
compensation amount, each chair of a Board committee receives a $3,000 cash fee
annually and each director on a Board committee receives a $1,000 cash fee for
each committee meeting attended.
The Company will reimburse its directors for reasonable out-of-pocket
expenses related to their attendance at meetings or other expenses incurred for
corporate purposes.
Equity Compensation Plan Information
The following table sets forth information concerning the issuance of
Shares under the Stock Option Plan for the financial year ended December 31,
2005.
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
warrants and rights rights reflected in column(a))
Plan Category (a) (b) (c)
------------- -------------------- --------------------- ----------------------
Equity compensation plans 1,023,334 10.88 2,792,988
approved by securityholders
Equity compensation plans not 27,308 10.29 nil
approved by securityholders
Total: 1,050,642 2,792,988
[This space intentionally left blank]
-20-
Performance Graph
The following graph compares the yearly percentage change in the
Company's cumulative total shareholder return on its Shares with the cumulative
total return of the S&P/TSX Composite Index, for the financial years ended
December 31, 2005, 2004, 2003, 2002 and 2001:
[GRAPHIC OMITTED]
(CDN$)
-----------------------------------------------------------------------------------------------
PAA Base TSE 300 Base
--- ---- ------- ----
December 31, 2001 $ 6.71 86.58 7,688 91.46
December 31, 2002 $12.28 158.45 6,615 78.69
December 31, 2003 $18.46 238.19 8,221 97.80
December 31, 2004 $19.23 248.13 9,247 110.00
December 30, 2005 $21.91 282.71 11,272 134.09
Interest of Insiders in Material Transactions
No insider of the Company and no associate or affiliate of any insider
has or has had any material interest, direct or indirect, in any transaction
since the commencement of the Company's last completed financial year, or in
any proposed transaction, which in either such case has materially affected or
will materially affect the Company.
Management Contracts
There are no other management functions of the Company which are, to
any substantial degree, performed by a person other than the directors or
senior officers of the Company.
Interest of Certain Persons in Matters to be Acted Upon
Except as disclosed herein, no director or executive officer of the
Company, nor any associate or affiliate of any of the foregoing persons, has
any material interest, direct or indirect, by way of beneficial ownership of
Shares or otherwise, in any matter to be acted on at the Meeting other than the
election of directors.
Other Matters
Management of the Company knows of no other matters which will be
brought before the Meeting, other than those referred to in the Notice of
Meeting. Should any other matters, which do not have a material effect on the
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business of the Company, properly come before the Meeting, the Shares
represented by the proxies solicited hereby will be voted on those matters in
accordance with the best judgment of the persons voting such proxies.
Additional Information
Additional information relating to the Company is available on SEDAR
at www.sedar.com. The Company's financial information is provided in its
comparative financial statements and management's discussion and analysis
("MD&A") for the most recently completed financial year. Copies of the
financial statements and MD&A are available upon request to the Controller and
Corporate Secretary of the Company at 1500 - 625 Howe Street, Vancouver,
British Columbia, Canada, V6C 2T6.
Copies of the above documents will be provided free of charge to
shareholders of the Company. The Company may require the payment of a
reasonable charge from any person or Company who is not a shareholders of the
Company and who requests a copy of any such document.
Approval of this Circular
The contents of this Information Circular have been approved by the
directors of the Company and its mailing has been authorized by the directors
of the Company pursuant to resolutions passed as at March 17, 2006.
DATED at Vancouver, British Columbia, this 21st day of March, 2006.
BY ORDER OF THE BOARD
/S/ ROBERT PIROOZ
ROBERT PIROOZ,
General Counsel and Secretary
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A-1
APPENDIX "A"
PAN AMERICAN SILVER CORP.
PROPOSED RESOLUTIONS
Resolution No. 1
----------------
Special resolution of the Meeting approving an alteration to the Company's
Notice of Articles and Articles.
ALTERATION OF NOTICE OF ARTICLES AND ARTICLES
WHEREAS:
A. Pursuant to the British Columbia Business Corporations Act (the "Act"), the
Company, as a pre-existing British Columbia company, has filed a transition
application that contains a notice of articles (the "Notice of Articles") with
the Registrar of Companies for British Columbia (the "Registrar of Companies");
B. The Notice of Articles contains a statement that the Pre-existing Company
Provisions contained in the regulations to the Act (the "PCPs") apply to the
Company;
C. It is now expedient for the Company to alter its Notice of Articles to
remove the application of the PCPs and to increase its authorized share
structure; and
D. After filing a notice of alteration with the Registrar of Companies, the
Company wishes to adopt a new form of articles in order to increase the quorum
required for general meetings, to update the form of articles of the Company
and to take advantage of various provisions under the Act;
RESOLVED as a special resolution that:
1. the Notice of Articles of the Company be altered to remove the
application of the PCPs;
2. the maximum number of Common shares without par value that the Company
is authorized to issue, of which 67,693,101 are issued and
outstanding, be increased from 100,000,000 Common shares without par
value to 200,000,000 Common shares without par value and the
authorized share structure and the Notice of Articles of the Company
be altered accordingly;
3. Parts 1 through 25 of the existing articles of the Company be deleted
in their entirety and Parts 1 through 21, as set out in the attached
Schedule A to this resolution, be adopted in substitution therefore;
4. subject to the deposit at the Company's records office of this
resolution, the solicitors for the Company are authorized and directed
to electronically file a notice of alteration with the Registrar of
Companies; and
5. the alterations made to the Company's articles shall not take effect
until immediately after the notice of alteration has been filed with
the Registrar of Companies.
A-1
B-20
APPENDIX "B"
BUSINESS CORPORATIONS ACT
ARTICLES
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PAN AMERICAN SILVER CORP.
Incorporation number: 187665
PART 1 - INTERPRETATION
1.1 Definitions. In these Articles, unless the context otherwise
requires:
(a) "Board of Directors" or "Board" or "the directors" means the
directors or the sole director of the Company for the time
being;
(b) "Business Corporations Act" means the Business Corporations
Act (British Columbia) from time to time in force and all
amendments to that Act and includes all regulations and
amendments made pursuant to that Act;
(c) "Company" means the company named at the head of these
articles;
(d) "prescribed address" of a director means the address as
recorded in the register of directors to be kept pursuant to
the Business Corporations Act;
(e) "registered address" of a shareholder means the last known
address of that shareholder as recorded in the central
securities register to be kept pursuant to the Business
Corporations Act;
(f) "registered owner", when used with respect to a share of the
Company, means the person registered in the central
securities register as the shareholder in respect of such
share.
1.2 Business Corporations Act and Interpretation Act Definitions Applicable.
The definitions in the Business Corporations Act and the definitions and rules
of construction in the Interpretation Act (British Columbia), with the
necessary changes and so far as applicable, and unless the context requires
otherwise, apply to these Articles as if they were an enactment. If there is a
conflict between a definition in the Business Corporations Act and a definition
or rule in the Interpretation Act relating to a term used in these Articles,
the definition in the Business Corporations Act prevails in relation to the use
of the term in these Articles. If there is a conflict between these Articles
and the Business Corporations Act, the Business Corporations Act prevails.
1.3 Consistency. Words in these articles importing the singular include the
plural, and vice versa, and words importing a male person include a female
person and a corporation.
1.4 Agreement with Business Corporations Act. Any words or phrases defined in
the Business Corporations Act shall, if not inconsistent with the subject or
context, bear the same meaning when used in these articles.
PART 2 - ALTERATIONS
2.1 Directors' Resolution. Subject to the Business Corporations Act, the
Company may, by a resolution of the directors:
(a) if the special rights and restrictions attached to shares of a
class so authorize:
(i) create one or more series of shares out of a class
of shares, and before the issue of any shares of
such series:
(A) determine the maximum number or determine
that there is no maximum number of shares
that the Company is authorized to issue for
such series of shares created;
B-1
(B) create and attach special rights or
restrictions to the shares of any such
series of shares created; and
(C) create an identifying name for the shares
of any such series of shares created;
(ii) for a series of shares of which there are no issued
shares:
(A) alter any determination of the number of shares
of which the series shall consist;
(B) alter any special rights or restrictions
attached to the shares of the series of shares;
or
(C) alter the identifying name of shares of the
series of shares;
(b) redeem or repurchase shares;
(c) accept a surrender of shares by way of gift or for
cancellation;
(d) convert fractional shares into whole shares on a subdivision
or consolidation of shares or on a redemption, purchase or
surrender of shares;
(e) change its name;
(f) adopt or change a translation of its name;
(g) subdivide all or any of its unissued shares with par value
into shares of smaller par value;
(h) subdivide all or any of its unissued shares without par
value;
(i) consolidate all or any of its unissued shares with par value
into shares of larger par value;
(j) consolidate all or any of its unissued shares without par
value;
(k) eliminate any class or series of shares if none of the shares
of that class or series of shares are allotted or issued;
(l) change all or any of its unissued shares with par value into
shares without par value;
(m) change all or any of its unissued shares without par value
into shares with par value; or
(n) alter the identifying name of any of its classes of shares;
and make any necessary alterations to its notice of articles or these Articles
or both to effect the change.
2.2 Ordinary Resolution. Subject to the Business Corporations Act, the
Company may, by an ordinary resolution:
(a) deal with all matters set out in Article 2.1;
(b) establish a maximum number of shares that the Company is
authorized to issue out of any class of shares for which no
maximum is established;
(c) increase, reduce or eliminate the maximum number of shares
that the Company is authorized to issue out of any class of
shares;
(d) for a class of shares of which there are no issued shares,
create special rights or restrictions for, and attach those
special rights or restrictions to, the shares of the class of
shares; or
(e) for a class of shares of which there are no issued shares,
vary or delete any special rights or restrictions attached to
the shares of the class of shares;
and make any necessary alterations to its notice of articles or these Articles
or both to effect the change.
2.3 Special Resolution. Subject to the Business Corporations Act, the
Company may, by a special resolution:
(a) deal with all matters as set out in Article 2.1 and Article 2.2;
(b) alter its notice of articles;
B-2
(c) alter these Articles;
(d) create one or more classes of shares;
(e) subdivide all or any of its fully paid issued shares with par
value into shares of smaller par value;
(f) subdivide all or any of its fully paid issued shares without par
value;
(g) consolidate all or any of its fully paid issued shares with par
value into shares of larger par value;
(h) consolidate all or any of its fully paid issued shares without par
value;
(i) if the Company is authorized to issue shares of a class of shares
with par value;
(i) subject to the Business Corporations Act, decrease the
par value of those shares, or
(ii) increase the par value of those shares if none of the
shares of that class of shares are allotted or issued;
(j) change all or any of its fully paid issued shares with par value
into shares without par value;
(k) for a class or series of shares of which there are issued shares,
create special rights or restrictions for, and attach those
special rights or restrictions to, the shares of the class or
series of shares;
(l) for a class or series of shares of which there are issued shares,
vary or delete any special rights or restrictions attached to the
shares of the class or series of shares;
(m) otherwise alter its authorized share structure when required or
permitted to do so by the Business Corporations Act;
(n) substantially change the business of the Company;
(o) dispose of all or substantially all of the assets of the Company;
or
(p) enter into a merger or plan of arrangement.
2.4 Special Majority. The majority of votes required for the Company to pass a
special resolution at a general meeting is 2/3 of the votes cast on the
resolution by shareholders voting shares that carry the right to vote at
general meetings.
2.5 Special Separate Majority. The majority of votes required to pass a special
separate resolution at a class meeting is 2/3 of the votes cast on the
resolution by shareholders voting shares that carry the right to vote at the
class meeting.
2.6 Consent Resolution. A consent resolution in writing, whether by signed
documents, fax, e-mail or any other method of transmitting legibly recorded
messages, of shareholders or directors or a committee of directors is as valid
as if it had been passed at a duly called and held meeting of the shareholders,
directors or committee, as the case may be. The consent resolution may be
executed in any number of counterparts, each of which when executed and
delivered (by fax or otherwise) is deemed to be an original, and all of which
together constitute one consent resolution in writing.
2.7 Ordinary Resolution Sufficient. Unless the Business Corporations Act, the
notice of articles or these articles provide otherwise, any action to be take
by a resolution of the shareholders may be taken by ordinary resolution.
PART 3 - SHARE CERTIFICATES
---------------------------
3.1 Form of Certificate. Subject to the requirements of the Business
Corporations Act, every share certificate issued by the Company shall be in
such forma s the directors approve.
3.2 Mailing of Certificates. Any share certificate may be mailed by registered
mail, postage prepaid, to the shareholder entitled to that certificate at that
shareholder's registered address and the Company is not liable for any loss
occasioned to the shareholder if that share certificate is lost or stolen. In
respect of a share held jointly by several
B-3
persons, mailing of a certificate for that share to one of several joint
holders or to a duly authorized agent of any of the joint holders is sufficient
delivery to all.
3.3 Signature on Certificate. A share certificate which contains printed or
otherwise mechanically reproduced signatures, as may be permitted by the
Business Corporations Act, is as valid as if signed manually, notwithstanding
that any person whose signature is so printed or mechanically reproduced shall
have ceased to hold the office that is stated on such certificate to hold the
date of the issue of such certificate.
3.4 Replacement of Lost or Destroyed Certificate. If a share
certificate:
(a) is worn out or defaced, the directors may, upon production to
them of that certificate and upon such other terms, if any,
that they determine, order the certificate to be cancelled
and issue a new certificate to replace the cancelled
certificate;
(b) is lost, stolen or destroyed, then upon production of proof
to the satisfaction of the directors and upon provision of
such indemnity and security, if any, that the directors deem
adequate, a new share certificate must be issued to the
person entitled to the lost, stolen or destroyed certificate.
3.5 Consolidation of Certificates. If two or more certificates are surrendered
by their registered owner to the Company together with a written request that
the Company issue one certificate registered in that registered owner's name
representing the aggregate of the shares represented by the certificates so
surrendered, the Company must cancel the certificates so surrendered and issue
in their place one certificate in accordance with the request.
3.6 Fee for Certificates. There must be paid to the Company in respect of the
issue of any certificate pursuant to this Part 3 such amount, if any, as the
directors may from time to time determine and which must not exceed the amount
prescribed in the Business Corporations Act.
3.7 Non-Recognition of Trusts. Except as required by law or statute or these
Articles, no person is recognized by the Company as holding any share upon any
trust and the Company is not bound by or compelled in any way to recognize
(even when having notice of any trust) any equitable, contingent, future or
partial interest in any share or any interest in any fractional part of a share
or (except as ordered by a court of competent jurisdiction) any other rights in
respect of any share except an absolute right to the entirety in the
shareholder.
3.8 Central Securities Register. As required by and subject to the Business
Corporations Act, the Company must maintain in British Columbia a central
securities register. The directors may, subject to the Business Corporations
Act, appoint an agent to maintain the central securities register. The
directors may also appoint one or more agents, including the agent which keeps
the central securities register, as transfer agent for its shares or any class
or series of its shares, as the case may be, and the same or another agent as
registrar for its shares or such class or series of its shares, as the case may
be. The directors may terminate such appointment of any agent at any time and
may appoint another agent in its place.
3.9 Branch Registers. Subject to the Business Corporations Act, the Company may
keep or cause to be kept one or more branch securities registers at such place
or places, whether within or outside the Province of British Columbia, as the
directors may from time to time determine.
PART 4 - ISSUE, TRANSFER AND TRANSMISSION OF SHARES
---------------------------------------------------
4.1 Directors Authorized to Issue Shares. Subject to this Part 4 and to any
direction to the contrary contained in a resolution passed at a general meeting
authorizing any increase of capital, the issue of shares is under the control
of the directors who may issue, otherwise dispose of or grant options on shares
authorized but not yet issued at any time, to any person including a director,
in the manner, upon the terms and conditions and at the price or for the
consideration as the directors, in their absolute discretion, may determine.
4.2 Transferability and Instrument of Transfer. Subject to the restrictions, if
any, set forth in these Articles, any shareholder may transfer that
shareholder's shares by an instrument in writing executed by or on behalf of
that shareholder and delivered to the Company or its transfer agent. The
instrument of transfer of any share of the
B-4
Company must be in the form, if any, provided on the back of the Company's form
of share certificate or in any other form which the directors may approve. If
the directors so require, each instrument of transfer must be in respect of
only one class of shares.
4.3 Submission of Instruments of Transfer. Every instrument of transfer must be
executed by the transferor and provided to the Company or the office of its
transfer agent or registrar for registration together with the share
certificate for the shares to be transferred and such other evidence, if any,
as the directors or the transfer agent or registrar may require to prove the
title of the transferor or the transferor's right to transfer the shares. If
the transfer is registered, the instrument of transfer must be retained by the
Company or its transfer agent or registrar. If the transfer is not registered,
the instrument of transfer must be returned to the person depositing it
together with the share certificate that accompanied it when tendered for
registration.
4.4 Authority in Instrument of Transfer. The signature of a shareholder or of
that shareholder's duly authorized attorney on the instrument of transfer
authorizes the Company to register the shares specified in the instrument of
transfer in the name of the person named in that instrument of transfer, the
number of shares specified therein or, if no number is specified, all the
shares of the registered owner represented by share certificates deposited with
the instrument of transfer. If no transferee is named in the instrument of
transfer, the instrument of transfer shall constitute a complete and sufficient
authority to the Company, its directors, officers and agents to register, in
the name of the person designated in writing by depositing the instrument of
transfer with the Company, the number of shares specified therein or, if no
number is specified, all the shares of the registered owner represented by
share certificates deposited with the instrument of transfer.
4.5 Enquiry as to Title Not Required. Neither the Company nor any of its
directors, officers or agents is bound to enquire into any title of the
transferor of any shares to be transferred and none of them is liable to any
person for registering the transfer.
4.6 Transfer Fee. There must be paid to the Company in respect of the
registration of any transfer such amount, if any, as the directors may from
time to time prescribe.
4.7 Commission or Discount. Subject to the provisions of the Business
Corporations Act, the Company, or the directors on behalf of the Company, may
pay a commission or allow a discount to any person in consideration of his
subscribing or agreeing to subscribe, or procuring or agreeing to procure
subscriptions, whether absolutely or conditionally, for any shares in the
Company.
4.8 Personal Representative Recognized. Upon the death or bankruptcy of a
shareholder, that shareholder's legal personal representative or trustee in
bankruptcy, although not a shareholder, has the same rights, privileges and
obligations that attach to the shares formerly held by the deceased or bankrupt
shareholder if the documents required by the Business Corporations Act have
been deposited at the Company's registered office. This Article does not apply
on the death of a shareholder with respect to shares registered in that
shareholder's name and the name of another person in joint tenancy.
4.9 Jointly Held Shares. If there are joint shareholders in respect of a share
and in the case of the death or bankruptcy of one of the joint shareholders,
the legal personal representative of the deceased or the trustee in bankruptcy
of the bankrupt shareholder, as the case may be, and the surviving joint
shareholder or shareholders are the only persons recognized by the Company as
having any title to or interest in the share so held jointly.
PART 5 - PURCHASE OF SHARES
---------------------------
5.1 Company Authorized to Purchase its Shares. Subject to the provisions of
this Part 5, the Business Corporations Act and the special rights and
restrictions attached to any class of shares, the Company may, by a resolution
of the directors:
(a) purchase any of its shares at the price and upon the terms
specified in that resolution; and
(b) sell any of its shares so purchased but not cancelled at the price
and upon the terms specified in that resolution.
B-5
5.2 Redemption of Part of a Class of Shares. If the Company proposes at its
option to redeem some but not all of the shares of any class or series, the
directors may by resolution, subject to the special rights or restrictions
attached to such shares, decide the manner in which the shares to be deemed
shall be selected.
PART 6 - BORROWING POWERS
-------------------------
6.1 Powers of Directors. Subject to the Business Corporations Act, the
directors may from time to time at their discretion authorize the Company to:
(a) borrow any amount of money;
(b) guarantee the repayment of any amount of money borrowed by any
person or corporation; and
(c) guarantee the performance of any obligation of any person or
corporation;
and may raise or secure the repayment of any amount of money so borrowed or
guaranteed or any obligation so guaranteed in any manner and upon any terms and
conditions as they may think fit and in particular and without limiting the
generality of the foregoing by the issue of bonds, debentures or other debt
obligations or by the granting of any mortgages or other security interest on
the undertaking of the whole or any part of the property of the Company, both
present and future.
6.2 Negotiability of Debt Obligations. The directors may make any bonds,
debentures or other debt obligations issued by the Company by their terms
assignable free from any equities between the Company and the person to whom
they may be issued or any other person who lawfully acquires them by
assignment, purchase or otherwise.
6.3 Special Rights on Debt Obligations. The directors may authorize the issue
of any bonds, debentures or other debt obligations of the Company at a
discount, premium or otherwise and with special or other rights or privileges
as to redemption, surrender, drawings, allotment of or conversion into or
exchange for shares, attending at general meetings of the Company and otherwise
as the directors may determine at or before the time of issue.
6.4 Execution of Debt Obligations. If the directors so authorize or if any
instrument under which any bonds, debentures or other debt obligations of the
Company are issued so provides any bonds, debentures and other debt obligations
of the Company, instead of being manually signed by the directors or officers
authorized in that behalf, may have the facsimile signatures of those directors
or officers printed or otherwise mechanically reproduced thereon and in either
case is as valid as if signed manually and every bond, debenture or other debt
obligation so bearing facsimile signatures of directors or officers of the
Company must be manually signed, countersigned or certified by or on behalf of
a registrar, branch registrar, transfer agent or branch transfer agent of the
Company duly authorized to do so by the directors or the instrument under which
such bonds, debentures or other debt obligations are issued. Notwithstanding
that any person whose facsimile signature is so used has ceased to hold the
office that he or she is stated on any bond, debenture or other debt obligation
to hold at the date of the actual issue of that bond, debenture or other debt
obligation, the bond, debenture or other debt obligation is valid and binding
on the Company.
PART 7 - GENERAL MEETINGS
-------------------------
7.1 Location of General Meetings. Every general meeting must be held at such
time and location as the directors may determine.
7.2 Notice of General Meetings. Notice of a general meeting must specify the
time and location of the meeting and, in case of special business (as described
in Part 8), the general nature of that business.
7.3 Extraordinary General Meetings. Any general meeting other than an annual
general meeting is herein referred to as an extraordinary general meeting.
7.4 Convening Extraordinary General Meetings. The directors may, whenever they
think fit, convene an extraordinary general meeting for whatever purpose or
purposes the directors may determine.
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7.5 Waiver of Notice. Any person entitled to notice of a general meeting may
waive or reduce the period of notice for that meeting in writing or otherwise
and may do so before, during or after the meeting.
7.6 Record Date for Notice. The directors may set a date as the record date for
the purpose of determining shareholders entitled to vote at any meeting of
shareholders. The record date must not precede the date on which the meeting is
to be held by more than two months or, in the case of a general meeting
requisitioned by shareholders under the Business Corporations Act, by more than
four months.
7.7 Failure to Give Notice. The accidental omission to send notice of any
meeting to, or the non-receipt of any notice by, any of the persons entitled to
notice does not invalidate any proceedings at that meeting.
7.8 Postponement. Where, in accordance with the Business Corporations Act, and
any other applicable legislation, the Company has published a notice of a
general meeting at which directors are to be elected, the Company may,
notwithstanding such notice, postpone the general meeting to a date other than
that specified in such notice. In the event of such postponement, the Company
shall publish, in the same manner prescribed for the original notice, a notice
of the postponement of the meeting which notice shall include, if the date to
which the meeting is postponed is known, the same information as is required by
the Business Corporations Act, and any other applicable legislation, to be
included in the original notice. If the date to which the meeting is postponed
is not known, the notice of postponement need state only that the meeting is
postponed until further notice, provided however that once such date is known,
the company shall publish a new notice which shall comply with the Business
Corporations Act, and any other applicable legislation. The date to which any
such meeting is postponed shall be deemed to be the date of the meeting for the
purpose of complying with any time limitations in respect of general meetings
prescribed by the Business Corporations Act, or any other applicable
legislation.
7.9 Notice of Special Business at General Meeting. If any special business
includes the presenting, considering, approving, ratifying or authorizing the
execution of any document, then the portion of any notice relating to that
document is sufficient if it states that a copy of the document or proposed
document is or will be available for inspection by shareholders at a place in
the Province of British Columbia specified in that notice during business hours
in any working day or days prior to the date of the meeting.
PART 8 - PROCEEDINGS AT GENERAL MEETINGS
----------------------------------------
8.1 Special Business. All business shall be deemed special business which is
transacted at:
(a) an extraordinary general meetings; and
(b) an annual general meeting other than the consideration of the
financial statements and of the reports of the directors and
the auditor, fixing or changing the number of directors, the
election of directors, the appointment of the auditor, fixing
the remuneration of the auditor and such other business as by
these articles or the Business Corporations Act may be
transacted at a general meeting without prior notice thereof
being given to the shareholders or any business which is
brought under consideration by the report of the directors.
8.2 Quorum. Subject to this Part 8, a quorum for a general meeting is two
individuals who are shareholders, proxy holders representing shareholders or
duly authorized representatives of corporate shareholders personally present
and representing shares aggregating not less than 25% of the issued shares of
the Company carrying the right to vote at that meeting. In the event there is
only one shareholder, the quorum is one person personally present and being, or
representing by proxy, that shareholder, or in the case of a corporate
shareholder, a duly authorized representative of that shareholder. The
directors, the Secretary, the Assistant Secretary, and the solicitor of the
Company (and any invitee of the Chair of the Board) shall be entitled to attend
any general meeting but no such person shall be counted in the quorum or be
entitled to vote at any general meeting unless he is a member or proxyholder or
is otherwise entitled to vote thereat.
8.3 Requirement of Quorum. No business other than the election of a chair and
the adjournment or termination of the meeting may be transacted at any general
meeting unless a quorum is present at the commencement of the meeting but the
quorum need not be present throughout the meeting.
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8.4 Lack of Quorum. If within 30 minutes from the time appointed for a meeting
a quorum is not present, the meeting:
(a) if convened by requisition of the shareholders, must be terminated;
and
(b) in any other case, must stand adjourned to the same day in the
next week at the same time and place.
If at the adjourned meeting a quorum is not present within 30 minutes from the
time appointed, the shareholder or shareholders present in person, by proxy or
by authorized representative is or are a quorum.
8.5 Chair. The chair of the Board, if any, or in his or her absence the
President or in his absence the Vice-President of the Company, if any, is
entitled to act as chair at every general meeting. Prior to a general meeting
at which neither the chair of the Board nor the Company's President will act as
chair, the directors, by resolution, may appoint one of their number or the
Company's solicitor to act as chair of a general meeting. If at any general
meeting the chair of the Board, if any, and the President, if any, are not
present within 15 minutes after the time appointed for holding the meeting or
if neither is willing to act as chair, and the directors have not previously by
resolution appointed one of their number or the Company's solicitor to act as
chair as such meeting, the directors present must choose one of their number or
the Company's solicitor to act as chair. If no director is present or if all of
the directors present and the Company's solicitor decline to act as chair or if
the directors present fail to so choose, the persons present and entitled to
vote shall choose one of their number to act as chair.
8.6 Solicitor May Act as Chair. Notwithstanding article 8.5, with the consent
of the meeting, which consent may be expressed by the failure of any person
present and entitled to vote to object, the solicitor of the Company may act or
chair at the meeting.
8.7 Adjournments. The chair of the meeting may, with the consent of any meeting
at which a quorum is present and must, if so directed by the meeting, adjourn
the meeting from time to time and from place to place. No business may be
transacted at any adjourned meeting other than the business left unfinished at
the meeting from which the adjournment took place. If a meeting is adjourned
for 30 days or more, notice, but not the advance notice otherwise required with
respect to the election of directors, of the adjourned meeting must be given as
in the case of a general meeting. It is otherwise not necessary to give any
notice of an adjourned meeting or of the business to be transacted at any
adjourned meeting.
8.8 Voting. Every question submitted to a general meeting must be decided:
(a) if a ballot is demanded by a shareholder or proxy holder
entitled to vote at the meeting or is directed by the chair,
by ballot; or
(b) in any other case, by a show of hands or by any other manner
that adequately discloses the intentions of the shareholders
or proxy holders.
The chair must declare to the meeting the decision on every question in
accordance with the result of the ballot, the show of hands or the other manner
that adequately disclosed the intentions of the shareholders or proxy holders
and that decision must be entered in the minute book of the Company. A
declaration of the chair that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority and an entry to that effect in the minute book of the Company is
conclusive evidence of the fact without proof of the number or proportion of
the votes recorded in favour of or against that resolution.
8.9 Resolution Need Not Be Seconded. No resolution proposed at a meeting need
be seconded and the chair of any meeting is entitled to move or second a
resolution.
8.10 Casting Vote. In case of an equality of votes upon a resolution, whether
on a show of hands or by ballot or any other manner, the chair does not have a
casting vote but shall only vote the votes to which he or she may be entitled
as a shareholder or proxyholder.
8.11 Manner of Taking Ballot. If a ballot is duly demanded it must be taken at
once or in the manner the chair of the meeting directs. A demand for a ballot
may be withdrawn. In the case of any dispute as to the
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admission or rejection of a vote the chair must conclusively determine in good
faith whether that vote is admitted or rejected.
8.12 Splitting Votes. On a ballot, a shareholder entitled to more than one vote
need not, if that shareholder votes, use all that shareholder's votes or cast
all the votes that shareholder uses in the same way.
8.13 Demand for Ballot Not to Prevent Continuance of Meeting. The demand for a
ballot does not prevent the continuance of a meeting for the transaction of any
business other than the question on which a ballot has been demanded.
8.14 Retention of Ballots and Proxies. The Company must, for at least three
months after a meeting of shareholders, keep each ballot cast and each proxy
voted at the meeting and, during the period, make them available for inspection
during statutory business hours by any shareholder or proxy holder entitled to
vote at the meeting. At the end of the three-month period, the Company may
destroy such ballots and proxies.
8.15 Polls. No poll may be demanded on the election of a meeting chair. A poll
demanded on a question of adjournment shall be taken forthwith. A poll demanded
on any other question shall be taken as soon as, in the opinion of the chair,
reasonably convenient, but in no event later than seven days after the meeting
and at such time and place and in such manner as the chair of the meeting
directs. When the result of a poll indicates that a particular motion has
carried by the requisite majority or failed, that result shall be deemed to be
the result of the meeting at which the pool was demanded, taken at the time of
such meeting, and such result shall be entered in the book of proceedings of
the Company, which entry, following destruction of the ballots cast on the
poll, shall be conclusive evidence of such result. The demand for a poll shall
not, unless the chair so rules, prevent the continuance of a meeting for the
transaction of any business other than the question on which a poll has been
demanded.
PART 9 - VOTES OF SHAREHOLDERS
------------------------------
9.1 Number of Votes Per Share or Shareholder. Subject to any special rights or
restrictions attached to any share contained in these Articles, on a show of
hands every shareholder entitled to vote present in person, by proxy or by
authorized representative has one vote and on a ballot every shareholder
entitled to vote on that ballot has one vote for every whole share held by that
shareholder and a fractional vote in proportion to any fraction of a share held
by that shareholder.
9.2 Votes of Persons in Representative Capacity. A person who is not a
shareholder may vote at a meeting of shareholders, whether on a show of hands
or on a ballot, and may appoint a proxy holder to act at the meeting if, before
doing so, the person satisfies the chair of the meeting or the directors that
the person is a legal personal representative or a trustee in bankruptcy for a
shareholder who is entitled to vote at the meeting.
9.3 Votes by Joint Holders. If there are joint shareholders registered in
respect of any share, any one of the joint shareholders may vote at any meeting
in person, by proxy or by authorized representative in respect of the share as
if that joint shareholder were solely entitled to it. If more than one of the
joint shareholders is present at any meeting in person, by proxy or by
authorized representative, the joint shareholder so present whose name stands
first on the central securities register in respect of the share is alone
entitled to vote in respect of that share. For the purpose of this Part 9, two
or more executors or administrators of a deceased shareholder in whose sole
name any share stands are deemed joint shareholders.
9.4 Representative of a Corporate Shareholder. If a corporation, that is not a
subsidiary of the Company, is a shareholder, that corporation may appoint, by
an instrument in writing, a person to act as its authorized representative at
any meeting of shareholders of the Company, and:
(a) for that purpose, the instrument appointing the authorized
representative must:
(i) be received at the registered office of the Company
or at any other place specified in the notice
calling the meeting for the receipt of proxies at
least the number of business days
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specified in the notice for the receipt of proxies,
or if no number of days is specified, not less than
48 hours before the time for holding the meeting; or
(ii) be deposited with the chair of the meeting, or to a
person designated by the chair of the meeting, prior
to the commencement of the meeting;
(b) if an authorized representative is appointed under this Part 9:
(i) the authorized representative is entitled to
exercise in respect of and at that meeting the same
rights on behalf of the corporation that the
authorized representative represents as that
corporation could exercise if it were a shareholder
who is an individual including, without limitation,
the right to appoint a proxy holder; and
(ii) the authorized representative, if present at the
meeting, is to be counted for the purpose of forming
a quorum and is deemed to be a shareholder present
in person at the meeting.
An instrument appointing an authorized representative of a corporation must be
in writing signed by a duly authorized person on behalf of that corporation and
must be sent to the Company.
9.5 Shareholder of Unsound Mind. A shareholder of unsound mind entitled to
attend and vote, in respect of whom an order has been made by any court having
jurisdiction, may vote, whether on a show of hands or on a poll, by his
committee, curator bonis, or other person in the nature of a committee or
curator bonis appointed by that court. Evidence of the appointment of any such
committee, curator bonis or other person shall be demonstrated by presenting to
the chair of the meeting, prior to commencement of the meeting, a notarially
certified copy of the court order by which he was appointed and by presenting
evidence acceptable to the chairman that he is the person named in the order as
the appointee. In the absence of such evidence, the chair shall determine
whether or not any such committee, curator bonis or other person shall be
entitled to attend and vote at the meeting and such determination made in good
faith shall be final and conclusive.
9.6 Proxy of Shareholder of Unsound Mind. A committee, curator bonis or other
person appointed in respect of a member of unsound mind and entitled to vote as
aforesaid may appoint a proxyholder.
9.7 Appointment of Proxy Holders. A shareholder holding more than one share in
respect of which that shareholder is entitled to vote at a general meeting is
entitled to appoint one or more, but not more than five, proxy holders to
attend, act and vote for that shareholder at the general meeting and in so
doing that shareholder must specify the number of shares that each proxy holder
is entitled to vote.
9.8 Execution of Proxy Instrument. A proxy must be in writing signed by the
appointor or the appointor's attorney or, if the appointor is a corporation, by
the authorized representative or a duly authorized person on behalf of that
corporation.
9.9 Qualification of Proxy Holder. A person must not be appointed as a proxy
holder unless the person is a shareholder, although a person who is not a
shareholder may be appointed as a proxy holder if:
(a) the person appointing the proxy holder is a corporation or an
authorized representative of a corporation appointed under
this Part 9;
(b) the Company has at the time of the meeting for which the
proxy holder is to be appointed only one shareholder entitled
to vote at the meeting; or
(c) the Company, by a resolution of the directors, permits the
proxy holder to attend and vote at the meeting.
9.10 Deposit of Proxy. A proxy and the power of attorney or other authority, if
any, under which it is signed or a notarially certified copy of such power of
attorney or other authority must be deposited at the registered office of the
Company, excluding Saturdays and holidays, or at such other place as is
specified for that purpose in the notice calling the meeting not less than 48
hours, excluding Saturdays and holidays, before the time for holding the
meeting at which the person named in the proxy proposes to vote or must be
deposited with the chair of the meeting, or with a person designated by the
chair of the meeting, prior to the commencement of the meeting. In addition to
any
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other method of depositing proxies provided for in these Articles, the
directors may from time to time make regulations:
(a) permitting the depositing of proxies at some place or places
other than the place at which a meeting or adjourned meeting
of shareholders is to be held;
(b) providing for particulars of those proxies to be sent in
writing or by fax, e-mail or any other method of transmitting
legibly recorded messages before a meeting or an adjourned
meeting to the Company or any agent of the Company for the
purpose of receiving those particulars; and
(c) providing that particulars of those proxies may be voted as
though the proxies themselves were produced to the chair of
the meeting or of the adjourned meeting as required by this
Article.
Votes given in accordance with proxies and particulars of proxies so deposited
are valid and counted.
9.11 Validity of Proxy Vote. A vote given in accordance with the terms of a
proxy is valid notwithstanding the previous death, bankruptcy or incapacity of
the shareholder or revocation of the proxy or of the authority under which the
proxy was executed or the transfer of the share in respect of which the proxy
is given, provided that prior to the meeting no notice in writing of such
death, bankruptcy, incapacity, revocation or transfer has been received at the
registered office of the Company or by the chair of the meeting or of the
adjourned meeting at which the vote was given.
9.12 Form of Proxy. A proxy appointing a proxy holder must be in the following
form or in any other form that the directors approve:
(Name of Company)
---------------
The undersigned hereby appoints _______________________________________________
_____________________ or failing him or her ___________________________________
_______________________________________________________________________________
as proxy holder for the undersigned to attend at and vote for and on behalf of
the undersigned at the general meeting of the Company to be held on the ____
day of _______________, ____, and at any adjournment of that meeting.
Signed this ____ day of _______________, ____.
______________________________
(Signature of Shareholder)
9.13 Revocation of Proxy. Subject to this Part, every proxy may be revoked by
an instrument in writing that is received at the registered office of the
Company at any time up to and including the last business day before the day
set for the holding of the meeting at which the proxy is to be used or
deposited with the chair of the meeting, or with a person designated by the
chair of the meeting, prior to the commencement of the meeting.
9.14 Revocation of Proxy Will Be Signed. An instrument to revoke a proxy must
be signed as follows:
(a) if the shareholder for whom the proxy holder is appointed is
an individual, the instrument must be signed by the
shareholder or his or her legal personal representative or
trustee in bankruptcy;
(b) if the shareholder for whom the proxy holder is appointed is
a corporation, the instrument must be signed by a duly
authorized person on behalf of the corporation or by the
authorized representative appointed for the corporation under
this Part 9.
9.15 Spoiled Form of Proxy. The chair of a meeting shall determine whether or
not a proxy, deposited for use at such meeting, which may not strictly comply
with the requirements of the form of proxy as set out in these articles as to
form, execution, accompanying documentation, time of filing or otherwise shall
be valid for use at such meeting and any such determination made in good faith
shall be final and conclusive.
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PART 10 - DIRECTORS
-------------------
10.1 General Authority. Subject to these Articles, the directors may exercise
all powers and do all acts and things as the Company is by the Business
Corporations Act, these Articles or otherwise authorized to exercise and do and
which are not by these Articles, by statute or otherwise lawfully directed or
required to be exercised or done by the Company by unanimous resolution,
special resolution or ordinary resolution.
10.2 Number of Directors. The number of directors may be determined by ordinary
resolution. The number of directors may be changed from time to time by
ordinary resolution whether previous notice of that ordinary resolution has
been given or not. If at any time the Company becomes a public company and the
number of directors fixed pursuant to these Articles is less than three, then
the number of directors is deemed to have been increased to three.
10.3 Directors' Acts Valid Despite Vacancy. An act or proceeding of the
directors is not invalid merely because fewer than the number of directors set
or otherwise required under these Articles is in office.
10.4 Qualification of Directors. A director is not required to hold a share in
the capital of the Company as qualification for his or her office but must be
qualified as required by the Business Corporations Act to become, act or
continue to act as a director.
10.5 Remuneration and Expenses of Directors. The remuneration of the directors
as such may from time to time be determined by the directors. Any remuneration
of a director is in addition to any salary or other remuneration paid to him or
her as an officer or employee of the Company. Every director must be repaid
such reasonable expenses as he or she may incur in and about the business of
the Company. Other than remuneration for professional services described in
this Part 10, if any director performs any services for the Company that in the
opinion of the directors are outside the ordinary duties of a director or if he
or she is specifically occupied in or about the Company's business other than
as a director, he or she may be paid a remuneration to be fixed by the
directors. The remuneration so fixed may be either in addition to or in
substitution for any other remuneration that he or she may be entitled to
receive and the additional remuneration may be charged as part of ordinary
working expenses of the Company. Unless otherwise determined by ordinary
resolution, the directors may pay a gratuity or pension or allowance on
retirement to any director who has held any salaried office or place of profit
with the Company, to his or her spouse or dependants and they may also make any
contributions to any fund and pay premiums for the purchase or provision of any
gratuity, pension or allowance in respect of that director.
10.6 Right to Office and Contract with Company. A director may hold any office
or place of profit in the Company, other than auditor, in conjunction with his
or her office of director for the period and on such terms as the directors may
determine. Subject to compliance with the Business Corporations Act, no
director or intended director is disqualified by his or her office from
contracting with the Company with regard to his or her tenure of office or
place of profit or as vendor, purchaser or otherwise.
10.7 Director Acting in Professional Capacity. Any director may act by him or
herself or his or her firm in a professional capacity for the Company and he or
she or his or her firm is entitled to remuneration for professional services as
if he or she were not a director.
10.8 Alternate Directors. Any director may from time to time appoint any person
who is approved by resolution of the directors to be his or her alternate
director provided that approval is not required if a director is appointed
alternate director for another director. The appointee, while he or she holds
office as an alternate director, is entitled to notice of meetings of the
directors and, in the absence of the director for whom he or she is an
alternate, to attend and vote at meetings as a director and is not entitled to
be remunerated otherwise than out of the remuneration of the director
appointing him or her. Any director may make or revoke an appointment of his or
her alternate director by notice in writing sent to the Company. A person may
act as an alternate for more than one director at any given time and a director
may act as an alternate director for any other director. No person may act as
an alternate director unless that person qualifies under the Business
Corporations Act to act as a director of the Company. Every alternate director,
if authorized by the notice appointing him or her, may sign any consent
resolution in place of the director appointing him or her.
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10.9 Appointment of Attorney. The directors may from time to time, by power of
attorney, appoint any person to be the attorney of the company for such
purposes, and with such powers, authorities and discretions (not exceeding
those vested in or exercisable by the directors under these articles and
excepting the powers of the directors relating to the constitution of the Board
any of its committees and the appointment or removal of officers and the power
to declare dividends) and for such period, with such remuneration and subject
to such conditions as the directors may think fit, and any such appointment may
be made in favour of any of the directors or any of the members of the Company
or in favour of any corporation, or any of the shareholders, directors,
nominees or managers of any corporation, firm or joint venture and any such
power of attorney may contain such provisions for the protection or convenience
of persons dealing with such attorney as the directors think fit. Any such
attorney may be authorized by the directors to sub-delegate all or any of the
powers, authorities and discretions for the time being vested in him.
10.10 Interested Directors. A director who is, in any way, directly or
indirectly, interested in a proposed contract or transaction with the Company
shall be counted in the quorum at any meeting of the directors at which the
proposed contract or transaction is approved.
10.11 Interested Director may be Director of Other Corporation. A director may
be or become a director or other officer or employee of or otherwise interested
in, any other corporation or firm, whether or not the Company is interested
therein as a shareholder or otherwise, and, subject to compliance with the
provisions of the Business Corporations Act, such director shall not be
accountable to the Company for any remuneration or other benefits received by
him as a director, officer or employee or, or from his interest in, such other
corporation or firm.
PART 11 - ELECTION, APPOINTMENT AND REMOVAL OF DIRECTORS
--------------------------------------------------------
11.1 Election and Appointment. The shareholders may elect or appoint directors
at any time and from time to time. Sixty-days prior written notice must be
provided to the Company for any proposed non-management nomination to the
Board.
11.2 Elections and Appointments at Annual General Meetings. At each annual
general meeting all the directors retire and the shareholders must elect or
appoint a Board of Directors consisting of the number of directors for the time
being fixed pursuant to Part 10. Any retiring director is eligible for
re-election or re-appointment. If the holding of an annual general meeting of
the Company is deferred or waived by a unanimous resolution of all shareholders
entitled to vote at the annual general meeting, each director in office on the
annual reference date selected in the unanimous resolution continues to be a
director until the next annual reference date unless that director retires or
is removed prior to the next annual reference date.
11.3 Filling a Casual Vacancy. The directors may at any time and from time to
time appoint any person as a director to fill a casual vacancy among the
directors or a vacancy resulting from an increase of the number of directors.
11.4 Power to Appoint Additional Directors. Between successive annual general
meetings, the directors have the power to appoint one or more additional
directors but not more than one-third the number of directors elected or
appointed at the last annual general meeting at which directors were elected or
appointed. Any director so appointed may hold office only until the next
following annual general meeting of the Company but is eligible for election at
such meeting and, so long as he or she is an additional director, the number of
directors is increased accordingly.
11.5 Removal of Directors. If a director is convicted of an indictable offence
or ceases to be qualified to act as a director of the Company and does not
promptly resign, the Company may remove the director before the expiration of
the director's term of office by a resolution of the directors. The Company may
otherwise remove a director before the expiration of the director's term of
office by an ordinary resolution of the shareholders.
PART 12 - PROCEEDINGS OF DIRECTORS
----------------------------------
12.1 Meetings and Quorum. The directors may hold meetings as they think fit for
the dispatch of business and may adjourn and otherwise regulate their meetings
and proceedings as they think fit. The directors may
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from time to time fix the quorum necessary for the transaction of business and
unless so fixed the quorum is a majority of the Board.
12.2 Chair. The chair of the Board, if any, of the Company is entitled to act
as chair of every meeting of the Board but if at any meeting the chair of the
Board, if any, is not present within 15 minutes after the time appointed for
holding the meeting, or if the chair of the Board is not willing to act as
chair, the directors present must choose one of their number to act as chair.
12.3 Call and Notice of Meetings. A director may at any time call a meeting of
the directors. Reasonable notice specifying the time and place of that meeting
shall be personally given or sent to each director by mail, postage prepaid,
addressed to each director's address as it appears on the books of the Company
or by leaving it at his usual business or residential address or by telephone,
fax or any method of transmitting legibly recorded messages. It is not
necessary to give to any director notice of a meeting of directors immediately
following a general meeting at which that director has been elected or notice
of a meeting of directors at which that director was appointed.
12.4 Validity of Meeting Despite Failure to Give Notice. The accidental
omission to give notice of any meeting of directors to, or the non-receipt of
any notice by, any director or alternate director does not invalidate any
proceedings at that meeting.
12.5 Meeting Participation. A director may participate in a meeting of the
directors or of any committee of the directors by video conference or telephone
if all directors participating in the meeting, whether by video conference or
telephone or in person, are able to communicate with each other. If all the
directors consent, a director may participate in a meeting of the directors or
of any committee of the directors by a communications medium other than video
conference or telephone if all directors participating in the meeting are able
to communicate with each other. A director who participates in a meeting by a
communications medium other than video conference or telephone is deemed to
have agreed to participate by the other communications medium. A director who
participates in a meeting by video conference, telephone or other
communications medium is deemed for all purposes of the Business Corporations
Act and these Articles to be present at the meeting and must be counted in the
quorum for and is entitled to communicate and vote at that meeting.
12.6 Competence of Quorum. The directors at a meeting at which a quorum is
present are competent to exercise all or any of the authorities, powers and
discretions for the time being vested in or exercisable by the directors.
12.7 Committees. The directors may from time to time by resolution constitute,
dissolve or reconstitute standing committees and other committees consisting of
such persons as the directors may determine. Every committee so constituted has
the authorities, powers and discretions that may be delegated to it by the
directors and must act in accordance with any regulations that the directors
may impose upon it.
12.8 Validity of Meeting if Directorship Deficient. All acts done by any
director or by any member of a committee constituted by the directors,
notwithstanding that it is discovered afterwards that there was some defect in
the appointment of any person so acting or that he or she was disqualified, are
valid.
12.9 Majority Rule . Questions arising at any meeting of the directors must be
decided by a majority of votes. The chair shall not have a second and casting
vote.
12.10 Resolutions in Writing. A resolution consented to in writing, whether by
document, telegram, telex or any method of transmitting legibly recorded
messages or other means, signed by all of the Directors or their alternates
shall be as valid and effectual as if it had been passed at a meeting of the
Directors duly called and held. Such resolution may be in two or more
counterparts which together shall be deemed to constitute one resolution in
writing. Such resolution shall be filed with the minutes of the proceedings of
Directors and shall be effective on the dates dated thereon on the latest dated
on any counterpart.
B-14
PART 13 - OFFICERS
------------------
13.1 Appointment of Officers. The directors may appoint officers of the Company
and may specify their duties. Any individual may be appointed to any office of
the Company. Any person appointed Chairman shall be a director. Two or more
offices of the Company may be held by the same individual.
PART 14 - DIVIDENDS
-------------------
14.1 Declaration of Dividends. Subject to the Business Corporations Act and the
rights, if any, of shareholders holding shares with special rights and
restrictions, the directors may declare dividends and fix the date of record
and the date for payment of any dividend. No date of record for any dividend
may precede the date of payment of that dividend by more than the maximum
number of days permitted by the Business Corporations Act. No notice need be
given of the declaration of any dividend. If no valid date of record is fixed,
the date of record is deemed to be the same date as the date of payment of the
dividend.
14.2 Dividend Bears No Interest. No dividend may bear interest against the
Company.
14.3 Payment in Specie. The directors may direct payment of any dividend wholly
or partly by the distribution of specific assets or of paid-up shares or bonds,
debentures or other debt obligations of the Company or in any one or more of
those ways and if any difficulty arises in regard to the distribution the
directors may settle the difficulty as they think fit. The directors may fix
the value for distribution of specific assets and may vest any of those
specific assets in trustees upon such trusts for the persons entitled to those
specific assets as the directors think fit.
14.4 Fractional Interests. Notwithstanding the provisions of this Part 14, if
any dividend results in any shareholder being entitled to a fraction of a
share, bond, debenture or other debt obligation of the Company, the directors
may pay that shareholder the cash equivalent in place of that fraction of a
share, bond, debenture or other debt obligation. The directors may arrange
through a fiscal agent or otherwise for the sale, consolidation or other
disposition of fractions of shares, bonds, debentures or other debt obligations
of the Company on behalf of shareholders entitled to them.
14.5 Payment of Dividends. Any dividend payable in cash by the Company may be
paid by cheque mailed to the registered address of the shareholder or in the
case of joint shareholders to the registered address of the joint shareholder
first named in the central securities register or to such person or to such
address as any shareholder may direct in writing. Every cheque must be made
payable to the order of the person to whom it is sent and in the case of joint
shareholders to those joint shareholders.
14.6 Receipt by Joint Shareholders. If several persons are joint shareholders
of any share, any one of them may give an effective receipt for any dividend,
bonus or other money payable in respect of the share.
PART 15 - ACCOUNTING RECORDS AND AUDITORS
-----------------------------------------
15.1 Accounts to be Kept. The directors must cause accounting records to be
kept as necessary to properly record the financial affairs and condition of the
Company and to comply with the provisions of statutes applicable to the
Company.
15.2 Location of Accounts. The directors must determine the place at which the
accounting records of the Company must be kept and those records must be open
to the inspection of any director during the statutory business hours of the
Company.
15.3 Inspection by Shareholder. Unless the directors determine otherwise, or
unless otherwise determined by an ordinary resolution, no shareholder of the
Company shall be entitled to inspect the accounting records of the Company.
15.4 Remuneration of Auditors. The directors may set the remuneration of any
auditor of the Company.
B-15
PART 16 - SENDING OF RECORDS
----------------------------
16.1 Manner of Sending Records. Unless the Business Corporations Act requires
otherwise, a record may be sent:
(a) to the Company by delivery or mail to the Company at the
delivery address or mailing address of its registered office
or by fax or e-mail to a fax number or e-mail address
specified by the Company for that purpose;
(b) to a director by delivery or mail to the director at the
prescribed address of that director or by fax or e-mail to
the fax or e-mail address specified for that purpose by the
director;
(c) to a shareholder by delivery or mail to the shareholder at
the registered address of that shareholder or by fax or
e-mail to the fax or e-mail address specified for that
purpose by the shareholder; or
(d) to the person entitled to a share in consequence of the death
or bankruptcy of a shareholder by delivery or mail or by fax
or e-mail to that person at the address specified for that
purpose by the person so entitled and until that address, fax
number or e-mail address has been so specified, the record
may be sent in any manner in which it might have been sent if
the death or bankruptcy had not occurred.
16.2 Sending to Joint Holders. A record may be sent by the Company to joint
shareholders in respect of a share registered in their names by sending the
record to the joint shareholder first named in the central securities register
in respect of that share.
16.3 Notice to Trustees. A notice, statement, report or other record may be
provided by the Company to the persons entitled to a share in consequence of
the death, bankruptcy or incapacity of a shareholder by:
(a) mailing the record, addressed to such person:
(i) by name, by the title of the legal personal
representative of the deceased or incapacitated shareholder,
by the title of trustee of the bankrupt shareholder or by any
similar description; and
(ii) at the address, if any, supplied to the Company for that
purpose by the persons claiming to be so entitled; or
(b) if an address referred to in paragraph (a)(ii) has not been
supplied to the Company, by giving the notice in a manner in
which it might have been given if the death, bankruptcy or
incapacity had not occurred.
16.4 Date Record Deemed Received. If a record is sent by mail, postage prepaid,
that record is deemed to have been received on the day, Saturdays, Sundays and
holidays excepted, following the date of mailing. If a record is sent by fax,
e-mail or any other manner of transmitting visually recorded messages, that
record is deemed to have been received on the day it is sent if received before
or during statutory business hours that day and is deemed to have been received
on the day, Saturdays and holidays excepted, following the date it is sent if
received after statutory business hours or on a Saturday or holiday.
PART 17 - NOTICES
-----------------
17.1 Minimum Number of Days. Notice of a general meeting must be sent to all
shareholders holding shares that carry the right to vote at general meetings at
least 14 days before the general meeting. Notice of a class or series meeting
must be sent to all shareholders holding shares of that class or series at
least 14 days before the class or series meeting.
B-16
17.2 Persons to Receive Notice. Notice of every general meeting must be sent
to:
(a) every shareholder holding a share or shares carrying the
right to vote at that meeting on the record date or, if no
record date was established by the directors, on the date the
notice is sent;
(b) the personal representative of a deceased shareholder if
entitled to notice by the Business Corporations Act;
(c) the trustee in bankruptcy of a bankrupt shareholder if
entitled to notice by the Business Corporations Act;
(d) every director; and
(e) the auditor, if any.
No other person is entitled to receive notices of general meetings.
17.3 Manner of Sending Notice. Any notice required or permitted by the Business
Corporations Act, the regulations or these articles to be sent by or to a
person may be sent in any manner prescribed for the sending of a record by the
Business Corporations Act, the regulations or these articles and the provisions
of section 6 and 7 of the Business Corporations Act shall apply to such notice
as if such notice were a record as defined in the Interpretation Act of British
Columbia.
PART 18 - EXECUTION OF DOCUMENTS
--------------------------------
18.1 Seal Optional. The directors may provide a common seal for the Company and
may provide for its use. The directors have power to destroy the common seal
and may provide a new common seal.
18.2 Official Seal. The directors may provide for use in any other province,
state, territory or country an official seal that must have on its face the
name of the province, state, territory or country where it is to be used.
18.3 Affixing of Seal to Documents. The directors must provide for the safe
custody of each of the Company's seals, if any, which shall not be affixed to
any instrument except by the authority of a resolution of the directors and by
such person or persons as may be prescribed in and by that resolution and the
person or persons so prescribed must sign every instrument to which the seal of
the Company is affixed in his, her or their presence, provided that a
resolution directing the general use of a seal, if any, may at any time be
passed by the directors and applies to the use of that seal until countermanded
by another resolution of the directors. In the absence of any resolution so
authorizing the use of any seal, any seal of the Company may be affixed to any
document that requires the seal of the Company in the presence of all the
directors.
PART 19 - INDEMNIFICATION
-------------------------
19.1 Definitions. In this Part 19:
(a) "associated corporation" means a corporation or entity that
(i) is or was an affiliate of the Company;
(ii) is a corporation, other than the Company, for which
the eligible party is or was a director, alternate
director or officer, at the request of the Company,
or
(iii) is a partnership, trust, joint venture or other
unincorporated entity for which the eligible party
holds or held a position equivalent to that of a
director or officer at the request of the Company;
(b) "eligible party" means a person who is or was a director,
alternate director or officer of the Company;
B-17
(c) "eligible penalty" means a judgment, penalty or fine awarded
or imposed in, or an amount paid in settlement of, an
eligible proceeding;
(d) "eligible proceeding" means a proceeding in which an eligible
party or any of the heirs and legal personal representatives
of the eligible party, by reason of the eligible party being
or having been a director, alternate director or officer or
holding or having held a position equivalent to that of a
director, alternate director or officer of the Company or an
associated corporation
(i) is or may be joined as a party, or
(ii) is or may be liable for or in respect of a judgment,
penalty or fine in, or expenses related to, the
proceeding;
(e) "expenses" includes costs, charges and expenses, including
legal and other fees, but does not include judgments,
penalties, fines or amounts paid in settlement of a
proceeding;
(f) "proceeding" includes any legal proceeding or investigative
action, whether current, threatened, pending or completed.
19.2 Mandatory Indemnification of Eligible Parties. To the extent the Company
is not so prohibited by the Business Corporations Act, the Company must
indemnify each eligible party and the heirs and legal personal representatives
of each eligible party against all eligible penalties to which each eligible
party is or may be liable, and the Company must, after the final disposition of
an eligible proceeding pay the expenses actually and reasonably incurred by
each eligible party in respect of that proceeding. Each eligible party is
deemed to have contracted with the Company on the terms of the indemnity
contained in this Part 19.
19.3 Non-Compliance with Business Corporations Act. The failure of each
eligible party to comply with the Business Corporations Act or these Articles
does not invalidate any indemnity to which he or she is entitled under this
Part.
19.4 Advance Expenses. Unless prohibited by applicable law or court order, the
Company must pay, as they are incurred, in advance of the final disposition of
an eligible proceeding, the expenses actually and reasonably incurred by an
eligible party in respect of the eligible proceeding provided that the Company
shall not make such payments unless the Company first receives from the
eligible party a written undertaking that, if it is ultimately determined that
the payment of expenses is prohibited by applicable law, the eligible party
must repay the amounts advanced.
19.5 Indemnity Restricted. Despite any other provision of this Part 19, the
Company is not obliged to make any payment that is prohibited by the Business
Corporations Act or by court order in force at the date the payment is made.
19.6 Company May Purchase Insurance. The Company may purchase and maintain
insurance for the benefit of any person (or his or her heirs or legal personal
representatives) who:
(a) is or was serving as a director, alternate director or
officer of the Company;
(b) is or was serving as a director, alternate director or
officer of any associated corporation; or
(c) at the request of the Company, holds or held a position
equivalent to that of a director or officer of a partnership,
trust, joint venture or other unincorporated entity against
any liability incurred by him or her in such equivalent
position.
B-18
PART 20 - AUTHORIZED SHARE STRUCTURE
------------------------------------
20.1 Described in Notice of Articles. The authorized share structure of the
Company consists of shares of the class or classes and series, if any,
described in the Notice of Articles of the Company.
PART 21 - RESTRICTIONS ON BUSINESS OR POWERS
--------------------------------------------
21.1 No Restrictions. There are no restrictions on the business to be carried
on or the powers to be exercised by the Company.
_______________________________________________
Signature of Incorporator
_______________________________________________
Print Full Name of Incorporator
DATE:__________________________________________
B-19
APPENDIX "C"
CORPORATE GOVERNANCE DISCLOSURE OF
PAN AMERICAN SILVER CORP.
---------------------------------------------------- ----------------------------------------------------------------
Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
---------------------------------------------------- ----------------------------------------------------------------
1. Board of Directors
(a) Disclose the identity of directors The following members of the board of directors (the "Board") of
who are independent. Pan American Silver Corporation (the "Company") are considered to
be "independent", within the meaning of the Corporate Governance
Disclosure Rules:
William A. Fleckenstein - independent
Michael Larson - independent
Michael J.J. Maloney - independent
Paul B. Sweeney - independent
John M. Willson - independent
John H. Wright - independent - former President and COO of the
Company (resigned July 2003)
---------------------------------------------------- ------------------------------------------------------------------
(b) Disclose the identity of directors who o Ross J. Beaty - not independent - compensated member of the
are not independent, and describe executive of the Company from April of 1994 to present
the basis for that determination.
o Geoffrey A. Burns - not independent - current President and
CEO of the Company
o Mr. Wright is independent for the purposes of the Corporate
Governance Disclosure Rules, but will not be considered
independent under Nasdaq rules until July 2006.
---------------------------------------------------- ------------------------------------------------------------------
(c) Disclose whether or not a majority of A majority of the Company's directors are independent - Five of
directors are independent. If a majority eight current directors qualify as independent for the
of directors are not independent, purposes of the Corporate Governance Disclosure Rules and the
describe what the Board does to Nasdaq rules.
facilitate its exercise of independent
judgment in carrying out its
responsibilities.
---------------------------------------------------- ------------------------------------------------------------------
C-1
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Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
---------------------------------------------------- ----------------------------------------------------------------
(d) If a director is presently a director of o Ross Beaty - member of the board of directors of Lumina
any other issuer that is a reporting Resources, Regalito Copper and Global Copper Corp.
issuer (or the equivalent) in the same
jurisdiction or a foreign jurisdiction, o Michael Larson - member of the board of trustees of
identify both the director and the other Western Asset/Claymore US Treasury Inflation
issuer. Protected Securities Fund and Western Asset/Claymore
US Treasury Inflation Protected Securities Fund (II).
o Paul Sweeney - member of the board of directors of
Newgold Inc., Pacific Rim Mining Corp. and Polaris
Minerals Corporation.
o John Willson - member of the board of directors of Aber
Diamond Corporation, Finning International Inc. and Nexen
Inc.
o John Wright - member of the board of directors of
Regalito Copper, Global Copper Corp. and Northern Peru.
---------------------------------------------------- ------------------------------------------------------------------
(e) Disclose whether or not the independent Yes. Following each board of directors meetings, the independent
directors hold regularly scheduled members of the Board hold in-camera meetings at which which
meetings at which non-independent non-independent directors and members of management are not in
directors and members of management are attendance.
not in attendance. If the independent
directors hold such meetings, disclose
the number of meetings held since the
beginning of the issuer's most recently
completed financial year. If the
independent directors do not hold such
meetings, describe what the Board does to
facilitate open and candid discussion
among its independent directors.
---------------------------------------------------- ------------------------------------------------------------------
(f) Disclose whether or not the chair of the Ross J. Beaty is the Chair of the Board and is not independent.
Board is an independent director. If the William Fleckenstein, an independent director, has been appointed
Board has a chair or lead director who is lead director. Michael J.J. Maloney, an independent director, is
an independent director, disclose the the Chairman of the Nominating and Governance Committee.
identity of the independent chair or lead
director, and describe his or her role and The Board has adopted a position description for the lead
responsibilities. If the Board has neither director, which was recommended for adoption by the Board by the
a chair that is independent nor a lead Nominating and Governance Committee. The lead director's primary
director that is independent, describe what responsibility is to ensure that the Board functions independent
the Board does to provide leadership for of management and to act as principal liaison between the
its independent directors. independent directors and the Chief Executive Officer. Attached
hereto as Schedule "A" is the "Mandate of the Lead Director".
---------------------------------------------------- ------------------------------------------------------------------
C-2
---------------------------------------------------- ----------------------------------------------------------------
Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
---------------------------------------------------- ----------------------------------------------------------------
(g) Disclose the attendance record of each For the financial year ended December 31, 2005, the Board held
director for all Board meetings held 5 Board meetings. The following is a list of the directors'
since the beginning of the issuer's attendance records:
most recently completed financial year. Ross J. Beaty - attended 5 of 5 Board meetings
Geoffrey A. Burns - attended 5 of 5 Board meetings
William A. Fleckenstein - attended 5 of 5 Board meetings and 2
of 2 independent Board meetings
Michael Larson - attended 5 of 5 Board meetings and 2 of 2
independent Board meetings
Michael J.J. Maloney - attended 5 of 5 Board meetings and 2 of
2 independent Board meetings
Paul B. Sweeney - attended 5 of 5 Board meetings and 2 of 2
independent Board meetings
John M. Willson - attended 5 of 5 Board meetings and 2 of 2
independent Board meetings
John H. Wright - attended 5 of 5 Board meetings and 2 of 2
independent Board meetings
---------------------------------------------------- ------------------------------------------------------------------
2. Board Mandate
Disclose the text of the Board's written mandate. The Board has adopted a formal written mandate which defines its
If the Board does not have a written mandate, stewardship responsibilities. The terms of the Board of Directors
describe how the Board delineates its role and Mandate are attached hereto as Schedule "B"
responsibilities.
---------------------------------------------------- ------------------------------------------------------------------
3. Position Descriptions
(a) Disclose whether or not the Board The Board has adopted a written position description for the chair
has developed written position of the Board, which is attached hereto as Schedule "C" and tilted
descriptions for the chair and the "Mandate of the Chairman of the Board".
chair of each Board committee.
If the Board has not developed As the chairman of the Board is not independent, a lead director
written position descriptions for has been appointed and given a mandate (see 1(f) above).
the chair and/or the chair of
each Board committee, briefly The chair of each committee has been provided with a mandate for
describe how the Board delineates the committee and has accepted leadership responsibilities for
the role and responsibilities of ensuring fulfilment of the applicable mandate. Each chair is
each such position. sufficiently skilled through education and experience to lead the
respective committee.
---------------------------------------------------- ------------------------------------------------------------------
(b) Disclose whether or not the Board and The Board has adopted a written position description for the chief
CEO have developed a written position executive officer, which is attached hereto as Schedule "D" and
description for the CEO. If the Board tilted "Mandate of the Chief Executive Officer".
and CEO have not developed such a
position description, briefly
describe how the Board delineates the
role and responsibilities of the CEO.
---------------------------------------------------- ------------------------------------------------------------------
C-3
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Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
---------------------------------------------------- ----------------------------------------------------------------
4. Orientation and Continuing Education
(a) Briefly describe what measures Each new director, on joining the Board, is given an outline
the Board takes to orient new of the nature of the Company's business, its corporate
directors regarding (i) the role of strategy, current issues within the Company, the expectations
the Board, its committees and its of the Company concerning input from directors and the
directors, and (ii) the nature and general responsibilities of the Company's directors. Each new
operation of the issuer's business. director is given a board manual which includes all Board
policies and mandates. New directors are required to meet
with management of the Company to discuss and better
understand the business of the Company and will be advised by
counsel to the Company of their legal obligations as
directors of the Company. Directors have been and will
continue to be given tours of the Company's mines and
development sites to give such directors additional insight
into the Company's business.
---------------------------------------------------------------------------------------------------------------------
(b) Briefly describe what measures, Directors have been and will continue to be given tours of
if any, the Board takes to provide the Company's silver mines and development sites to give such
continuing education for its directors additional insight into the Company's business. In
directors. If the Board does not addition, the General Counsel of the Company has the
provide continuing education, responsibility of circulating to the Board members, on a
describe how the Board ensures that quarterly basis, a memorandum summarizing new and evolving
its directors maintain the skill precedents applicable to directors of public companies with
and knowledge necessary to meet respect to their conduct, duties and responsibilities.
their obligations as directors.
---------------------------------------------------------------------------------------------------------------------
5. Ethical Business Conduct
(a) Disclose whether or not the As part of its stewardship responsibilities, the Board has
Board has adopted a written code approved a formal "Code of Ethical Conduct" (the "Code") that
for the directors, officers and is designed to deter wrong-doing and to promote honest and
employees. If the Board has adopted ethical conduct and full, accurate and timely disclosure. The
a written code: (i) disclose how a Code is applicable to all the Company"s directors, officers
person or company may obtain a copy and employees. The Board monitors compliance with the Code
of the code; (ii) describe how the and is responsible for the granting of any waivers from these
Board monitors compliance with its standards to directors or executive officers. Disclosure will
code, or if the Board does not be made by the Company of any waiver from these standards
monitor compliance, explain whether granted to the Company"s directors or executive officers in
and how the Board satisfies itself the Company"s quarterly report that immediately follows the
regarding compliance with its code; grant of such waiver.
and (iii) provide a cross-reference
to any material change report filed There has been no conduct of a director or executive officer
since the beginning of the issuer's that constitutes a departure from the Code, and no material
most recently completed financial change report in that respect has been filed.
year that pertains to any conduct
of a director or executive officer
that constitutes a departure from
the code.
---------------------------------------------------------------------------------------------------------------------
C-4
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Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
-----------------------------------------------------------------------------------------------------------------------
(b) Describe any steps the Board Directors must disclose to the General Counsel any instances
takes to ensure directors exercise in which they perceive they have a material interest in any
independent judgment in matter being considered by the Board; and if it is determined
considering transactions and there is a conflict of interest, or that a material interest
agreements in respect of which a is held, the conflict must be disclosed to the Board. In
director or executive officer has addition, the interested Board member must refrain from
a material interest. voting and exit the meeting while the transaction at issue is
being considered by the Board.
----------------------------------------------------------------------------------------------------------------------
(c) Describe any other steps the The Company's Nominating and Governance Committee is
Board takes to encourage and responsible for setting the standards of business conduct
promote a culture of ethical contained in the Code and for overseeing and monitoring
business conduct. compliance with the Code. The Code also sets out mechanisms
for the reporting of unethical conduct.
The Board sets the tone for ethical conduct throughout the
Company by considering and discussing ethical considerations
when reviewing the corporate transactions of the Company.
----------------------------------------------------------------------------------------------------------------------
6. Nomination of Directors
(a) Describe the process by which The Nominating and Governance Committee identifies, reviews
the Board identifies new the qualifications of and recommends to the Board possible
candidates for Board nomination. nominees for election or re-election to the Board at each
annual general meeting of the Company and identifies, reviews
(b) Disclose whether or not the the qualifications of and recommends to the Board possible
Board has a nominating committee candidates to fill vacancies on the Board between annual
composed entirely of independent general meetings. The Nominating and Governance Committee
directors. If the Board does not also annually reviews and makes recommendations to the Board
have a nominating committee with respect to the composition of the Board.
composed entirely of independent
directors, describe what steps the All members of the Nominating and Governance Committee are
Board takes to encourage an outside, non-management and independent directors in
objective nomination process. accordance with the Corporate Governance Disclosure Rules and
the Nasdaq Rules.
(c) If the Board has a nominating
committee, describe the The Nominating and Governance Committee oversees the
responsibilities, powers and effective functioning of the Board and annually reviews and
operation of the nominating makes recommendations to the Board with respect to: (i) the
committee. composition of the Board; (ii) the appropriateness of the
committees of the Board, their mandates and responsibilities
and the allocation of directors to such committees; and (iii)
the appropriateness of the terms of the mandate and
responsibilities of the Board.
--------------------------------------------------------------------------------------------------------------------
C-5
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Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
-----------------------------------------------------------------------------------------------------------------------
7. Compensation
(a) Describe the process by which The Company's Director of Human Resources and Compensation
the Board determines the Committee reviews overall compensation policies and makes
compensation for the issuer's recommendations to the Board on the compensation of executive
directors and officers. officers.
(b) Disclose whether or not the The Compensation Committee is comprised of two directors,
Board has a compensation committee both of whom are independent directors for the purposes of
composed entirely of independent the TSX Guidelines and the Nasdaq rules. The Chairman of the
directors. If the Board does not Compensation Committee is John M. Willson.
have a compensation committee
composed entirely of independent The Compensation Committee determines the salary and benefits
directors, describe what steps the of the executive officers of the Company, determines the
Board takes to ensure an objective general compensation structure, policies and programs of the
process for determining such Company, administers the Company's Annual Incentive Plan,
compensation. Long-Term Incentive Plan and Stock Option and Stock Bonus
Plan, and delivers an annual report to shareholders on
(c) If the Board has a executive compensation. In addition, the Compensation
compensation committee, describe Committee reviews and makes recommendations to the Board for
the responsibilities, powers and approval with respect to the annual and long term corporate
operation of the compensation goals and objectives relevant to determining the compensation
committee. of the President and CEO and the Chairman of the Board.
(d) If a compensation consultant
or advisor has, at any time since
the beginning of the issuer's most
recently completed financial year,
been retained to assist in
determining compensation for any
of the issuer's directors and
officers, disclose the identity of
the consultant or advisor and
briefly summarize the mandate for
which they have been retained. If
the consultant or advisor has been
retained to perform any other work
for the issuer, state that fact
and briefly describe the nature of
the work.
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C-6
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Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
-----------------------------------------------------------------------------------------------------------------------
8. Other Board Committees
If the Board has standing committees other The Board also has a Health, Safety and Environment Committee
than the audit, compensation and nominating which consists of eight directors (all of the members of the
committees, identify the committees and Board). The Company recognizes that proper care of the
describe their function. environment is integral to its existence, its employees, the
communities in which is operates and all of its operations.
The Health, Safety and Environment Committee ensures that an
audit is made, not less than annually, of all construction,
remediation and active mines. The results of such audits are
reported to the Health, Safety and Environment Committee as
is the progress on any significant remediation efforts. The
Health, Safety and Environment Committee ensures that strict
policies with respect to the health and safety of its
employees are in place at each of its operations and that
such policies are vigorously enforced.
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C-7
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Governance Disclosure Guidelines under
National Instrument 58-101 Disclosure of
Corporate Governance Practices Comments
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9. Assessments
Disclose whether or not the board, The Chairman of the Board and the CEO are assessed each year
its committees and individual on the basis of the objectives set out by the Board for their
directors are regularly assessed respective positions, their individual performance throughout
with respect to their the year and their ability to execute on long-term strategy.
effectiveness and contribution. If The Chairman and the CEO are assessed first by the
assessments are regularly Compensation Committee and then by the Board as a whole.
conducted, describe the process
used for the assessments. If The Board has also appointed a Nominating and Governance
assessments are not regularly Committee, which proposes and makes recommendations to the
conducted, describe how the board Board with respect to: (i) the composition of the Board; (ii)
satisfies itself that the board, the appropriateness of the committees of the Board, their
its committees, and its individual mandates and responsibilities and the allocation of directors
directors are performing to such committees; and (iii) the appropriateness of the
effectively. terms of the mandate and responsibilities of the Board.
During 2005, the Nominating and Governance Committee, in
consultation with the entire Board, undertook to formally
establish the roles and responsibilities of each of the Lead
Director, the Chairman of the Board and the CEO and determine
against what criteria each such position should be assessed.
To date, the Board and the Nominating and Governance
Committee have not assessed the effectiveness of each member
of the Board or the Board as a whole. Each Board member is
significantly qualified through their current or previous
professions and no member has failed to attend any meeting of
the Board or a committee thereof. Each member fully
participates in each meeting having in all cases been
specifically canvassed for their input.
The Nominating and Governance committee, having been
satisfied with the performance of the Board will, as it is
now deemed appropriate, develop a more formal process, which
will include periodic confidential surveys and assessments of
the directors, the Board as a whole and the committees of the
Board.
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C-8
SCHEDULE "A"
PAN AMERICAN SILVER CORP.
(the "Company")
MANDATE OF THE LEAD DIRECTOR
The board of directors of the Company (the "Board") has created the position of
Lead Director, to be filled when the chairman of the Board is not an
independent member of the Board within the meaning of applicable corporate
governance regulations. The Lead Director's primary responsibility will be to
ensure that the Board functions independent of management and to act as
principal liaison between the independent directors and the Chief Executive
Officer.
DUTIES AND RESPONSIBILITIES
1. The Lead Director will preside as chair over all meetings of the
independent directors that are held in the absence of management, and
determine the procedure taken at such meetings.
2. In consultation with the Chairman of the Board, the Lead Director will
review and make recommendations with respect to the agenda for all of the
meetings of the full board.
3. At any time during a meeting of the Board, the Lead Director may request
that the independent directors meet in the absence of members of
management. Upon such request, the Chairman of the Board shall cause the
ordinary business of the Board to be halted to permit the meeting to take
place and the ordinary business of the Board shall not resume until such
meeting has concluded.
4. The Lead Director, in cooperation with the Chairman of the Board and the
other directors, shall provide the leadership necessary to provide greater
assurance that:
a) the responsibilities of the Board and its committees are well
understood by the members and management of the company;
b) the Board works as a cohesive team;
c) adequate resources and timely and relevant information are
available to the Board to support its work;
d) the effectiveness of the board and its committees is assessed on
a regular basis;
e) the Board's committee structure and committee mandates are
appropriate and adequate to support the discharge of the Board's
responsibilities; and
f) the scheduling, organization and procedures of the Board and
committee meetings provide adequate time for due consideration
and serious discussion of relevant issues.
The mandate of the Lead Director shall be reviewed by the Board, or
one of its committees, at least once a year.
C-9
SCHEDULE "B"
PAN AMERICAN SILVER CORP.
(the "Company")
BOARD OF DIRECTORS MANDATE
STEWARDSHIP RESPONSIBILITY
A. Subject to the Memorandum and Articles of the Company and applicable
law, the Board of Directors of the Company (the "Board") has a
responsibility for the stewardship of the Company, including the
responsibility to:
(i) supervise the management of and oversee the conduct of business
of the Company;
(ii) provide leadership and direction to management;
(iii) evaluate management;
(iv) set policies appropriate for the business of the Company; and
(v) approve corporate strategies and goals.
BOARD COMPOSITION AND MEETINGS
A. A majority of the Board shall be unrelated to the Company.
For the purposes of this Mandate, an "unrelated director" means a
director who is independent of the management of the Company and is
free from any interest and any business or other relationship which
could, or could reasonably be perceived to, materially interfere
with the director's ability to act with a view to the best interests
of the Company, other than interests and relationships arising from
shareholdings.
B. The directors will be elected each year by the shareholders of the
Company at the annual general meeting of shareholders. The Nominating
and Governance Committee will recommend to the full Board nominees for
election to the Board and the Board will propose a slate of nominees to
the shareholders for election as directors for the ensuing year.
C. Immediately following each annual general meeting, the Board shall:
(i) elect a Chairman of the Board and, when desirable, a lead
director of the Board, and establish their duties and
responsibilities;
(ii) appoint the President and CEO of the Company and establish their
duties and responsibilities;
(iii) on the recommendation of the CEO, appoint the senior officers of
the Company and approve the senior management structure of the
Company;
(iv) appoint a nominating and governance committee, an audit
committee, a compensation committee and a health, safety and
environment committee; and
(v) approve the mandate, duties and responsibilities of each
committee of the board of directors;
D. The Board shall be responsible for monitoring the performance of the
President and CEO, and for determining the compensation of the President
and CEO.
C-10
E. From time to time, the Board may appoint special committees to assist
the Board in connection with specific matters.
F. The Board shall meet not less than four times during each year and will
endeavour to hold one meeting in each financial quarter. The Board will
also meet at any other time at the call of the Chairman of the Board or,
subject to the Memorandum and Articles of the Company, of any director.
POSITION DESCRIPTIONS
A. The Board will ensure the Company has management of the highest calibre.
This responsibility is carried out primarily by:
(i) appointing the President as the Company's business leader and
developing criteria and objectives against which the Board will
assess, on an ongoing basis, the President's performance;
(ii) developing position descriptions for the Chairman of the Board
and the chair of each board committee and, with the CEO,
developing position descriptions for the President and CEO, and
regularly assessing those appointed individuals against such
descriptions; and
(iii) developing and approving corporate objectives which the CEO is
responsible for meeting, and assessing the CEO against these
objectives.
B. A principal responsibility of the Chairman of the Board will be to
manage and act as the chief administrative officer of the Board with
such duties and responsibilities as the Board may establish from time to
time. The Chairman of the Board need not be independent of management.
C. The principal duties and responsibilities of the lead director will be
as established by the Board from time to time. The lead director will be
independent of management.
D. The Board will ensure that proper limits are placed on management's
authority.
STRATEGIC PLANNING PROCESS AND RISK MANAGEMENT SYSTEM
A. The Board is responsible for adopting, supervising and providing
guidance on the strategic planning process and approving a strategic
plan which takes into account, among other things, the opportunities and
risks of the Company's business.
B. The President and senior management team will have direct responsibility
for the ongoing strategic planning process and the establishment of long
term goals for the Company, which are to be reviewed and approved not
less than annually by the Board.
C. The Board will have a continuing understanding of the principal risks
associated with the business, largely through continuous communication
with management. The Board will ensure the implementation of appropriate
systems to manage any such risks.
D. The Board will provide guidance to the President and senior management
team with respect to the Company's ongoing strategic plan. The Board is
responsible for monitoring the success of management in implementing the
approved strategies and goals.
INTERNAL CONTROLS AND MANAGEMENT INFORMATION SYSTEMS
A. Through the President and CEO, management will establish systems to
ensure that appropriate and responsible levels of internal controls are
in place for the Company. The confidence of the Board in the ability and
integrity of management is the paramount control mechanism.
C-11
COMMUNICATIONS POLICY
A. The Board will monitor and review annually the policies and procedures
that are in place to provide for effective communication by the Company
with its shareholders and with the public generally, including:
(i) effective means to enable shareholders to communicate with senior
management and the Board; and
(ii) effective channels by which the Company will interact with
analysts and the public.
B. The Board will approve the content of the Company's major communications
to shareholders and the investing public, including interim and annual
reports, the Management Information Circular, the Annual Information
Form, any prospectuses that may be issued and significant press
releases.
C. The Board will maintain a Corporate Disclosure Policy which summarizes
its policies and practices regarding disclosure of material information
to investors, analysts and the media.
SUCCESSION PLANNING
A. The Board will keep in place, and review regularly, adequate and
effective succession plans for the Chairman, President and senior
management personnel (including appointing, training and monitoring
senior management).
BOARD INDEPENDENCE
A. The Board will provide for the independent functioning of the Board. The
Board will implement appropriate structures and procedures to ensure
that the Board can function independently of management at such times as
is desirable or necessary through:
(i) the recruitment of strong, independent directors, who shall
compose a majority of the Board;
(ii) the appointment of a committee of directors independent of
management;
(iii) the appointment of a lead director who is not a member of
management; and
(iv) the institution of regular meetings of independent directors at
every quarterly Board meeting, without the presence of management
and which is chaired by the lead director.
B. All directors will have open access to the Company's senior management.
C. The Board encourages individual directors to make themselves available
for consultation with management outside Board meetings in order to
provide specific advice and counsel on subjects where such directors
have special knowledge and experience.
NEW DIRECTOR ORIENTATION AND CONTINUING EDUCATION
A. The Nominating and Governance Committee, in conjunction with the
Chairman and President, is responsible for ensuring that new directors
are provided with an orientation and education program.
B. The details of the orientation of each new director will be tailored to
that director's individual needs and areas of interest.
C. The Board will assist the Nominating and Governance Committee in
establishing and maintaining an ongoing director education program.
C-12
GENERAL OBLIGATIONS
A. Approve all capital plans and establish priorities for the allocation of
funds to ongoing operations and capital projects.
B. Approve all single expenditure items proposed by the Company exceeding
$2,000,000 not provided for in any approved capital plan.
C. Approve any policy for hedging and forward sales of silver and/or base
metals.
D. Approve any policy for management of foreign currency risk.
E. Approve the annual budget.
F. Attend, prepare for and be actively involved in regular Board meetings
and, if applicable, Board committee meetings.
G. Develop the Company's approach to corporate governance, including
developing a set of corporate governance principles and guidelines that
are specifically applicable to the Company.
H. Adopt and monitor, through the Nominating and Governance Committee, a
formal code of business ethics that will govern the behaviour of
directors, officers and employees of the Company, and, in appropriate
circumstances, grant waivers from such code of business conduct.
INDEPENDENT ADVISORS
A. The Board and any committees may at any time retain outside financial,
legal or other advisors at the expense of the Company. Any director may,
subject to the approval of the Chairman of the Board, retain an outside
advisor at the expense of the Company.
C-13
SCHEDULE "C"
PAN AMERICAN SILVER CORP.
(the "Company")
MANDATE OF THE CHAIRMAN OF THE BOARD
In addition to the responsibilities and specific duties set out in the Board
Mandate, the chairman of the board of directors (the "Chairman") of the Company
has the responsibilities and duties described below.
GLOBAL STATEMENT
The Chairman provides effective leadership to the board of directors (the
"Board") in the governance of the Company. The Chairman sets the "tone" for the
Board and its members to foster ethical and responsible decision-making,
appropriate oversight of management and best corporate governance practices.
A principal responsibility of the Chairman of the Board will be to manage and
act as the chief administrative officer of the Board with such duties and
responsibilities as the Board may establish from time to time.
APPOINTMENT
1. The Chairman will:
(a) be a duly elected or appointed member of the Board;
(b) be appointed as Chairman by the Board each year; and
(c) have the competencies and skills recommended by the Compensation
and Nominating and Governance Committees, respectively.
2. The performance of the Chairman will be evaluated annually by the
Board and the Chairman may be removed or replaced at any time by the
Board if the Chairman's performance does not meet the expectations of
the Board.
DUTIES AND RESPONSIBILITIES
1. The Chairman shall have the following responsibilities:
(a) with the Board, to lead, manage and organize the Board,
consistent with the approach to corporate governance practices
adopted by the Board from time to time and to ensure the Board is
accountable for the Company's overall approach to governance
issues;
(b) except as otherwise authorized by the by-laws of the Company, to
preside as chair at all meetings of the Board and shareholders;
(c) to ensure that the shareholders meet at least once annually and
as many additional times as required by law;
(d) with the Chief Executive Officer ("CEO"), to set the agenda of
the Board and shareholders' meetings in consultation with the
corporate secretary of the Company;
(e) to ensure that all business set out in the agendas of Board
meetings is discussed and brought to resolution, as required;
(f) to assist the committees and committee chairs to bring important
issues forward to the Board for consideration and resolution;
(g) to provide the Board, the Board committees and individual
directors with leadership to assist them to carry out their
duties and responsibilities effectively and efficiently, and
independently from management;
(h) to ensure that the Board meets in separate, regularly scheduled,
non-management, in-camera sessions;
(i) to ensure the responsibilities of the Board are effectively
carried out in compliance with the Board Mandate and that the
functions of the Board delegated to committees of the Board are
carried out by the committees and reported to the Board and
recorded as such;
(j) together with the CEO and the nominating and governance
committee, to actively participate in the recruitment, education
and retention of directors;
(k) to act as a liaison between the Board and the senior management
of the Company including acting as an advisor to the CEO;
(l) to ensure the Board represents and protects the interests of its
shareholders;
(m) to foster ethical and responsible decision-making by the Board,
the Board committees and individual directors;
(n) to ensure that the boundaries between Board and management
responsibilities are clearly understood and respected and that
relationships between Board and management are conducted in a
professional and constructive manner;
(o) with the nominating and governance committee, to respond to
potential conflicts of interest situations;
(p) with the chair of the Nominating and Governance Committee, to
actively participate in and oversee the administration of the
annual evaluation of performance and effectiveness of the Board,
Board committees, all individual directors and committee chairs,
other than that of the Chairman;
(q) to evaluate, once or more annually, as the nominating and
governance Committee decides, this position description and
recommended to the Board for consideration any changes thereto;
(r) at the request of the CEO, to represent the Company to
shareholders and external stakeholders, including local community
groups, government and non-governmental organizations;
(s) to actively participate in the corporate development and growth
of the Company;
(t) to assist the CEO in formulating the Company's corporate mission
statement and overall strategy of the Company;
(u) to assist in securing any financings deemed by the Board to be
necessary for the Company to maintain its operations and
development and assist with the assessment of financing options
including debt, equity and hybrid alternatives;
(v) to assist in ensuring the development of appropriate funding
alternatives with the development of a strategy for negotiating
with debt investors and equity underwriters; and
(w) to carry out such other duties and responsibilities as may be
required of the Chairman by the Board from time to time.
C-14
SCHEDULE "D"
PAN AMERICAN SILVER CORP.
(the "Company")
MANDATE OF THE CHIEF EXECUTIVE OFFICER
In addition to the responsibilities and specific duties set out in the Board
Mandate, the Chief Executive Officer (the "CEO") of the Company has the
responsibilities and duties described below.
GLOBAL STATEMENT
The CEO provides effective leadership and vision for the Company and sets an
example for management to foster ethical and responsible decision-making,
appropriate oversight of management and best corporate governance practices.
The CEO and senior management team will have direct responsibility for the
ongoing strategic planning process and the establishment of long term goals for
the Company, which are to be reviewed and approved not less than annually by
the board of directors of the Company (the "Board").
APPOINTMENT
1. The CEO will:
(a) be a duly elected or appointed member of the Board;
(b) be appointed as CEO by the Board each year; and
(c) have the competencies and skills recommended by the Compensation and
Nominating and Governance Committees, respectively.
2. The performance of the CEO shall be evaluated annually by the Board.
3. The CEO is not "independent" as such term is defined in the document
entitled "Meaning of Director Independence".
DUTIES AND RESPONSIBILITIES
5. The CEO shall report to the Chairman of the Board and be accountable
to the Board and to the committees of the Board as requested from time
to time by the Chairman of the Board and the chairs of the committees
of the Board.
6. The CEO shall be responsible for the management of the affairs of the
Company. The CEO shall have the following specific responsibilities
and these do not, in any way, limit or comprehensively define the
CEO's overall responsibilities for the management of the affairs of
the Company:
(a) to provide leadership and vision to manage the Company in the
best interests of its shareholders;
(b) to provide general supervision and management of the daily and
routine affairs of the Company within the guidelines established
by the Board, consistent with decisions requiring prior approval
of the Board and the Board's expectations of management;
(c) to guide and inspire the employees of the Company, providing the
executive leadership necessary to ensure the long-term success of
the Company;
(d) to provide leadership in establishing the Company's long term
plan in conjunction with the Board;
(e) to communicate in a timely fashion with the Board any matters of
importance affecting the Company and its ability to carry on its
business, to work closely with the chairman of the Board in
setting Board agendas, and to provide timely and relevant
information to the Board to enable the Board to effectively
discharge its obligations;
(f) to assist the Nominating and Governance Committee chair in
developing the Board, Board committee and executive position
mandates;
(g) to assist the Nominating and Governance Committee chair in
developing an orientation program for new directors and a
continuing education program for directors;
(h) to develop and maintain an effective organizational structure
that reflects operational needs and defines the authority and
responsibility of management;
(i) with the compensation committee and director of human resources,
to manage the human resources department, including the
succession planning process, and to make recommendations to the
Board for the appointment of officers of the Company;
(j) to appoint, counsel and monitor the performance of senior
management, and to ensure the Board has regular exposure to
senior management;
(k) with the compensation committee, make recommendations to the
Board on salary levels and bonuses for senior management and
stock options for employees and management;
(l) with the nominating and governance committee and the Board, to
participate in developing the position of CEO, and annually
review and make recommendations to the Board with respect to the
appropriateness of the terms of this position description;
(m) with the compensation committee and the Board, to participate in
developing CEO annual accountabilities consisting of personal and
corporate goals and objectives aligned with the Company's
mission, long term goal and strategic objectives, as well as
indicators to measure the CEO performance, and present them to
the Board for review, and in the Board's discretion, approval;
(n) to ensure that an annual evaluation of CEO performance is
conducted by the nominating and governance committee and the
Board;
(o) to set the ethical tone for the Company and management, including
(i) overseeing the administration and implementation of, and
compliance with, the Company's policies and procedures; (ii) take
all reasonable steps to satisfy the Board as to the integrity of
the CEO and other senior officers; and (iii) take all reasonable
steps to satisfy the Board that the CEO and other senior officers
create a culture of integrity throughout the organization;
(p) with the chief financial officer of the Company, to implement
policies and processes to ensure the integrity of the Company's
internal control, management information systems and financial
reporting;
(q) to serve as an external spokesperson for the Company, including
effectively managing relations with the Company's external
stakeholders, shareholders, customers, creditors, suppliers, the
media, government and non-government organizations;
(r) to ensure compliance with, and suggest to the Board for approval,
any revisions to the communications policy of the Company;
(s) to provide required regulatory certifications regarding the
Company and its activities;
(t) to formulate the Company's corporate mission statement and
overall strategy of the Company;
(u) to ensure that annual objectives, long term and strategic plans,
periodic business, capital and operating plans and budgets for
the Company are developed and recommended to the Board for
approval, and to monitor the corporate performance relative to
the foregoing and provide periodic reports to the Board on such
performance;
(v) to facilitate the securing of any financings deemed by the Board
to be necessary for the Company to maintain its operations and
development and carry out assessments of various financing
alternatives including debt, equity and hybrid options;
(w) to ensure the development of appropriate funding alternatives
with the development of a strategy for negotiating with debt
investors and equity underwriters;
(x) to make regular assessments of the capital structure of the
Company in order to ensure an optimal capital mix of debt and
equity; and
(y) to otherwise ensure the development of policies necessary for the
corporation to achieve its strategy and objectives and recommend
those policies to the Board as appropriate.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, Pan American Silver Corp., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 11, 2006
PAN AMERICAN SILVER CORP.
By:
/s/ Robert Pirooz
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Robert Pirooz
Secretary