Corporate Governance

Evergreen Gaming Corporation is a Publicly Traded Canadian corporation listed on the Toronto Stock Exchange (TSX) under the symbol TNA.  The Stock Exchange regulates corporate governance and disclosures through the British Columbia Securities Commission (BCSC.COM).  In addition, the company is required to file its financial results through regular postings on SEDAR.COM.  Its business operations are conducted in Washington State.  Therefore, the company is licensed and regulated by the Washington State Gambling Commission.

General

“Corporate Governance” refers to the process and structure used to direct and manage the business and affairs of a corporation. The objective is to enhance shareholder value, including ensuring the financial viability of the business. Corporate governance processes and structures define the division of power among the shareholders, the board of directors and management, and establish ways to ensure accountability. They also take into account how the direction and management of the business will affect other stakeholders such as employees, customers, suppliers and communities.

The Canadian Securities Administrators have adopted two National Instruments, 58-201 Corporate Governance Guidelines (“NI 58-201”) and 58-101 Disclosure of Corporate Governance Practices (“NI 58-101”).

NI 58-201 sets forth a set of guidelines or “best practices” for reporting issuers to consider when evaluating their own corporate governance practices. Recognizing that not all of the guidelines set forth in NI 58-201 will be appropriate for all companies, full implementation of the guidelines is not mandated by either NI 58-201 or the TSX Venture Exchange. NI 58-101 mandates the disclosure of the corporate governance practices actually implemented by a reporting company, in certain prescribed disclosure documents.

As the business of the Company is straightforward and its Board is relatively small, the Company’s Corporate Governance practices are at an early stage of evolution. The following describes the Company’s approach to corporate governance, in compliance with NI 58-101.

Board of Directors

The Company’s Board consists of a total of four directors, two of whom, Len Libin and Steve Michels, are not independent. Mr. Libin, who is also the Chairman of the Board, is not independent in that he is an executive officer of the Company. Mr. Michels is not independent in that he receives, directly or indirectly, compensation from the Company for providing management services, as more fully described under “Management Contracts”. The other two directors, Larry Hoff and Laurence Smith, are independent.

In carrying out its responsibilities, the Board has no formal procedures designed to facilitate the exercise of independent supervision over management, relying instead on the integrity of the individual members of its management team to act in the best interests of the Company and its shareholders.

No director of the Company is a director of any other reporting company, or the equivalent, in British Columbia or any other jurisdiction.

The independent directors do not hold regularly scheduled meetings at which non-independent members are not in attendance. The Board has no formal procedures designed to facilitate open and candid discussion among its independent directors, choosing again to rely on the integrity and experience of individual Board members to speak openly and candidly upon matters before the Board. As required, the Board is prepared to function independently of management by referring matters to independent committees and by holding ad hoc meetings without management present.

Since the beginning of the Company’s most recently completed financial year, there have been three meetings of the Board. The attendance record of each director is as follows:

Name of Director Number of Meetings Attended (out of 3)
Leonard Libin 3
Larry Hoff 3
Laurence Smith 3
Steve Michels 3

Board Mandate

The Board does not have a written mandate. Generally, the Board considers its mandate to be the management or supervision of the management of the affairs and business of the Company. The Board considers its specific mandate to include the fixing, implementation and monitoring of policy with respect to strategic planning, communications, succession planning, financial performance and reporting, management compensation and risk identification and management. The Board’s mandate also includes the management of all matters that have not been specifically delegated to senior management or a committee of the Board. Although the Board has delegated to management the responsibility for managing the day-to-day affairs of the Company and certain other management responsibilities, the Board retains a supervisory role in respect of, and ultimate responsibility for, all matters relating to the Company and its business.

Specifically the Board assumes the following responsibilities:

  • strategic planning;
  • succession planning;
  • monitoring of financial performance and financial reporting;
  • reviewing and approving the Company’s operating plans;
  • identifying the principal risks of the Company and reviewing the systems to manage these risks;
  • reviewing and approving the Company’s capital expenditure policy as well as those expenditures that exceed the limits for management approval;
  • reviewing and approving significant operational and financial matters and providing direction to management on these matters;
  • reviewing the Company’s communications policy;
  • reviewing and approving corporate objectives and goals applicable to the senior management personnel of the Company; and
  • management compensation.

Position Descriptions

The Company does not have written position descriptions for its Chairman or the Chairmen of its Committees. The Board delineates the role and responsibilities of each such position through a process of discussion and experience. Generally, each such Chairman is expected to compile the agenda items for each meeting, including receiving input from senior management and others with respect to matters to be discussed, ensure that Board or Committee members are properly notified of meetings and the business to be conducted, provide appropriate background material in advance of each meeting, conduct the business of each meeting in an orderly and business-like manner, and ensure that decisions of each meeting are communicated to the full Board and senior management, as appropriate, in a timely fashion for implementation.

The Company does not have a written position description for the CEO. The Board delineates the role and responsibilities of the CEO through a process of discussion and experience. Generally, the CEO is responsible for the efficient and effective management of the Company’s day-to-day operations. The CEO is expected to oversee the implementation of the Company’s strategic plans, and to ensure that the Board is kept apprised of the Company’s progress in this regard. The CEO is responsible for overseeing management’s system of internal controls and reporting, to obtain reasonable assurance that the Company’s assets are safeguarded, transactions are authorized and financial information is reliable.

Orientation and Continuing Education

The Company does not have a formal process of orientation for new Board members. However, the Company does orient and educate new Board members by providing background information, conducting personal meetings and responding to questions, during the early stages of a new Board member’s involvement with the Company.

The Company does not have a formal process of continuing education for directors. Generally, the Company expects that existing and new Board members will have a general familiarity with the Company’s business, given its straightforward nature. Also, the Company makes its professional advisors available to consult with individual directors and the Board, as needed. The Company also relies on the established qualifications and expertise of its Board members.

Ethical Business Conduct

The Board has not adopted a written code for the Company’s directors, officers and employees with respect to ethical business conduct. To the greatest extent possible, the Company attempts to attract and retain individuals with a well-developed personal code of ethical conduct in both their business and personal lives.

In considering a transaction in which a director has a material interest, the director is required to disclose the nature and extent of his interest to the Board and to abstain from voting on any resolution pertaining to the transaction.

Nomination of Directors

The Board does not have a Nominating Committee to identify new candidates for Board nomination. Potential candidates for appointment to the Board are considered by the Board as a whole, in reliance on the recommendations, qualifications and experience of its members. The Board recognizes that, in accordance with good corporate governance practices, it is desirable to appoint additional members who are independent, and expects to give weight to this consideration in future Board appointments.

Compensation

The Company’s Board does not have a Compensation Committee. All matters related to compensation are considered and settled by the full Board, in reliance on the qualifications and experience of its members. While no specific procedures have been established to ensure an objective process for determining compensation, the Company believes its levels of compensation to be fair and appropriate. The Board has not engaged an outside consultant or advisor to assist in determining compensation for any of the Company’s directors or officers.

Other Board Committees

The Board has no committees other than its audit committee.

Assessments

The Board has no specific procedures for regularly assessing the effectiveness and contribution of the Board, its committees or individual directors. As the business of the Company is relatively straightforward and its Board relatively small, it is expected that a significant lack of performance on the part of a committee or individual director would become readily apparent, and could be dealt with on a case-by-case basis. With respect to the Board as a whole, the Board monitors its performance on an ongoing basis, and as part of that process considers the overall performance of the Company and input from its shareholders.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

No executive officer, director, employee, former executive officer, former director, former employee, proposed nominee for election as a director, or associate of any such person has been indebted to the Company or its subsidiaries at any time since the commencement of the Company’s last completed financial year where such indebtedness remains outstanding at the date of this Information Circular. No guarantee, support agreement, letter of credit or other similar arrangement or understanding has been provided by the Company or its subsidiaries at any time since the beginning of the most recently completed financial year with respect to any such indebtedness of any such person.

The following table sets forth details of the Company’s compensation plans under which equity securities of the Company are authorized for issuance at the end of the Company’s most recently completed financial year.

Plan Category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans

Equity compensation plans approved by securityholders

Nil

N/A

3,600,000

Equity compensation plans not approved by securityholders

Nil

N/A

Nil

Total

Nil

N/A

3,600,000

 

AUDIT COMMITTEE AND RELATIONSHIP WITH AUDITOR

National Instrument 52-110 of the Canadian Securities Administrators (“NI 52-110”) requires the Company, as a venture issuer, to disclose annually in its Information Circular certain information concerning the constitution of its Audit Committee and its relationship with its independent auditor, as set forth in the following.

The Company’s Audit Committee is comprised of three directors, Leonard Libin, Larry Hoff, and Laurence Smith. As defined in NI 52-110, Leonard Libin is not “independent”, while Larry Hoff and Laurence Smith are “independent”. Also as defined in NI 52-110, all of the Audit Committee members are “financially literate”.

Mr. Libin has over 40 years of gaming experience dating back to 1969, as a casino instructor, dealer, supervisor and manager in Alberta and British Columbia. He operated the Grand Casino in Vancouver for 18 years. Mr. Libin and a partner opened the Edgewater Casino in downtown Vancouver in 2005 which was sold to a Nevada gaming company, Paragon Gaming, in September 2006 for $35 million. He was a founder of the Company in October 2006 and remains a major shareholder.

Larry Hoff is a licensed Real Estate Broker in the greater Seattle metropolitan area with more than 35 years of experience in the residential and commercial brokerage business. He has served as a broker at Prudential NW Realty and most recently as the owner of the Larry J. Hoff Realty firm.

Laurence Smith retired in 2010 as Commercial Loan Officer, Banner Bank, a commercial bank with 86 branches, headquartered in Walla Walla, Washington, and was the Company’s Washington State banking advisor for several years.

Since the commencement of the Company’s most recently completed financial year, the Company’s Board of Directors has not failed to adopt a recommendation of the Audit Committee to nominate or compensate an external auditor.

Since the commencement of the Company’s most recently completed financial year, the Company has not relied on the exemptions contained in sections 2.4 or 8 of NI 52-110. NI 52-110 provides that the Audit Committee must pre-approve all non-audit services to be provided by the Company’s auditor. Section 2.4 provides an exemption from this requirement where the total amount of fees related to the non-audit services are not expected to exceed 5% of the total fees payable to the auditor in the fiscal year in which the non-audit services were provided. Section 8 permits a company to apply to a securities regulatory authority for an exemption from the requirements of NI 52-110, in whole or in part.

The Audit Committee has not adopted specific policies and procedures for the engagement of non-audit services. Subject to the requirements of NI 52-110, the engagement of non-audit services is considered by the Company’s Board of Directors, and where applicable the Audit Committee, on a case-by-case basis.