The Company's approach to corporate governance is set out below.
Board of Directors
The board currently consists of seven individuals:
Kenneth Holmes
Gerry Diakow
Donald Getty
John Hope
Barry Lee
Gary Payie
Daniel Kostiuk
National Policy 58-201 -- "Corporate Governance Guidelines" (the "Guidelines") suggest that the board of directors of every listed company should be constituted with a majority of individuals who qualify as "independent" directors under National Instrument NI 58-101. Under NI 58-101, which refers in turn to Multilateral Instrument 52-110 -- "Audit Committees", a director is considered independent if he or she has no direct or indirect "material relationship" with Velocity (other than shareholdings) which could, in the view of the Board, reasonably interfere with the exercise of that director's independent judgment. Of the current board, only the Chairman, Kenneth R. Holmes, the President, Gerald Diakow and the Chief Financial Officer, Donald Getty, would be considered "insiders" or management directors and, accordingly, are not considered to be "independent" within the meaning of MI 52-110. The other directors are considered by the Board to be "independent" within the meaning of MI 52-110.
Orientation and Continuing Education
The Board ensures that each new nominee has the competencies, skills and personal qualities required to perform his duty properly, and Company management does provide informal orientation and education to new directors respecting Velocity's history, properties, performance and strategic plans. However, the Board does not have any formal policies with respect to the orientation of new directors, nor does it take any measures to provide continuing education for the directors. At this stage of Velocity's development, and having regard to the background and experience of its directors, the Board does not feel it necessary to have such policies or programs in place.
Ethical Business Conduct
To date, the Board has not adopted a formal written Code of Business Conduct and Ethics. However, the current limited scope of Velocity's operations and the small number of officers and consultants allows the Board to monitor on an ongoing basis the activities of management and to ensure that the highest standard of ethical conduct is maintained. As Velocity grows in size and scope, the Board anticipates that it will formulate and implement a formal Code of Business Conduct and Ethics.
Nomination and Assessment
The Board has not previously had a formal process in place with respect to the recruitment or appointment of new directors. Nominees have historically been recruited by existing Board members, and the recruitment process has involved both formal and informal discussions among Board members. The Board does not have a Nomination Committee.
The Board monitors, but does not formally assess, the performance of individual Board members and their contributions. The Board does not, at present, have a formal process in place for assessing the effectiveness of the Board as a whole, its committees or individual directors, but will consider implementing one in the future should circumstances warrant. Based on Velocity's size, its stage of development and the limited number of individuals on the Board, the Board considers a formal assessment process to be inappropriate at this time.
Compensation
Velocity does not currently have a Compensation Committee. The Board as a whole determines compensation of directors and officers. Except as disclosed elsewhere herein, directors and officers are not compensated for acting as directors or officers, save for being granted incentive stock options. Such options are set within guidelines prescribed by the Exchange. The Board is satisfied that currently outstanding stock options adequately reflect the responsibilities and risks involved in being an effective director of Velocity.
Other Board Committees
At the present time, the only standing committees are the Audit Committee and the Corporate Governance Committee. As Velocity grows, and its operations and management structure became more complex, the Board expects it will constitute additional formal standing committees, such as a Compensation Committee, and will ensure that such committees are governed by written charters and are composed of at least a majority of independent directors.
Audit Committee
As a reporting issuer in British Columbia, Velocity is required to have an audit committee. Daniel Kostiuk, Garry Payie and Barry Lee are currently members of Velocity's audit committee to ensure that the committee consists of at least three directors, the majority of whom are not employees, control persons or officers of Velocity. Velocity has no Executive Committee.
Independence of Audit Committee
Multilateral Instrument 52-110 "Audit Committees" ("MI 52-110") provides that a member of an audit committee is independent if the member has no direct or indirect material relationship with the issuer, which could, in the view of the issuer's board of directors, reasonably interfere with the exercise of the member's independent judgment. All of the members of the audit committee of Velocity are, in the view of the issuer's board of directors, "independent" as that term is defined in MI 52-110.
Financial Literacy of Audit Committee
MI 52-110 provides that an individual is "financially literate" if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the issuer's financial statements. All of the directors of Velocity are financially literate as that term is defined in MI 52-110.
Corporate Governance Committee
The Corporate Governance Committee is appointed by the board to review and assist the board in matters of corporate governance and presently consists of Kenneth Holmes, John Hope and Barry Lee.