SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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TABLE OF CONTENTS
TLC
VISION CORPORATION
NOTICE OF 2009 ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 19, 2009
NOTICE IS HEREBY GIVEN THAT the 2009 annual and special meeting
of the shareholders of TLC Vision Corporation (the
Company) will be held on June 19, 2009 at
10:00 a.m. Eastern Time at the offices of Torys LLP,
79 Wellington Street West, 33rd Floor, Toronto,
Ontario, for the following purposes:
1. To elect seven directors for the ensuing year;
2. To approve amending and restating the TLC Vision
Corporation Amended and Restated Share Option Plan in its
entirety as the TLC Vision Corporation 2009 Long-Term Incentive
Plan;
3. To approve a one-time option exchange program for
employees other than directors and executive officers;
4. To approve the amendment of the TLC Vision Corporation
Amended and Restated Share Option Plan (as the same may be
amended and restated as the TLC Vision Corporation 2009
Long-Term Incentive Plan) to increase the aggregate number of
common shares reserved for issuance under such plan by
1,000,000 shares to 10,116,000 shares, but only if
item 3 above is not approved by the shareholders;
5. To appoint Ernst & Young LLP as auditors of
the Company for the ensuing year and to authorize the directors
to fix the remuneration to be paid to the auditors;
6. To receive the consolidated financial statements of the
Company for the fiscal year ended December 31, 2008,
together with the report of the auditors thereon; and
7. To transact such further business as may properly come
before the annual and special meeting or any adjournment thereof.
The full text of the resolutions approving items 2, 3 and 4
is contained in Appendix A to the accompanying management
information circular.
The Board of Directors has fixed the close of business on
May 4, 2009 as the record date for determining the
Companys shareholders entitled to notice of and to vote at
the annual and special meeting.
Management of the Company is soliciting the enclosed form of
proxy. Please refer to the accompanying management information
circular for further information with respect to the business to
be transacted at the annual and special meeting. The management
information circular is deemed to be incorporated by reference
in and to form part of this notice.
By Order of the Board of Directors
Brian L. Andrew
General Counsel and Secretary
April 30, 2009
Whether or not you expect to attend the annual and special
meeting, please exercise your right to vote either by
(a) signing and returning the form of proxy to CIBC Mellon
Trust Company, Proxy Dept., P.O. Box 721,
Agincourt, Ontario, M1S 0A1, so as to arrive not later than
5:00 p.m. (Eastern Time) on June 17, 2009 or, if the
meeting is adjourned, 48 hours (excluding Saturdays,
Sundays and holidays) before any adjourned meeting or
(b) by completing the request for voting instructions in
accordance with the directions provided. If you execute a proxy
card, you may still attend the annual and special meeting,
revoke your proxy and vote your shares in person. However,
attending the annual and special meeting in person will not
revoke your proxy unless you follow the procedures explained
under General Proxy Information Revocation of
Proxies in the accompanying management information
circular.
TLC
VISION CORPORATION
MANAGEMENT
INFORMATION CIRCULAR
The information contained in this management information
circular is given as at April 30, 2009, except where
otherwise noted. This management information circular is first
being sent or given to shareholders on or about May 15,
2009. All references to $ shall mean
U.S. dollars and all references to Cdn$ shall
mean Canadian dollars.
Unless the context requires otherwise, the Company,
TLC
Vision
, we, our,
and us, refer to TLC Vision Corporation.
FORWARD-LOOKING
STATEMENTS
This management information circular contains certain
forward-looking statements within the meaning of
Section 27A of the U.S. Securities Act of 1933,
Section 21E of the U.S. Securities Exchange Act of
1934 and Canadian provincial securities laws, which statements
can be identified by the use of forward looking terminology,
such as may, will, expect,
intend, anticipate,
estimate, predict, plans or
continue or the negative thereof or other variations
thereon or comparable terminology referring to future events or
results. We caution that all forward-looking information is
inherently uncertain and that actual results may differ
materially from the assumptions, estimates or expectations
reflected in the forward-looking information. A number of
factors could cause actual results to differ materially from
those in the forward-looking statements, including but not
limited to our ability to continue as a going concern, economic
conditions, the delisting of our common shares, accumulation of
deficits, the level of competitive intensity for laser vision
correction, the market acceptance of laser vision correction,
concerns about potential side effects and long term effects of
laser vision correction, the ability to maintain agreements with
doctors on satisfactory terms, quarterly fluctuation of
operating results that make financial forecasting difficult, the
volatility of the market price of our common shares, the ability
to execute business strategies, profitability of investments,
successful execution of our direct-to-consumer marketing
programs, the ability to open new centers, the ability to
implement and integrate new operations and facilities, the
ability to balance demand for refractive surgery with operating
costs, the reliance on key personnel, medical malpractice claims
and the ability to maintain adequate insurance therefore, claims
for federal, state and local taxes, compliance with industry
regulation, compliance with U.S. and Canadian healthcare
regulations, and disputes regarding intellectual property, many
of which are beyond our control.
Forward-looking information is based on current expectations and
various factors and assumptions applied which we believed to be
reasonable at the time, including but not limited to general
economic and industry growth rates, pricing levels and
competitive intensity, procedure growth, technology deployment,
equipment costs, and industry structure and stability.
Therefore, should one or more of these risks materialize, or
should assumptions underlying the forward-looking statements
prove incorrect, actual results may vary significantly from what
we currently foresee. Accordingly, we warn investors to exercise
caution when considering any such forward-looking information
herein and to not place undue reliance on such statements and
assumptions. We are under no obligation (and we expressly
disclaim any such obligation) to update or alter any
forward-looking statements or assumptions whether as a result of
new information, future events or otherwise, except as required
by applicable law.
You should refer to our reports filed with the Canadian
provincial securities regulators and the U.S. Securities
and Exchange Commission (the SEC) from time to time
for cautionary statements identifying important factors with
respect to such forward-looking statements, including certain
risks and uncertainties, that could cause actual results to
differ materially from results referred to in forward-looking
statements.
EXCHANGE
RATE DATA
The following table sets forth, for each period indicated, the
low and high exchange rates for Canadian dollars expressed in
United States dollars, the exchange rate at the end of such
period and the average of such exchange rates for each day
during such period, based on the noon rate of exchange as
reported by the Bank of Canada for the conversion of Canadian
dollars into United States dollars:
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Year Ended December 31,
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2006
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2007
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2008
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Low
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0.8528
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0.8437
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0.7711
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High
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0.9099
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1.0905
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1.0289
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Period End
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0.8581
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1.0220
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0.8166
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Average
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0.8820
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0.9345
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0.9381
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On April 29, 2009, the noon rate was US$0.8328 = Cdn$1.00.
GENERAL
PROXY INFORMATION
Solicitation
of Proxies
The information contained in this management information
circular, which is a proxy statement under U.S. securities
law, is furnished in connection with the solicitation of proxies
to be used at the annual and special meeting of shareholders of
TLC Vision Corporation to be held on Friday, June 19, 2009
at 10:00 a.m. Eastern Time at the offices of Torys
LLP, 79 Wellington Street West, 33rd Floor, Toronto,
Ontario, and at all adjournments of the meeting, for the
purposes set forth in the accompanying notice of meeting.
It
is expected that the solicitation will be made primarily by
mail. We have retained Kingsdale Shareholder Services Inc., a
proxy solicitation firm, to assist in the solicitation of
proxies for a fee of Cdn$24,000 plus customary out-of-pocket
expenses. Our directors and officers may also solicit proxies
personally. We will, if requested, reimburse banks, brokerage
houses and other custodians, nominees and certain fiduciaries
for their reasonable out-of-pocket expenses incurred in
connection with the distribution of proxy materials to their
principals. The solicitation of proxies by this management
information circular is being made by or on behalf of the
Companys management and the total cost of the solicitation
will be borne by the Company.
Appointment
of Proxies
If you are a registered owner of common shares, you may vote in
person at the meeting or you may appoint another person to
represent you as proxyholder and vote your shares at the
meeting. If you wish to attend the meeting and vote in person,
do not complete or return the enclosed form of proxy or any
other form of proxy sent to you because you will vote in person
at the meeting. Please register with the transfer agent, CIBC
Mellon Trust Company, when you arrive at the meeting.
The persons named in the enclosed form of proxy are
representatives of the Companys management and are
directors or officers of the Company.
A shareholder who
wishes to appoint some other person, who need not be a
shareholder of the Company, to represent such shareholder at the
meeting may do so by inserting such persons name in the
blank space provided in the enclosed form of proxy.
To be valid, proxies must be deposited with the Secretary of the
Company,
c/o CIBC
Mellon Trust Company, Proxy Dept., P.O. Box 721,
Agincourt, Ontario, M1S 0A1, not later than 5:00 p.m.
(Eastern Time) on June 17, 2009 or, if the meeting is
adjourned, 48 hours (excluding Saturdays, Sundays and
holidays) before any adjourned meeting.
Our international office is located at 5280 Solar Drive,
Mississauga, Ontario, L4W 5M8 and our
U.S. headquarters are located at 16305 Swingley Ridge
Rd., Ste. 300, Chesterfield, MO 63017. Our registered
office is located at 44 Chipman Hill, Suite 1000,
P.O. Box 7289, Station A, Saint John,
New Brunswick, E2L 4S6.
2
Non-Registered
Shareholders
Only our registered shareholders, or the persons they appoint as
their proxies, are permitted to attend and vote at the meeting.
However, in many cases, the Companys shares beneficially
owned by a holder (Non-Registered Holder) are
registered either:
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in the name of an intermediary that the Non-Registered Holder
deals with in respect of the shares. Intermediaries include
banks, trust companies, securities dealers or brokers and
trustees or administrators of self-administered RRSPs, RRIFs,
RESPs, IRAs and similar plans; or
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in the name of a depository (such as CDS Clearing and Depositary
Services Inc. in Canada or The Depository Trust Company in
the United States) of which the intermediary is a participant.
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In accordance with Canadian securities law, we have distributed
copies of the notice of meeting, this management information
circular, the form of proxy and the annual report for the fiscal
year ended December 31, 2008 (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, in the case of Canadian
Non-Registered Holders, a Non-Registered Holder has waived the
right to receive them. Typically, intermediaries will use a
service company (such as Broadridge Financial Solutions, Inc.
(Broadridge)) to forward the meeting materials to
Non-Registered Holders.
Non-Registered Holders who have not waived the right to receive
meeting materials will receive either a voting instruction form
or, less frequently, a form of proxy. The purpose of these forms
is to permit Non-Registered Holders to direct the voting of the
shares they beneficially own. Non-Registered Holders should
follow the procedures set out below, depending on which type of
form they receive.
A.
Voting Instruction Form
. In most
cases, a Non-Registered Holder will receive, as part of the
meeting materials, a voting instruction form. If the
Non-Registered Holder does not wish to attend and vote at the
meeting in person (or have another person attend and vote on the
Non-Registered Holders behalf), the voting instruction
form must be completed, signed and returned in accordance with
the directions on the form. Voting instruction forms sent by
Broadridge permit the completion of the voting instruction form
by telephone or through the Internet at www.proxyvotecanada.com.
If a Non-Registered Holder wishes to attend and vote at the
meeting in person (or have another person attend and vote on the
Non-Registered Holders behalf), the Non-Registered Holder
must complete, sign and return the voting instruction form in
accordance with the directions provided and a form of proxy
giving the right to attend and vote will be forwarded to the
Non-Registered Holder.
or
B.
Form of Proxy
. Less frequently, a
Non-Registered Holder will receive, as part of the meeting
materials, a form of proxy that has already been signed by the
intermediary (typically by a facsimile, stamped signature) which
is restricted as to the number of shares beneficially owned by
the Non-Registered Holder but which is otherwise uncompleted. If
the Non-Registered Holder does not wish to attend and vote at
the meeting in person (or have another person attend and vote on
the Non-Registered Holders behalf), the Non-Registered
Holder must complete the form of proxy and deposit it with the
Secretary of the Company as described above under
Appointment of Proxies. If a Non-Registered Holder
wishes to attend and vote at the meeting in person (or have
another person attend and vote on the Non-Registered
Holders behalf), the Non-Registered Holder must strike out
the names of the persons named in the proxy and insert the
Non-Registered Holders (or such other persons) name
in the blank space provided.
Non-Registered Holders should follow the instructions on the
forms they receive and contact their intermediaries promptly if
they need assistance.
3
Revocation
of Proxies
A registered shareholder who has given a proxy may revoke the
proxy by:
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completing and signing a proxy bearing a later date and
depositing it with the Secretary of the Company as described
above; or
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depositing an instrument in writing executed by the shareholder
or by the shareholders attorney authorized in writing:
(i) at our registered office at any time up to and
including the last business day preceding the day of the
meeting, or any adjournment of the meeting, at which the proxy
is to be used, or (ii) with the chairman of the meeting on
the day of the meeting or any adjournment of the meeting; or
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in any other manner permitted by law.
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A Non-Registered Holder may revoke a voting instruction form or
a waiver of the right to receive meeting materials and to vote
given to an intermediary at any time by written notice to the
intermediary, except that an intermediary is not required to act
on a revocation of a voting instruction form or of a waiver of
the right to receive materials and to vote that is not received
by the intermediary at least seven days prior to the meeting.
Voting of
Proxies
The management representatives designated in the enclosed form
of proxy will vote or withhold from voting the shares for which
they are appointed as proxy on any ballot that may be called for
in accordance with the instructions of the shareholder as
indicated on the proxy, and if the shareholder specifies a
choice with respect to any matter to be acted upon, the shares
will be voted accordingly. In the absence of such direction,
such shares will be voted by the management representatives
FOR
each of the resolutions as indicated in the
discussion of each resolution below.
The scrutineers appointed for the meeting will tabulate votes
cast by proxy or in person at the meeting. The scrutineers at
the meeting will include common shares that are present and
entitled to vote but that abstain or are withheld from voting on
a particular matter for purposes of determining the presence of
a quorum but not for purposes of determining whether the
required vote has been received for a particular matter. If a
broker indicates on a proxy that such broker does not have
discretionary authority to vote on a particular matter and has
not received instructions from the beneficial owner, such shares
will not be considered for purposes of determining the presence
of a quorum or for the purposes of determining whether the
required vote has been received.
The form of proxy confers discretionary voting authority on
those persons designated in the proxy with respect to amendments
or variations to the resolutions identified in the notice of the
meeting and with respect to other matters that may properly come
before the meeting. Our management knows of no such amendment,
variation or other matter to come before the meeting as of the
date of this management information circular. However, if such
amendments or variations or other matters properly come before
the meeting, the management representatives designated in the
form of proxy will vote the common shares represented thereby in
accordance with their best judgment.
Voting
Shares and Record Date
On April 29, 2009, we had outstanding 50,565,219 common
shares. Each holder of common shares of record at the close of
business on May 4, 2009, the record date established for
notice of the meeting, will, except as otherwise described, be
entitled to one vote for each common share held on all matters
proposed to come before the meeting or any adjournment thereof,
except to the extent that the holder has transferred any common
shares after the record date and the transferee of such shares
establishes ownership of them and demands, not later than the
close of business 10 days before the meeting, to be
included in the list of shareholders entitled to vote at the
meeting, in which case the transferee will be entitled to vote
such shares.
A quorum for the shareholder meeting will consist of at least
two persons present in person and each entitled to vote at the
meeting and holding at least
33
1
/
3
%
of our outstanding common shares.
4
Votes
Required
Election
of Directors
Each of our shareholders entitled to vote at an election of
directors has cumulative voting rights. Such rights entitle a
shareholder to cast a number of votes equal to the number of
votes attached to the shares held by the shareholder multiplied
by the number of directors to be elected. Seven directors are to
be elected at the meeting. The shareholder may cast all such
votes in favour of one candidate for director or distribute them
among the candidates in any manner. The seven nominees who
receive the greatest number of votes cast in person or by proxy
for the election of directors will be elected as directors. See
Business to be Conducted at the Meeting
Election of Directors Cumulative Voting.
Abstentions will have no effect on the election of directors.
Approval
of the Amended and Restated Long-Term Incentive Plan
The affirmative vote of the majority of the votes cast at the
meeting in person or by proxy is required to approve the
Companys Amended and Restated Long-Term Incentive Plan.
See Business to be Conducted at the Meeting
Approval of Amended and Restated Long-Term Incentive Plan.
Abstentions and broker non-votes will not be included in
determining the number of votes cast and, as a result, will not
have an effect on the result of the vote.
Approval
of the One-Time Stock Option Exchange Program
The affirmative vote of the majority of the votes cast at the
meeting in person or by proxy is required to approve the
Companys proposed one-time stock option exchange program
for employees other than directors and executive officers. See
Business to be Conducted at the Meeting
Approval of the One-Time Stock Option Exchange Program.
Abstentions will have no effect on the vote to approve the stock
option exchange program. Abstentions and broker non-votes will
not be included in determining the number of votes cast and, as
a result, will not have an effect on the result of the vote.
Approval
of Increase in Number of Shares Reserved for Amended and
Restated Option Plan (as the same may be amended and restated as
the Amended and Restated Long-Term Incentive Plan)
The affirmative vote of the majority of the votes cast at the
meeting in person or by proxy is required to approve the
increase in the number of shares reserved for the Amended and
Restated Option Plan (as the same may be amended and restated as
the Amended and Restated Long-Term Incentive Plan) if the
Companys shareholders do not approve the proposed one-time
stock option exchange program for employees. See Business
to be Conducted at the Meeting Approval of Increase
in Number of Shares Reserved for Existing Option Plan (as the
same may be amended and restated as the Amended and Restated
Long-Term Incentive Plan). Abstentions and broker
non-votes will not be included in determining the number of
votes cast and, as a result, will not have an effect on the
result of the vote.
Appointment
of Auditors
The affirmative vote of the majority of the votes cast at the
meeting in person or by proxy is required to appoint
Ernst & Young LLP as our auditors for the ensuing year
and to authorize the directors to fix the remuneration to be
paid to the auditors. Abstentions and broker non-votes will not
be included in determining the number of votes cast and, as a
result, will not have an effect on the result of the vote.
Additional
Solicitation
If there are not enough votes to approve any proposals at the
meeting, the shareholders who are represented in person or by
proxy may adjourn the meeting to permit further solicitation of
proxies. The persons named as proxies will vote those proxies
for such adjournment, unless marked to be voted against any
proposal for which an adjournment is sought, to permit the
further solicitation of proxies. Those proxies voted against any
proposal for which an adjournment is sought will be voted
against such adjournment. Abstentions and broker non-votes will
not have an effect on the result of the vote. Also, a
shareholder vote may be taken on one or more proposals in this
5
management information circular prior to any such adjournment if
there are sufficient votes for approval of such proposal(s).
BUSINESS
TO BE CONDUCTED AT THE MEETING
Election
of Directors
Our articles of continuance currently set the size of our board
of directors at a minimum of one director and a maximum of
fifteen directors. Presently, the board of directors consists of
six directors following the resignation of James C. Wachtman,
our former President and Chief Executive Officer, on
April 23, 2009. Our board of directors has determined that
a total of seven directors should be elected at the meeting. The
table below sets out the name and place of residence of each of
the individuals who is nominated by management of the Company
for election as a director of the Company to hold office until
the next annual meeting of our shareholders or until his
successor is elected or appointed. The table also sets out the
age of the nominee, the position with the Company that each
nominee presently holds, the principal occupation of each
nominee and the date on which each nominee was first elected or
appointed as a director. See the section entitled Security
Ownership of Certain Beneficial Owners and Management for
the number of our common shares that are beneficially owned,
directly or indirectly, or over which control or direction is
exercised by each nominee. Information on each nominees
business experience during the past five years is included
following the table. Our board of directors has an Audit
Committee, a Corporate Governance and Nominating Committee and a
Compensation Committee. The members of such committees are
indicated in the table below.
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Principal
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Director of the
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Name and Place of Residence
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Age
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Position with the Company
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Occupation
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Company since
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Michael D. DePaolis, O.D.
New York, U.S.A.
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52
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Director
(2*)(3)
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Optometrist
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June 2005
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Jay T. Holmes
Florida, U.S.A.
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66
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Director
(1)(3)
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Attorney and
Business Consultant
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June 2008
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Gary F.
Jonas
(4)
Maryland, U.S.A.
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64
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Nominee for Director
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Business Consultant
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Nominee for Director
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Olden C. Lee
Texas, U.S.A.
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67
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Director
(1)(2)
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Management
Consultant
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June 2008
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Richard L. Lindstrom, M.D.
Minnesota, U.S.A.
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61
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Director and Chief
Medical Officer
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Ophthalmologist
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May 2002
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Warren S.
Rustand
(4)
Arizona, U.S.A.
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66
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Director
(2)(3*)
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Management
Consultant
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October 1997
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Toby S. Wilt
Tennessee, U.S.A.
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64
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Director
(1*)(3)
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Corporate Director
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January 2004
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(1)
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Member of the Compensation
Committee, * Chairman
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(2)
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Member of the Corporate Governance
and Nominating Committee, * Chairman
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(3)
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Member of the Audit Committee,
* Chairman
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(4)
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Mr. Rustand was a director and
Chairman and Mr. Jonas was a director and CEO of Medical
Body Sculpting Inc., a company which operates two centers
offering non-surgical fat removal. A receiver was appointed with
respect to the assets of that company in December 2007.
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Each of managements nominees for director has consented to
serve as a nominee and as a director of TLC
Vision
if
elected and has consented to being named in this management
information circular.
Set forth below is biographical information relating to
managements nominees for election to the board of
directors of the Company.
Michael D. DePaolis, O.D.
has been a director of the
Company since June 2005. He has been engaged in the private
practice of optometry and is co-founder and President of
Visionary Eye Associates, a professional optometric practice
since 1995. He is a member of the American Academy of Optometry,
Fellow of the American Academy of Optometry and has been Chief
Optometric Editor of
Primary Care Optometry News
since
1995.
6
Dr. DePaolis is Adjunct Clinical Associate of Ophthalmology
at the University of Rochester School of Medicine &
Dentistry and has also served on the editorial review boards of
Contact Lens Spectrum, Optometry, Eye & Contact
Lens, Review of Optometry and Refractive Eye Care.
Jay T. Holmes
has been a director of the Company since
June 2008. He has been self-employed as an attorney and business
consultant since mid-1996. From 1981 to 1996 Mr. Holmes
held several senior management positions at Bausch &
Lomb, Inc., retiring as Executive Vice President and Chief
Administrative Officer. Bausch & Lomb is a global
company engaged in the eye care business. Mr. Holmes served
on the board of directors of Bausch & Lomb from 1986
to 1996. Mr. Holmes serves presently, and has served, on
the boards of directors of a number of other eye care related
companies, including Visx, Inc. from 1998 to 2005, IntraLase,
Inc. from 2005 to 2007, OccuLogix, Inc. from 2005 to 2008, and
ReVision Optics, Inc. from 2007 to date.
Gary F. Jonas
has been a consultant to the board since
June 2008. He has been CEO of Strategic Planning Advisors since
2002, while serving as a board member and CEO for several
companies involved in aesthetic health services. He was a
co-founder and CEO of 20/20 Laser Centers from 1993 until its
sale to the Company in 1997. From 1997 until 2000 he was the
Companys executive vice president for strategic growth.
During that period he served on its board of directors and also,
on behalf of the Company, he served on the board of LaserSight.
He has served on the boards of over a dozen for-profit and
non-profit organizations. He is member of the adjunct faculty of
the Carey Business School of Johns Hopkins University where he
teaches courses in business strategy.
Olden C. Lee
has been a director of the Company since
June 2008. He currently serves on the board of directors of and
is a consultant to Starbucks Coffee Company, a specialty coffee
company. Mr. Lee is also the Principal of Lee Management
Consulting Company, a management consulting company founded by
Mr. Lee. Mr. Lee worked with PepsiCo, Inc., a leading
global snack and beverage company, for 28 years in a
variety of positions, including serving as senior vice president
of human resources of its Taco Bell division and senior vice
president and chief personnel officer of its KFC division.
Mr. Lee retired from PepsiCo in 1998. Mr. Lee also
serves on the Executive Committee of the advisory board of the
Business School of the University of Arizona.
Richard L. Lindstrom, M.D.
has been a director of
the Company since May 2002 and, prior to that, a director of
Laser Vision Centers, Inc. (LaserVision) since
November 1995. Since 1979, Dr. Lindstrom has been engaged
in the private practice of ophthalmology and is the Founder,
Partner and Attending Surgeon of Minnesota Eye Consultants P.A.,
a provider of eye care services, or its predecessor since 1989.
In 1989, Dr. Lindstrom founded the Phillips Eye Institute
Center for Teaching & Research, an ophthalmic research
and surgical skill education facility. He is past president of
the International Society of Refractive Surgery and the American
Society of Cataract and Refractive Surgery. Dr. Lindstrom
has served as an Associate Director of the Minnesota Lions Eye
Bank since 1987. He is a medical advisor for several medical
device and pharmaceutical manufacturers and sits on the boards
of OccuLogix and Acufocus, Inc.
Warren S. Rustand
has been a director of the Company
since October 1997. Since October 2001, Mr. Rustand has
been Managing Partner of SCCapital Partners, a Newport Beach,
California investment banking firm and Chairman and Chief
Executive Officer of Summit Capital Consulting. He is also the
lead outside director of Providence Service Corporation, a
public company that provides counselors and mental health
providers to government agencies, and is also a director of
MedPro Safety Products, Inc., a public company that manufactures
medical devices. Mr. Rustand was the Chairman and Chief
Executive Officer of Rural/Metro Corporation, a U.S. public
company providing ambulance and fire protection services from
1996 to August 1998. Mr. Rustand was a director of
LucasVarity, PLC, a multi-billion dollar public company that
manufactures aerospace and automobile parts.
Toby S. Wilt
has been a director of the Company since
January 2004. A Certified Public Accountant (non-practicing),
Mr. Wilt is currently the Chairman of privately held
Christie Cookie Company, a manufacturer and distributor of baked
food products. His past directorships include C&S Sovran, a
southeastern bank holding company, Genesco, Inc., a manufacturer
and retailer of footwear and apparel, Titan Holdings, an
insurance company, and First American Corporation, a regional
bank holding company. As recently as 2007, Mr. Wilt was a
director of 1st Source Corporation, a financial institution
in South Bend, Indiana that provides consumer and commercial
banking services and a director of Outback Steakhouse, Inc., a
restaurant chain.
7
Cumulative
Voting
The
Business Corporations Act
(New Brunswick) provides
that each of our shareholders entitled to vote at an election of
directors has cumulative voting rights. Such rights entitle a
shareholder to cast a number of votes equal to the number of
votes attached to the shares held by the shareholder multiplied
by the number of directors to be elected. The shareholder may
cast all such votes in favour of one candidate for director or
distribute them among the candidates in any manner. If a
shareholder has voted for more than one candidate without
specifying the distribution of the shareholders votes
among the candidates, the shareholder shall be deemed to have
distributed the shareholders votes equally among the
candidates for whom the shareholder voted, disregarding
fractions. The seven nominees who receive the greatest number of
votes cast for the election of directors will be elected as
directors. If a shareholder wishes to distribute the
shareholders votes other than equally among the nominees
for whom the shareholder has directed the proxy representatives
designated in the enclosed form of proxy to vote, then the
shareholder must do so personally at the meeting or by another
proper form of proxy.
Management of the Company does not contemplate that any of the
proposed nominees will be unable to serve as a director, but, if
that should occur for any reason prior to the meeting, the
management representatives designated in the enclosed form of
proxy reserve the right to vote for another nominee at their
discretion unless a shareholder has specified in his or her
proxy that his or her common shares are to be withheld from
voting in the election of directors.
The management representatives designated in the enclosed
form of proxy intend to cast the votes to which the common
shares represented by such proxy are entitled equally among the
proposed nominees for election as directors for whom the
shareholder has voted, unless the shareholder who has given such
proxy has directed that such shares be withheld from voting in
the election of directors.
Our board of directors unanimously recommends a vote
FOR
the election of the individuals named above as directors.
Approval
of the Amended and Restated Long-Term Incentive Plan
Our board of directors has unanimously approved, subject to
shareholder approval, that the TLC Vision Corporation Amended
and Restated Share Option Plan (the Existing Option
Plan) be amended and restated in its entirety effective
April 30, 2009 as the TLC Vision Corporation 2009 Long-Term
Incentive Plan (the Long-Term Incentive Plan). The
full text of the resolution approving the Long-Term Incentive
Plan appears as Resolution No. 1 in Appendix A to this
management information circular.
Our board of directors took the following into consideration
when approving the amendment and restatement of the Existing
Option Plan as the Long-Term Incentive Plan:
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awards under the Long-Term Incentive Plan will be used, through
vesting and transfer restrictions, to retain our key employees
and to align their interests with the interests of our
shareholders;
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the Long-Term Incentive Plan will assist us to attract, retain
and motivate highly qualified individuals; and
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the board will have the flexibility to make different types of
equity awards and so can design compensation arrangements to
maximize retention, motivation and alignment of
managements interests with shareholders.
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Interests
of Directors and Executive Officers
Each of our directors and nominee directors named under
Business to be Conducted at the Meeting
Election of Directors and each of our executive officers
named under Executive Officers will be eligible for
awards under the Long-Term Incentive Plan, and accordingly, has
an interest in the Long-Term Incentive Plan amendment becoming
approved.
8
Description
of Long-Term Incentive Plan
The following is a general description of the material features
of the Long-Term Incentive Plan. This description is qualified
in its entirety by reference to the actual text of the Long-Term
Incentive Plan, which is attached to this management information
circular as Appendix B. Capitalized terms not expressly
defined in this description shall have the meanings given to
them in the Long-Term Incentive Plan.
Purpose
The purposes of the Long-Term Incentive Plan are to promote our
long-term success and to increase shareholder value by providing
participants with incentives to contribute to the long-term
growth and profitability of the Company and to assist the
Company to attract, retain and motivate highly qualified
individuals in a position to make significant contributions.
Administration
The Long-Term Incentive Plan will be administered by our board
of directors or a committee of the board of directors appointed
by the board of directors for this purpose and consisting of not
less than three directors. It is intended that our Compensation
Committee will be designated by our board of directors to
administer the Long-Term Incentive Plan.
The board of directors may, subject to stock exchange
requirements, select participants; make awards; determine the
number of common shares subject to each award; determine the
terms and conditions of each award (including those related to
transferability, vesting, forfeiture and exercisability and the
effect of a participants termination of employment);
adjust the terms of an award to comply with the laws,
regulations or rules of any applicable jurisdiction or stock
exchange; amend the terms and conditions of an award; specify
and approve the provisions of award documents; construe and
interpret any award document; adopt, amend and rescind
administrative guidelines and other rules and regulations
relating to the Long-Term Incentive Plan; and make all other
determinations necessary or advisable for the implementation and
administration of the Long-Term Incentive Plan.
Authorized
Shares and Limitations on Awards
The Long-Term Incentive Plan authorizes our board of directors
to issue compensatory awards of our common shares and awards
that are denominated in
and/or
may
be settled by delivery of our common shares. Subject to
adjustments as described below, under the Long Term Incentive
Plan, as is the case currently under the Existing Option Plan,
our board of directors is authorized to issue awards on our
underlying common shares which do not in the aggregate exceed
9,116,000 common shares (the Plan Limit). As of
April 28, 2009, options to acquire approximately 4,775,000
common shares, which represent 9% of the Companys issued
and outstanding common shares, remained outstanding and
unexercised under such plan and approximately 301,000 common
shares, which represent approximately 1% of the Companys
issued and outstanding common shares, remained available for
future option grants under such plan. If the Companys
shareholders do not approve the proposed one-time stock exchange
program for employees other than directors and executive
officers
,
shareholders will be asked to approve an
amendment to the Long Term Incentive Plan to increase the Plan
Limit by 1,000,000 shares to 10,116,000 shares. See
the discussion under the heading Approval of Increase in
the Number of Shares Reserved for Existing Option Plan (as the
same may be amended and restated as the Long-Term Incentive
Plan).
For purposes of determining the number of common shares that
remain available for issuance under the Long-Term Incentive
Plan, there shall be added back to the Plan Limit and again be
available for future awards the number of shares tendered by a
participant or withheld by the Company to pay the exercise price
of an award or to satisfy a participants tax withholding
obligations under the Long-Term Incentive Plan, and the number
of common shares corresponding to awards under the Long-Term
Incentive Plan that are forfeited or cancelled or otherwise
expire for any reason without being exercised or settled or that
are settled through the issuance of consideration other than
common shares.
Individual Limitations.
Subject to adjustment
as described below, the maximum number of common shares that may
be issued pursuant to options or stock appreciation rights
granted to any non-executive director, other than
9
the Chairman of our board of directors, may not exceed
15,000 shares in any calendar year and the maximum number
of common shares that may be issued pursuant to options or stock
appreciation rights granted to the Chairman of our board of
directors may not exceed 60,000 shares in any calendar
year. The maximum number of common shares that may be issued
pursuant to options and stock appreciation rights under the Long
Term Incentive Plan and all other security based compensation
arrangements granted to any individual in a calendar year may
not exceed 5% of our outstanding common shares. The maximum
amount of awards other than options and stock appreciation
rights that may be awarded to an individual in any calendar year
is the lesser of $5,000,000 measured as of the date of grant
(with respect to awards denominated in cash) or 5% of our
outstanding common shares, on a non-diluted basis and measured
as of the date of grant (with respect to awards denominated in
common shares). The maximum number of common shares that may be
issued pursuant to restricted shares, restricted stock units,
performance shares, performance stock units or other awards may
not exceed 500,000 common shares. No more than 10% of the
Companys total issued and outstanding common shares may be
issued to insiders of the Company within any one year period or
be issuable to insiders at any time under the Long-Term
Incentive Plan and all of the Companys other security
based compensation arrangements. Insider and
security based compensation arrangement have the
meanings attributed thereto in the Company Manual of the Toronto
Stock Exchange (TSX).
If there is any change in the number of our outstanding common
shares by reason of a stock split, reverse stock split, stock
dividend, recapitalization, reorganization, partial or complete
liquidation, reclassification, merger, consolidation,
separation, extraordinary cash dividend,
split-up,
spin-off, combination, exchange of shares, warrants or rights
offering to purchase common shares at a price substantially
below fair market value, or any other corporate event or
distribution of stock or property of the Company affecting the
common shares, our board of directors will make, subject to any
required approval of any relevant stock exchange or other
applicable authority, in any manner deemed necessary, an
equitable adjustment in (i) the number and kind of common
shares authorized for issuance under the Long-Term Incentive
Plan, (ii) the number and kind of common shares subject to
outstanding awards granted under the Long-Term Incentive Plan,
(iii) the exercise price per common share under any
outstanding award of options, and (iv) the limits described
above on the number of common shares available for grant to
individuals per calendar year.
Eligibility
and Types of Awards.
The Long-Term Incentive Plan authorizes the grant of options,
restricted shares, restricted stock units, stock appreciation
rights, performance cash awards, performance stock awards and
performance stock units. Awards may be granted by the board of
directors to individuals who are directors, officers, employees
or consultants of the Company or any of its affiliates. Our
board of directors has no obligation to grant any award or to
designate an individual as a participant.
Options
Our board of directors may grant options under the Long-Term
Incentive Plan that entitle a participant, as specified in an
award document, to purchase a specified number of shares during
a specified time at a price fixed by the board on the date of
grant which may not be less than the fair market value of a
common share on the date of the grant. An option shall become
exercisable after or at the time such option becomes vested as
determined by the board of directors. An option shall be
exercisable during such period(s) and on such terms as shall be
determined by the board of directors provided that options must
expire not later than ten years after the date of grant (subject
to extension of the term of options which would otherwise expire
during a blackout). An option which is not exercised shall
expire without any payment to the participant.
Exercise of Options.
Under the Long-Term
Incentive Plan, subject to the terms of the award, the exercise
price of an option can be paid in (i) cash or cash
equivalents, (ii) subject to limitations imposed by the
Company from time to time to ensure compliance with applicable
laws, by actual delivery or attestation to ownership of freely
transferable common shares already owned by the participant
exercising the option and having a fair market value equal in
value to the exercise price, (iii) a combination of
(i) and (ii), (iv) through net share settlement or
similar procedure involving the withholding of common shares
subject to the option with a value equal to the exercise price
or (v) by other means that the board of directors may
authorize. Our board of directors may also establish procedures
pursuant to which an option may be exercised through a
cashless exercise procedure involving a broker or
dealer
10
approved by the board of directors, that affords participants
the opportunity to sell immediately some or all of the shares
underlying the exercised portion of the option in order to
generate sufficient cash to pay the option exercise price
and/or
to
satisfy the minimum required withholding tax obligations related
to the option.
Treatment of Options Upon Termination of
Employment.
Except as otherwise specified in an
award document (or a participants written employment
agreement with the employer), upon termination of a
participants employment with the Company without cause, or
by the participant for good reason, within a period of one year
following a change in control, all options outstanding as of the
effective date of the change of control become fully vested and
immediately exercisable.
The provisions governing the disposition of options in the event
of a participants termination of employment for any other
reason are as specified by the board of directors at the time of
grant of an award and in the award document. Subject to
applicable law, in connection with a participants
termination of employment, the board of directors has the
discretion to accelerate the vesting, exercisability or
settlement of, eliminate the restrictions and conditions
applicable to, or extend the post-termination exercise period of
outstanding options but not beyond the original term of the
award.
No Repricing of Options.
Except for
adjustments for certain corporate events as described above in
Authorized Shares and Limitations on
Awards, the Long-Term Incentive Plan expressly prohibits,
except with the prior approval of the Companys
shareholders: (i) an option from being granted in
substitution for a previously granted option being cancelled or
surrendered as a condition of receiving a new award, if the new
award would have a lower exercise price than the award it
replaces, and (ii) the reduction of the exercise price of
an option once the option is granted.
Stock
Appreciation Rights
The board of directors may grant stock appreciation rights under
the Long-Term Incentive Plan that entitle a participant to
receive, as specified in an award document, an amount equal to
the excess, if any, of the fair market value on the exercise
date over the exercise price for the number of common shares for
which the stock appreciation right is exercised (the In
the Money Amount). The exercise price shall be set by the
board of directors on the date of grant and may not be less than
the fair market value of a common share on the date of the
grant. Payments to a participant on the exercise of a stock
appreciation right may be made in cash or common shares having
an aggregate fair market value as of the date of exercise equal
to the In the Money Amount. The term of a stock appreciation
right shall not exceed ten years.
Stock appreciation rights may also be granted in tandem with
options at the same time as the option or at a later date. A
stock appreciation right granted in tandem with an option shall
cover the same number of common shares as the option and shall
be exercisable only at the same time or times and to the same
extent, and shall have the same term, as the option. The
exercise price of a stock appreciation right granted in tandem
with an option shall equal the exercise price of the option.
Upon exercise of a stock appreciation right granted in tandem
with an option, the option shall be cancelled automatically to
the extent of the number of common shares covered by the stock
appreciation right exercised. Upon exercise of an option granted
in tandem with a stock appreciation right, the stock
appreciation right shall be cancelled automatically to the
extent of the number of common shares covered by the option
exercised.
Treatment of Stock Appreciation Rights Upon Termination of
Employment.
Except as otherwise specified in an
award document (or a participants written employment
agreement with the employer), upon termination of a
participants employment with the Company without cause, or
by the participant for good reason, within a period of one year
following a change in control, all stock appreciation rights
outstanding as of the effective date of the change of control
become fully vested and immediately exercisable.
The provisions governing the disposition of stock appreciation
rights in the event of a participants termination of
employment for any other reason are as specified by the board of
directors at the time of grant of an award and in the award
document. Subject to applicable law, in connection with a
participants termination of employment, the board of
directors has the discretion to accelerate the vesting,
exercisability or settlement of, eliminate the
11
restrictions and conditions applicable to, or extend the
post-termination exercise period of outstanding stock
appreciation rights but not beyond the original term of award.
No Repricing of Stock Appreciation
Rights.
Except for adjustments for certain
corporate events as described above in
Authorized Shares and Limitations on
Awards, the Long-Term Incentive Plan expressly prohibits,
except with the prior approval of the Companys
shareholders: (i) a stock appreciation right from being
granted in substitution for a previously granted stock
appreciation right being cancelled or surrendered as a condition
of receiving a new award, if the new award would have a lower
exercise price than the award it replaces, and (ii) the
reduction of the exercise price of a stock appreciation right
once the stock appreciation right is granted.
Restricted
Shares
At its discretion, our board of directors may grant in respect
of past services or sell, at a price determined by the board,
restricted shares consisting of one or more common shares to a
participant, subject to the terms, conditions and restrictions
set forth in the Long-Term Incentive Plan and specified in the
applicable award document. A restricted share may, among other
things, be subject to restrictions on transferability, have
vesting requirements or have specified circumstances in which
they may be cancelled.
Treatment of Restricted Shares Upon Termination of
Employment.
Except as otherwise specified in an
award document (or a participants written employment
agreement with the employer), upon termination of a
participants employment with the Company without cause, or
by the participant for good reason, within a period of one year
following a change in control, any restrictions imposed on
restricted shares outstanding as of the effective date of the
change in control shall lapse.
The provisions governing the disposition of restricted shares in
the event of a participants termination of employment for
any other reason are specified by the board of directors at the
time of grant of an award and in the award document. Subject to
applicable law, in connection with a participants
termination of employment, the board of directors has the
discretion to accelerate the vesting, exercisability or
settlement of, eliminate the restrictions and conditions
applicable to, or extend the post-termination exercise period of
outstanding restricted shares but not beyond the original term
of award.
Restricted
Stock Units
At its discretion, the board of directors may grant restricted
stock units which represent the right to receive a future award
of our common shares subject to such vesting, forfeiture and
other restrictions during a restricted period as the board of
directors may determine and as set forth in the applicable award
document. Each restricted stock unit represents the
participants right to receive one common share
and/or
cash
equal to the fair market value of a common share upon the lapse
of the applicable restricted period. Restricted stock units may
be settled in common shares issued to the participant or, at the
sole discretion of the board of directors, cash, or a
combination of cash and common shares, with a value equal to the
fair market value of the shares at the time of settlement. Our
board of directors may, at the time of grant, provide
participants with the right to receive dividends or payments
equivalent to dividends or interest with respect to outstanding
restricted stock units. The payments may be paid currently or
deemed to have been reinvested in awards or common shares, and
made in awards, common shares, cash, or a combination thereof,
as the board of directors shall determine.
Treatment of Restricted Stock Units Upon Termination of
Employment.
Except as otherwise specified in an
award document (or a participants written employment
agreement with the employer), upon termination of a
participants employment with the Company without cause, or
by the participant for good reason, within a period of one year
following a change in control, any restrictions imposed on
restricted stock units outstanding as of the effective date of
the change in control shall lapse and the restricted stock units
shall be redeemed.
The provisions governing the disposition of restricted stock
units in the event of a participants termination of
employment for any other reason are specified by the board of
directors at the time of grant of an award and in the award
document. Subject to applicable law, in connection with a
participants termination of employment, the board of
directors has the discretion to accelerate the vesting,
exercisability or settlement of, eliminate the restrictions and
12
conditions applicable to, or extend the post-termination
exercise period of outstanding restricted stock units but not
beyond the original term of award.
Performance
Awards
The board of directors may grant (i) performance cash
awards, (ii) performance shares, and (iii) performance
share units (Performance Awards) to participants. A
Performance Award represents a contingent right to payment of
cash
and/or
common shares subject to the achievement or satisfaction of
performance conditions established by the board of directors.
A performance cash award entitles a participant to receive,
subject to the terms, conditions and restrictions in the
applicable award document, a target cash payment established by
the board of directors and set forth in the award document
conditional on the achievement of performance goals over the
applicable performance period. Performance cash awards shall be
settled in cash.
A performance share entitles a participant to receive subject to
the other terms, conditions and restrictions in the applicable
award document a target number of common shares established by
the board of directors and set forth in the award document
conditional on the achievement of performance goals over the
applicable performance period.
A performance share unit entitles a participant to receive,
subject to the terms, conditions and restrictions in the
applicable award document, a target number of common shares
established by the board of directors and set forth in the award
document conditional on the achievement of performance goals
over the applicable performance period. The number of
performance share units which are redeemed may be greater or
less than the target number of shares, depending on the level of
achievement of the performance conditions. At the sole
discretion of the board of directors, performance share units
may be redeemed for the delivery of common shares issued to the
participant, cash, or a combination of common shares and cash,
with a value equal to the fair market value of the common shares
underlying the performance share units at the applicable date.
Other
Awards
The board of directors may also grant participants other forms
of equity-based or equity-related awards that the board of
directors determines to be consistent with the purpose of the
Long-Term Incentive Plan and the Companys interests. The
awards may provide for cash payments based in whole or in part
on the value or future value of common shares, for the
acquisition or future acquisition of common shares, or any
combination of the foregoing.
Except as otherwise specified in an award document (or a
participants written employment agreement with the
employer), upon termination of a participants employment
with the Company without cause, or by the participant for good
reason, within a period of one year following a change in
control, the performance conditions with respect to all
performance cash awards, performance shares, performance share
units and other performance-based awards that are outstanding as
of the effective date of the change in control are deemed to
have been attained at the specified target level of performance
and vesting is accelerated to the effective date of the change
in control for all Performance Awards denominated in common
shares.
The provisions governing the disposition of Performance Awards
in the event of a participants termination of employment
for any other reason are specified by the board of directors at
the time of grant of an award and in the award document. Subject
to applicable law, in connection with a participants
termination of employment, the board of directors has the
discretion to accelerate the vesting, exercisability or
settlement of, eliminate the restrictions and conditions
applicable to, or extend the post-termination exercise period of
outstanding Performance Awards but not beyond the original term
of award.
Reorganizations
The existence of the Long-Term Incentive Plan, the award
documents, and the awards granted thereunder shall not affect or
restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the
Companys capital structure or business, any merger or
consolidation of the Company, any issue of stock or of options,
warrants or rights to
13
purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or affect the
shares or the rights under shares or which are convertible into
or exchangeable for Shares, or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
In the event of our reorganization or the amalgamation, merger
or consolidation with another corporation, the board of
directors may make provision for the protection of the rights of
participants.
Change of
Control
In connection with a change of control or proposed change of
control, the board of directors may, on 5 days notice and
in a fair and equitable manner, determine the manner in which
each outstanding award and all rights granted under the
Long-Term Incentive Plan shall be treated including, for
example, requiring the acceleration of the expiry time for the
exercise of awards by the participants and of the time for the
fulfillment of any conditions or restrictions on such exercise,
and/or
declaring that each outstanding award shall be automatically
vested and exercisable or paid out in full conditional on the
completion of the change of control.
Amendment,
Suspension and Termination
Our board of directors may amend, modify, terminate or suspend
the Long-Term Incentive Plan at any time. However, no
termination, amendment, modification or suspension
(i) shall be effective without the approval of the
shareholders of the Company if shareholder approval is required
under the rules and listing standards of the NASDAQ Global
Market (NASDAQ), the TSX or other applicable law and
(ii) shall materially and adversely alter or impair the
rights of a participant in any award previously made under the
Long-Term Incentive Plan without the consent of the holder of
the award. No awards may be granted under the Long-Term
Incentive Plan on or after the date that is the tenth
anniversary of the Long-Term Incentive Plans effective
date.
Notwithstanding the foregoing, the board of directors has broad
authority to amend the Long-Term Incentive Plan or any award
under it without the approval of shareholders and without the
consent of a participant to the extent it deems necessary or
desirable (a) to comply with or take into account changes
in, or interpretations of, applicable tax laws, securities laws,
employment laws, accounting rules and other applicable law,
(b) to take into account unusual or nonrecurring events or
market conditions, (c) to take into account significant
acquisitions or dispositions of assets or other property by the
Company, or (d) to make any other changes, not materially
adverse to any outstanding award, that the board of directors,
in its absolute discretion, determines are in the interests of
the Company.
The board of directors is not entitled to make any of the
following types of amendments to the Long-Term Incentive Plan
without shareholder approval: (a) any increase to the
number of common shares issuable under the Long-Term Incentive
Plan or changes from a fixed number of shares issuable under the
plan to a percentage; (b) any amendment that increases the
length of the period after a blackout period during which
options may be exercised; (c) any amendment which reduces
the exercise price or would result in the exercise price for any
option or stock appreciation rights granted under the Long-Term
Incentive Plan being lower than the fair market value of the
common shares at the time the option or stock appreciation right
is granted, except adjustments described in Authorized
Shares and Limitations on Awards; (d) any amendment
expanding the categories of eligible individuals which would
have the potential of broadening or increasing insider
participation under the Long-Term Incentive Plan; (e) any
amendment extending the term of an option or stock appreciation
right held by an insider beyond its original term, except an
extension of an option that would otherwise expire during a
blackout period, to 10 days following the end of the
blackout period; and (f) amendments required to be approved
by shareholders under applicable law.
General
No award or amount payable under, or interest in, the Long-Term
Incentive Plan shall be transferable by a participant other than
pursuant to a beneficiary designation under the Long-Term
Incentive Plan, by last will and testament or by the laws of
descent and distribution or, except in the case of an incentive
stock option, pursuant to a domestic relations order, as the
case may be. The board of directors may, however, subject to
applicable law and the
14
terms and conditions that it shall specify, permit the transfer
of an award, other than an incentive stock option, for no
consideration to a permitted transferee, as defined in the
Long-Term Incentive Plan. Any award transferred to a permitted
transferee shall be further transferable only by last will and
testament or the laws of descent and distribution or, for no
consideration, to another permitted transferee of the
participant.
No participant shall have any claim or right to receive awards
or to continued employment and the Long-Term Incentive Plan will
not interfere in any way with our right to terminate the
employment of any individual any time, with or without cause.
The Long-Term Incentive Plan is intended to constitute an
unfunded plan for incentive compensation, with costs
of administration borne by the Company.
Certain
U.S. Federal Tax Consequences of the Plan
The following discussion summarizes certain U.S. federal
tax considerations for the U.S. participants in the
Long-Term Incentive Plan and certain U.S. tax effects to
the Company. Canadian, state and local tax consequences may
differ.
U.S. Federal Income Tax Consequences.
The
following briefly describes the U.S. federal income tax
consequences of the Long-Term Incentive Plan generally
applicable to employees, officers, directors and other
participants who are U.S. citizens and to the Company. The
discussion is general in nature and does not address issues
relating to the tax circumstances of any individual employee,
officer or director. The discussion is based on the Internal
Revenue Code of 1986, as amended (the Code),
applicable Treasury Regulations and administrative and judicial
interpretations thereof, each as in effect on the date of this
proxy statement. The description is therefore subject to future
changes in the law, possibly with retroactive effect. The
description does not address the consequences of state, local or
foreign tax laws.
Nonqualified Stock Options.
An optionee
generally will not recognize income upon the grant or vesting of
a nonqualified stock option with an exercise price at least
equal to the fair market value of our common shares on the date
of grant and no additional deferral feature. Upon the exercise
of a nonqualified stock option, the optionee generally will
recognize ordinary income equal to the difference between the
exercise price and the fair market value of the shares on the
exercise date. A participants disposition of shares
acquired upon the exercise of a nonqualified option generally
will result in short-term or long-term capital gain or loss
measured by the difference between the sale price and the
participants tax basis in such shares. The tax basis of
the shares generally will be equal to the fair market value of
the shares on the exercise date.
Incentive Stock Options (ISO).
An
employee generally will not recognize ordinary income on receipt
or exercise of an ISO so long as he or she has been an employee
of the Company from the date the ISO was granted until three
months before the date of exercise; however, the amount by which
the fair market value of the shares on the exercise date exceeds
the exercise price is an adjustment in computing the
employees alternative minimum tax in the year of exercise.
If the employee holds the common shares received on exercise of
the ISO for one year after the date of exercise (and for two
years from the date of grant of the ISO), any difference between
the amount realized upon the disposition of the shares and the
amount paid for the shares will be treated as long-term capital
gain (or loss, if applicable) to the employee. If the employee
exercises an ISO and satisfies these holding period
requirements, the Company will not deduct any amount in
connection with the ISO.
If an employee disposes of shares acquired upon the exercise of
an ISO before the holding period requirements described above
are satisfied, the disposition will constitute a disqualifying
disposition and the employee will recognize in the year of the
disposition ordinary income equal to the excess of the fair
market value of the shares, as of the exercise date, over the
exercise price (or, if less, the excess of the amount realized
on the sale of the shares over the exercise price). In either
event, the Company will be entitled to deduct an amount equal to
the amount constituting ordinary income to the employee in the
year of the disqualifying disposition. In addition, the employee
will have long-term or short-term capital gain or loss, as the
case may be, equal to the difference between the amount the
employee received upon disposition of the shares and the
exercise price increased by the amount of ordinary income, if
any, the employee recognized.
15
Stock Appreciation Rights (SARs).
The
recipient of a SAR generally will not recognize income upon the
grant or vesting of an SAR with a grant price at least equal to
the fair market value of a common share on the date of grant and
no additional deferral feature. Upon the exercise of an SAR, the
holder generally will recognize ordinary income equal to the
difference between the fair market value of the underlying
shares on the date of exercise and the grant price of the SAR.
The Company will be entitled to deduct the same amount in the
same year. In the case of payments in stock, the includable
amount and corresponding deduction each equal the fair market
value of the shares on the date of exercise.
Restricted Shares.
The recognition of income
from an award of restricted shares for federal income tax
purposes depends on the restrictions imposed on the shares.
Generally, taxation will be deferred until the first taxable
year the shares are no longer subject to substantial risk of
forfeiture. At the time the restrictions lapse, the employee
will recognize ordinary income equal to the then fair market
value of the stock. The employee may, however, make an election
to include the value of the shares in gross income in the year
of grant despite such restrictions. Generally, the Company will
be entitled to deduct the fair market value of the shares
transferred to the employee in the year the employee includes
the compensation in income.
Restricted Stock Units/Other Stock-Based Awards/Performance
Awards.
Any cash payments or the fair market
value of any common shares or other property an employee
receives in connection with restricted stock units, other
stock-based awards, performance awards, or as unrestricted
payments equivalent to dividends on unfunded awards or on
restricted shares are includable in income in the year received
or made available to the employee without substantial
limitations or restrictions. Generally, the Company will be
entitled to deduct the amount the employee includes in income in
the year of payment.
Deferred Compensation.
Any deferrals made
under the Long-Term Incentive Plan, including awards granted
under the Long-Term Incentive Plan, that are considered to be
deferred compensation, must satisfy the requirements of
Section 409A of the Code to avoid adverse tax consequences
to participating employees. These requirements include
limitations on election timing, acceleration of payments, and
distributions. The Company may structure or modify any deferrals
and awards under the Long-Term Incentive Plan to meet the
applicable tax law requirements, although it is not obligated to
do so.
Section 162(m).
Section 162(m) of
the Code imposes a $1,000,000 limitation on the compensation
deductible annually by the Company paid to certain executives.
The limit does not apply to certain qualified
performance-based compensation and the Long-Term Incentive
Plan is intended to comply with the requirements for qualified
performance-based compensation. However, in the event the Board
determines that compliance with Section 162(m) is not
desired with respect to a particular award, it may waive
compliance.
Tax Withholding.
The Company is authorized to
withhold from any award granted or payment due under the
Long-Term Incentive Plan the amount of any withholding taxes due
in respect of the award and to take such other action as may be
necessary to satisfy all obligations for the payment of
applicable withholding taxes.
Approvals
Required
TLC
Vision
management is asking shareholders to pass
Resolution 1, the full text of which is set out in
Appendix A to this management information circular, to
approve the Long-Term Incentive Plan. The affirmative vote of
the majority of the votes cast at the meeting is required to
approve the Long-Term Incentive Plan.
The management
representatives designated in the enclosed form of proxy intend
to vote the common shares for which they have been appointed FOR
the approval of the Plan unless the shareholder who has given
such proxy directs otherwise.
Your board of directors unanimously recommends a vote
FOR
the approval of the Long-Term Incentive Plan.
Approval
of One-Time Stock Option Exchange Program for
Employees
We are seeking shareholder approval for a one-time stock option
exchange program. The exchange program would allow us to cancel
certain underwater stock options (meaning the
exercise prices of the options are greater than our current
stock price) in exchange for fewer stock options with a lower
exercise price. Options will be
16
exchanged using ratios that are designed to be approximately
value-neutral. We will use the 52-week
intra-day-high
trading price of our common shares (measured from the start date
of the exchange program) as a threshold for options eligible to
be exchanged. This will ensure that only options that are
substantially underwater are eligible for the
exchange program. The members of our board of directors and our
senior leadership team (including our executive officers and
other senior officers designated by our Compensation Committee)
will not be eligible to participate in the exchange program.
Shareholder approval is required for this exchange program under
the NASDAQ listing rules. If our shareholders approve this
exchange program, the board intends to commence it as soon as
practicable after the meeting. If shareholders do not approve
the exchange program, it will not take place.
Overview
Our stock price has experienced a significant decline during the
last few years due in large part to the continued weak economy
as well as other factors outside our control that have
negatively impacted our financial results. Our business has
been, and continues to be, adversely impacted by the global
financial and economic crises. Our business depends heavily on
the amount of discretionary income our customers have to spend,
and they have less to spend on elective eye care as a result of
job losses, foreclosures, bankruptcies, reduced access to
credit, and sharply falling home values. Consequently, the
Companys employees hold a significant number of stock
options with exercise prices that greatly exceed both the
current market price of our common shares and the average market
price of our shares over the prior 12 months. Further, our
efforts to transform and reinvigorate our business and improve
our performance may not result in significant increases in our
stock price in the near-term, if at all. Thus, our board of
directors and the Compensation Committee believe these
underwater options no longer provide the long-term incentive and
retention objectives that they were intended to. Our board of
directors and the Compensation Committee believe the exchange
program is an important part of our strategy to align employee
and shareholder interests. The exchange program is important for
the Company because it will permit us to:
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Provide renewed incentives to our employees who participate in
the exchange program. As of April 10, 2009, 100% of our
outstanding stock options were underwater. The weighted average
exercise price of these underwater options was $4.09 (all
options granted in Canadian dollars were converted into
U.S. dollars) as compared to a $0.11 closing price of our
common shares on the NASDAQ exchange on April 10, 2009. As
a result, these stock options do not currently provide
meaningful retention or incentive value to our employees. We
believe the exchange program will enable us to enhance long-term
shareholder value by allowing us to retain experienced and
productive employees, by improving the morale of our employees
generally, and by aligning the interests of our employees more
fully with the interests of our shareholders. Equity-based
incentives have always been an important component of our total
remuneration philosophy and strategy.
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Meaningfully reduce our total number of outstanding stock
options, thus reducing the overhang of our
outstanding options. These underwater stock options currently
create an overhang of approximately 9.7% as of April 10,
2009 which is the percentage the total outstanding options
(approximately 4.9 million) represent of the total
outstanding common shares (approximately 50.6 million).
These options will remain in the overhang calculation until the
options are exercised, cancelled, forfeited, or expire. Keeping
these underwater options outstanding does not serve the
interests of our shareholders and does not provide the benefits
intended by our equity compensation program. By replacing the
eligible underwater options with fewer options with a lower
exercise price, the overhang of our outstanding options will be
decreased. The overhang represented by the options granted
pursuant to the exchange program will reflect an appropriate
balance between the Companys goals for its equity
compensation program and our interest in minimizing the overhang
of our outstanding options and the dilution of our
shareholders interests.
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Recapture value from compensation costs that we are already
incurring with respect to outstanding underwater stock options.
These options were granted with a fair market value exercise
price. Under applicable accounting rules, we will have to
recognize approximately $0.1 million of incremental
compensation expense related to these underwater options. We
believe it is not an efficient use of the Companys
resources to recognize compensation expense on options that are
perceived by our employees as providing no value. By replacing
options that have little or no retention or incentive value with
options that will provide both retention and incentive value
while not creating additional compensation expense (other than
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immaterial expense that might result from fluctuations in our
stock price after the exchange ratios have been set but before
the exchange actually occurs), the Company will be making
efficient use of its resources.
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For reference purposes, the following table summarizes
information regarding outstanding equity awards issued pursuant
to the Existing Option Plan (which will be amended and restated
by the approval of the Long-Term Incentive Plan at the meeting)
and common shares available for future grants under the Existing
Option Plan as of April 29, 2009:
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Shares available for future grant under Existing Option Plan
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301,000
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Shares issuable pursuant to outstanding stock options
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4,775,000
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Weighted average exercise price of all outstanding stock options
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$4.07
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Weighted average remaining term of all outstanding stock options
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4.36 years
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Shares issuable pursuant to all other outstanding equity awards
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0
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If our shareholders do not approve the exchange program,
eligible options will remain outstanding and in effect in
accordance with their existing terms. We will continue to
recognize compensation expense for these eligible options and
our shareholders will continue to be subject to the dilutive
effect of these options, even though the options may have little
or no retention or incentive value.
Summary
of Material Terms
The material terms of the proposed exchange program are
summarized below.
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The exchange program will be open to all U.S. and Canadian
employees and consultants, except as described below, who are
employed by us at the start of the exchange program and remain
employees until the date the replacement options are granted.
Eligible employees will be permitted to exchange
all or
none
of the eligible options for replacement options on a
grant-by-grant
basis.
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The members of our board and our senior leadership team, which
includes our executive officers and other senior officers
designated by our Compensation Committee, will not be eligible
to participate in the exchange program.
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The exchange ratios of eligible options cancelled in exchange
for replacement options will be determined in a manner intended
to result in the grant of replacement options that are
approximately value-neutral. The exchange ratios will be
established shortly before the start of the exchange program and
will depend on the original exercise price of the eligible
options and the then-current fair value of the options, as well
as the fair value of the new options (calculated using the
Black-Scholes option-pricing model). The exchange program will
not be a one-for-one exchange. Instead, participating employees
will receive replacement options for a lesser number of shares
(with a lower exercise price) than are covered by the cancelled
options.
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Each replacement option will have an exercise price per share
equal to the closing price of our common shares on the NASDAQ
exchange on the date of grant, and will have a new five-year
term.
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None of the replacement options will be vested on the date of
grant. The replacement options will be scheduled to vest in two
equal annual installments, fifty percent on each of the first
and second anniversaries of the grant date.
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The exchange program will begin as soon as practical and not
later than six months following the date of shareholder
approval. Our board of directors and the Compensation Committee
will determine the actual start date within that time period. If
the exchange program does not commence within six months of
shareholder approval, we will consider any future exchange or
similar program to be a new one, requiring new shareholder
approval before it could be implemented.
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While the terms of the exchange program are expected to be
materially similar to the terms described in this proposal, our
board of directors and the Compensation Committee may change the
terms of the exchange program in their sole discretion to take
into account a change in circumstances, as described below, and
may determine not to implement the exchange program even if
shareholder approval is obtained.
18
Reasons
for the Option Exchange Program
We believe that an effective and competitive employee incentive
program is imperative for the success of our business. We rely
on our experienced and productive employees and their efforts to
help the Company achieve its business objectives. At
TLC
Vision
, stock options constitute a key component of
our compensation philosophy and strategy because our board of
directors and the Compensation Committee believe that equity
compensation encourages employees to act like owners of the
business, motivating them to work toward our success and
rewarding their contributions by allowing them to benefit from
increases in the value of our shares. TLC
Vision
s
long-term incentive compensation program is broad-based, with
approximately 300 employees at all levels currently holding
stock options. The Company has offered stock options to our
employees since our inception.
Due to the significant decline of our stock price during the
last few years, many of our employees now hold stock options
with exercise prices significantly higher than the current
market price of our common shares. For example, the closing
price of our common shares on the NASDAQ exchange on
April 10, 2009 was $0.11, whereas, the weighted average
exercise price of all outstanding options held by our employees
was $4.09. As of April 10, 2009 approximately 100% of
outstanding stock options held by our employees were underwater.
Although we continue to believe that stock options are an
important component of our employees total compensation,
many of our employees view their existing options as having
little or no value because the exercise prices are significantly
higher than the current market price of our common shares. As a
result, for many employees, these options are ineffective to
provide the incentive and retention value that our board and the
Compensation Committee believe is necessary to motivate and
retain our employees.
Alternatives
Considered
When considering how best to continue to motivate and reward our
employees who have underwater options, we considered the
following alternatives:
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Increase cash compensation.
To replace equity
incentives, we considered whether we could increase base and
target bonus cash compensation. However, significant increases
in cash compensation would substantially increase our
compensation expenses and reduce our cash flow from operations,
which could adversely affect our business and operating results.
In addition, these increases would not reduce our overhang.
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Grant additional equity awards.
We also
considered special grants of additional stock options at current
market prices or another form of equity award such as restricted
stock units. However, these additional grants would
substantially increase both our overhang and the dilution to our
shareholders.
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Exchange options for cash.
Additionally, we
considered implementing a program to exchange underwater options
for cash payments. However, an exchange program for cash would
increase our compensation expenses and reduce our cash flow from
operations, which could adversely affect our business and
operating results. Furthermore, we do not believe that such a
program would have any retention or incentive value.
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Exchange options for restricted stock
units.
Lastly, we considered implementing a
program to exchange underwater options for restricted stock
units. However, in order to ensure that the exchange program is
approximately expense-neutral from an accounting perspective,
the exchange ratios for an options-for-restricted stock units
exchange program would need to be substantially higher than for
an options-for-options exchange program (i.e., fewer replacement
awards granted). Thus, we believe that employee participation in
an options-for-restricted stock units exchange program would be
lower than with an options-for-options exchange program.
Additionally, restricted stock units would be a new form of
equity for our employees and we believe that a lack of
familiarity with restricted stock units could negatively impact
employee participation in the exchange program.
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Implementation
of the Option Exchange Program
We decided on a program to exchange underwater options for
replacement options because we believe this is the best approach
for the Company. We determined that a program under which our
employees could exchange
19
underwater stock options for fewer stock options with a lower
exercise price was the most attractive alternative for the
following reasons:
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The exchange program offers a reasonable, balanced and
meaningful incentive for our eligible employees.
Under the
exchange program, participating employees will surrender
eligible underwater options for replacement options covering
fewer shares with a lower exercise price and that will vest in
two equal annual installments, fifty percent on each of the
first and second anniversaries of the replacement option grant
date.
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The exchange ratio will be calculated to return value to our
shareholders.
We will calculate the exchange
ratios to result in a fair value of the replacement options as a
whole that will be approximately value-neutral in relation to
the fair value of the eligible options as a whole that are
exchanged. For accounting purposes, there may be an incremental
compensation cost required under FAS 123(R) related to any
excess value received on a
grant-by-grant
basis, however, we expect this cost to be immaterial. We believe
this will have no significant adverse impact on our reported
earnings. We believe this combination of fewer shares subject to
options with lower exercise prices, granted with no expected
significant adverse impact on our reported earnings, together
with the new two year vesting requirement, represents a
reasonable and balanced exchange program with the potential for
a significant positive impact on employee retention, motivation
and performance. Additionally, stock options will provide value
to employees only if the Companys share price increases
over time thereby aligning employee and shareholder interests.
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The exchange program will reduce the overhang of our
outstanding equity awards.
Not only do the
underwater options have little or no retention value, they
cannot be removed from the overhang of our outstanding equity
awards until they are exercised, expire or the employee who
holds them leaves our employment. The exchange program will
reduce the overhang of our outstanding equity awards while
eliminating the ineffective options that are currently
outstanding. Because employees who participate in the exchange
program will receive fewer replacement options in exchange for
their surrendered options, the number of shares subject to all
outstanding equity awards will be reduced, thereby reducing the
overhang of our outstanding equity awards. Based on the
assumptions described below, if all eligible options are
exchanged, options to purchase approximately
1,680,975 shares will be surrendered, while replacement
options covering approximately 624,775 shares will be
granted and conditions will be removed on 467,500 options
granted conditionally in December 2008, resulting in a net
reduction in the equity award overhang by approximately
588,700 shares. The total number of shares subject to
outstanding equity awards as of April 29, 2009 would have
been approximately 4,186,300 shares, including the approximately
624,775 replacement options and 467,500 options granted
conditionally in December 2008. As of April 29, 2009
the total number of TLC common shares outstanding was
50,565,219. All eligible options that are not exchanged will
remain outstanding and in effect in accordance with their
existing terms.
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The reduced number of shares subject to the replacement
options will conserve our equity pool.
Under the
exchange program, shares subject to eligible options that are
surrendered in exchange for a lesser number of replacement
options will return to the pool of common shares available for
future equity awards and to satisfy the conditional options
granted in December 2008 and described under Information
on Executive Compensation. This return of common shares
will constitute an efficient use of the shares available for
future issuance.
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Members of our board and the senior leadership team will not
be eligible to participate in the exchange
program.
Although our directors and members of
the senior leadership team, which includes our executive
officers and certain other designated senior officers, also hold
options that are significantly underwater, these individuals are
not eligible to participate in the exchange program because we
believe that their compensation should remain at greater risk
based on our stock price.
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Description
of the Option Exchange Program
Implementing the Exchange Program.
We have not
commenced the exchange program and will not do so unless our
shareholders approve the exchange program. If the Company
receives shareholder approval of the exchange program, the
exchange program is expected to commence as soon as practical,
with terms materially
20
similar to those described in this circular. Even if the
shareholders approve this proposal, the board or the
Compensation Committee may still later determine not to
implement the exchange program. It is currently anticipated that
the exchange program will commence as soon as practicable
following approval of this proposal by our shareholders.
However, if the exchange program does not commence within six
months after the date of shareholder approval, the Company will
not commence an exchange or similar program without again
seeking and receiving shareholder approval.
Upon commencement of the exchange program, employees holding
eligible options will receive written materials (the offer
to exchange) explaining the precise terms and timing of
the exchange program. Employees would be given at least 20
business days (or such longer period as we may elect to keep the
exchange program open) to elect to exchange all or none of their
eligible options, on a
grant-by-grant
basis, for replacement options. After the offer to exchange is
closed, the options surrendered for exchange would be cancelled,
and the Compensation Committee would approve grants of
replacement options to participating employees in accordance
with the applicable exchange ratios. All such replacement
options would be granted under the Long-Term Incentive Plan if
the amendments required to further amend and restate the
Existing Option Plan as the Long-Term Incentive Plan are
approved by shareholders, and otherwise will be governed by the
Existing Option Plan, and would be subject to the terms of the
Long-Term Incentive Plan or the Existing Option Plan, as
applicable.
At or before commencement of the exchange program, we will file
the offer to exchange and other related documents with the SEC
as part of a tender offer statement on Schedule TO. Employees,
as well as shareholders and members of the public, will be able
to access the offer to exchange and other documents we file with
the SEC free of charge from the SECs web site at
www.sec.gov or on our web site at
http://www.tlcv.com.
If you are both a shareholder and an employee holding
eligible options, please note that voting to approve the equity
plan amendments authorizing the exchange program does not
constitute an election to participate in the exchange
program.
Eligible Options.
To be eligible for exchange
under the exchange program, an underwater option, as of the date
that the exchange program commences, must have a per share
exercise price above the 52-week
intra-day-high
trading price of our common shares as reported by the NASDAQ
exchange, but not higher than $9.00 per share, as these options
will soon expire and have a minimal fair value.
Eligible Participants.
The exchange program
will be open to all U.S. and Canadian employees and
non-employee contractors who hold eligible options, except as
described below. To be eligible, an individual must be employed
on the date the offer to exchange commences and must remain
employed through the date that replacement options are granted.
The exchange program will not be open to members of the board or
the senior leadership team. For purposes of the exchange
program, the senior leadership team will include our executive
officers and any other senior officers that the Compensation
Committee shall designate from time to time. As of
April 10, 2009 there were approximately 124 employees
eligible to participate in the exchange program (based on
assumptions described below).
Valuation Assumptions.
An independent
consultant, Radford, has calculated the fair values of the
options and exchange ratios based upon a U.S. share price
of $0.11 for options in U.S. dollars and a Canadian share
price of Cdn$0.14 for options in Canadian dollars, which is the
closing price of TLC
Vision
common shares on each
respective stock exchange as of April 9, 2009.
This initial calculation of the ratios at which outstanding
underwater options will be exchanged for new
at-the-money
options was calculated as of an assumed exchange date of
August 1, 2009.
The exchange ratios for this analysis have been determined using
a cost-neutral approach under FAS 123(R). There may be some
incremental accounting expense as of the closing date of this
transaction based upon the change in economic assumptions that
will be used to value the awards on the day the exchange is
actually made. Radford has calculated the cost-neutral exchange
ratios based upon the Black-Scholes model with the following
option-pricing model assumptions:
|
|
|
|
|
U.S. Market Value of TLC
Visions
Common
Shares
$0.11 TLC
Visions
closing stock price on the NASDAQ exchange on April 9, 2009.
|
21
|
|
|
|
|
Canadian Market Value of TLC
Visions
Common
Shares
Cdn. $0.14
TLC
Vision
s closing stock price on the TSX on
April 9, 2009.
|
|
|
|
Expected Volatility 88.25%
The
expected volatility calculation is consistent with the ongoing
methodologies used by TLC
Vision
for our FAS 123(R)
plain vanilla stock option valuations. As expressed
to Radford by TLC
Vision
, the volatility places 100% of
the weight on TLC
Visions
historical volatility.
Using the weighted average remaining contractual term of the old
awards, Radford calculated the historical volatility over the
most recent
3.81-year
periods as of April 9, 2009.
|
|
|
|
Expected Dividend Yield 0.00%
FAS 123(R) specifies that the expected dividend yield
should reflect any potential changes in the current dividend
yield to the extent those changes are publicly available.
Currently, TLC
Vision
does not pay a dividend so Radford
has applied a 0.00% dividend yield.
|
|
|
|
Risk-Free Rate of Return
Radford linearly
interpolated the Zero Coupon U.S. Treasury interest rates as of
April 9, 2009. The following tables formed the basis for
this calculation.
|
|
|
|
|
|
Treasury Interest Rates
|
April 9, 2009
|
1-month
|
|
|
0.13
|
%
|
3-month
|
|
|
0.18
|
%
|
6-month
|
|
|
0.39
|
%
|
1-year
|
|
|
0.60
|
%
|
2-year
|
|
|
0.96
|
%
|
3-year
|
|
|
1.36
|
%
|
5-year
|
|
|
1.90
|
%
|
7-year
|
|
|
2.49
|
%
|
10-year
|
|
|
2.96
|
%
|
|
|
|
|
|
|
Expected Life (underwater options)
Radford has determined an expected life for each
pre-exchange underwater award based upon the
in-the-money
level, vesting schedule, contractual term, and current life to
date based on tables determined by means of Monte-Carlo
simulations of future stock price paths. The expected life and
remaining contractual term combination was determined by
assuming that the outstanding options were exercised (after
vesting) once the simulated stock price path reached a level
where the options were
at-the-money
and became exercisable. Radford applied a uniform probability of
exercise behavior thereafter, analogous to the assumption of the
SECs Staff Accounting Bulletin #107.
|
|
|
|
Expected Life (new at the money
options)
For the post exchange awards, which
will be
at-the-money,
Radford determined an expected life based upon the
simplified approach as described in the SEC Staff
Accounting Bulletin #107. This approach assumes that
options will be exercised at the midpoint of the average time to
vest and the full contractual term. The new
at-the-money
options will vest (50% on each anniversary of the exchange date)
with a
5-year
contractual term, yielding an expected life of 3.25 years.
|
Exchange Ratios.
The exchange ratios have been
designed by Radford to result in a fair value of the replacement
options that will be approximately value-neutral in relation to
the fair value of the eligible options that are cancelled in the
exchange (based on valuation assumptions made when the offer to
exchange commences). These ratios will be designed to make the
grant of replacement options accounting expense neutral. The
actual exchange ratios will be determined by the Compensation
Committee shortly before the start of the exchange program.
The exchange ratios will be established by grouping together
eligible options with similar exercise prices and assigning an
appropriate exchange ratio to each grouping. These exchange
ratios will be based on the fair value of
22
the eligible options (calculated using the Black-Scholes
option-pricing model) within the relevant grouping. The
option-pricing model takes into account many variables, such as
the volatility of our common shares and the expected term of an
option. As a result, the exchange ratios do not necessarily
increase as the exercise price of the option increases. Setting
the exchange ratios in this manner is intended to result in the
issuance of replacement options that are approximately
value-neutral in relation to the surrendered eligible options
they replace. This will eliminate most of the additional
compensation cost that we must recognize on the replacement
options, other than immaterial compensation expense that might
result from fluctuations in our stock price after the exchange
ratios have been set but before the exchange actually occurs.
Although the exchange ratios cannot be determined now, we can
provide an example if we make certain assumptions regarding the
start date of the offer to exchange, the fair value of the
eligible options, and the fair market value of our common
shares. For illustration purposes, assume we were to begin the
exchange program on July 1, 2009, which would allow us to
include in the exchange program a substantial percentage of our
outstanding underwater options, and assume that our
then-applicable 52-week
intra-day-high
stock price would be $1.43. As a result, options with an
exercise price above $1.43 per share but below $9.00 per share
would be eligible for the exchange program. If, at the time we
set the exchange ratios, the fair market value of our common
shares was $0.11 per share, then based on the above method of
determining the exchange ratio, the following exchange ratios
would apply:
|
|
|
|
|
If the Exercise Price of an
|
|
The Exchange Ratio Would Be
|
Eligible Option Is:
|
|
(Eligible Option to Replacement Option):
|
|
$1.43 to $3.04
|
|
|
2-to-1
|
|
$3.05 to $9.00
|
|
|
4-to-1
|
|
The foregoing exchange ratios are provided merely as an example
of how we would determine the exchange ratios if we were
commencing the exchange offer based on a $0.11 share price.
We will apply the same methodology once these factors are
decided closer to the time of commencement of the exchange
program. The total number of replacement options a participating
employee will receive with respect to a surrendered eligible
option will be determined by converting the number of shares
underlying the surrendered eligible option according to the
applicable exchange ratio and rounding down to the nearest whole
share. The exchange ratios will be applied on a
grant-by-grant
basis.
For purposes of example only, if a participating employee
exchanged an eligible option for 120 shares with an
exercise price of $2.00 per share and the exchange ratio was one
share of replacement option for every two surrendered eligible
option shares, the employee would receive a replacement option
for 60 shares in exchange for the surrendered eligible
option (120 divided by 2). If the employee also exchanged
another eligible option for 320 shares with an exercise
price of $5.00 per share and the exchange ratio was one share of
replacement option for every four surrendered eligible option
shares, the employee would receive a replacement option for
80 shares in exchange for the surrendered eligible option
(320 divided by 4).
Continuing this example, if we assume that all eligible options
(as of April 10, 2009) remain outstanding and the
option holders remain eligible to participate, the following
table summarizes information regarding the eligible options and
the replacement options that would be granted in the exchange:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Maximum Number
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
Remaining Life of
|
|
|
|
|
|
of Shares Underlying
|
|
Exercise Prices of
|
|
Shares Underlying
|
|
|
Exercise Price of
|
|
|
Eligible Option
|
|
|
|
|
|
Replacement Options
|
|
Eligible Options
|
|
Eligible Options
|
|
|
Eligible Options
|
|
|
(Years)
|
|
|
Exchange Ratio
|
|
|
That May be Granted
|
|
|
$1.43 to $3.04
|
|
|
818,350
|
|
|
$
|
2.99
|
|
|
|
4.99
|
|
|
|
2.00-to-1
|
|
|
|
409,171
|
|
$3.05 to $9.00
|
|
|
862,625
|
|
|
$
|
5.42
|
|
|
|
3.22
|
|
|
|
4.00-to-1
|
|
|
|
215,604
|
|
Total
|
|
|
1,680,975
|
|
|
$
|
4.24
|
|
|
|
4.08
|
|
|
|
|
|
|
|
624,775
|
|
After the close of the exchange (assumed to be August 1,
2009) as presented in this example (assuming all eligible
options are tendered and without including any grants after
July 1, 2008), there will be 889,700 shares available
for grant and 4,186,300 options outstanding. These
outstanding options would have a weighted average exercise price
of $2.78 (including approximately 500,000 options with a strike
price of more than $9.00) and a weighted average remaining
contractual term of 5.33 years.
23
Election to Participate.
Participation in the
exchange program will be voluntary. Eligible employees will be
permitted to exchange all or none of the eligible options for
replacement options on a
grant-by-grant
basis.
Exercise Price of Replacement Options.
All
replacement options will be granted with an exercise price equal
to the closing price of our common shares on the replacement
option grant date as reported by the NASDAQ exchange.
Vesting of Replacement Options.
The
replacement options will vest in two equal annual installments,
fifty percent on each of the first and second anniversaries
of the replacement option grant date.
Term of the Replacement Options.
The
replacement options will have a five-year term.
Other Terms and Conditions of the Replacement
Options.
The other terms and conditions of the
replacement options will be set forth in an option agreement to
be entered into as of the replacement option grant date. Any
additional terms and conditions will be comparable to the other
terms and conditions of the eligible options. All replacement
options will be nonstatutory stock options granted under our
Long-Term Incentive Plan, if approved, or the Existing Option
Plan, if the Long-Term Incentive Plan is not approved,
regardless of the tax status of the eligible options surrendered
for exchange.
Return of Eligible Options Surrendered.
The
eligible options surrendered for exchange will be cancelled and
all common shares that were subject to such surrendered options
will again become available for future awards under the
Long-Term Incentive Plan, if approved, or the Existing Option
Plan, if the Long-Term Incentive Plan is not approved, including
to satisfy the conditional options granted in December 2008 and
described under Information on Executive
Compensation.
Accounting Treatment.
Under SFAS 123(R),
the exchange of options under the option exchange program is
treated as a modification of the existing options for accounting
purposes. Accordingly, we will recognize the unamortized
compensation cost of the surrendered options, as well as the
incremental compensation cost of the replacement options granted
in the exchange program, ratably over the vesting period of the
replacement options. The incremental compensation cost will be
measured as the excess, if any, of the fair value of each
replacement option granted to employees in exchange for
surrendered eligible options, measured as of the date the
replacement options are granted, over the fair value of the
surrendered eligible options in exchange for the replacement
options, measured immediately prior to the cancellation. Because
the exchange ratios will be calculated to result in an
approximately value-neutral option exchange, we do not expect to
recognize any significant incremental compensation expense for
financial reporting purposes as a result of the exchange
program. In the event that any of the replacement options are
forfeited prior to their vesting due to termination of service,
the incremental compensation cost for the forfeited replacement
options will not be recognized; however, we would recognize any
unamortized compensation expense from the surrendered options
which would have been recognized under the original vesting
schedule.
US. Federal Income Tax Consequences.
The
following is a summary of the anticipated material
U.S. federal income tax consequences of participating in
the exchange program. A more detailed summary of the applicable
tax considerations to participating employees will be provided
in the offer to exchange. We believe the exchange of eligible
options for replacement options pursuant to the exchange program
should be treated as a non-taxable exchange and neither we nor
any of our employees should recognize any income for
U.S. federal income tax purposes upon the surrender of
eligible options and the grant of replacement options. However,
the tax consequences of the exchange program are not entirely
certain, and the Internal Revenue Service is not precluded from
adopting a contrary position. The law and applicable regulations
themselves are also subject to change, possibly with retroactive
effect. All holders of eligible options are urged to consult
their own tax advisors regarding the tax treatment of
participating in the exchange program under all applicable laws
prior to participating in the exchange program. The tax
consequences for
non-U.S. employees
may differ from the U.S. federal income tax consequences
described in the preceding sentence.
Potential Modification to Terms to Comply with Governmental
Requirements.
The terms of the exchange program
will be described in an offer to exchange that will be filed
with the SEC. Although we do not anticipate that the SEC will
require us to materially modify the exchange programs
terms, it is possible that we will need to alter the terms of
the exchange program to comply with comments from the SEC.
Changes in the terms of the exchange
24
program may also be required for tax purposes for participants
in the United States as the tax treatment of the exchange
program is not entirely certain. The Compensation Committee will
retain the discretion to make any such necessary or desirable
changes to the terms of the exchange program for purposes of
complying with comments from the SEC or optimizing the
U.S. or Canadian federal tax consequences.
Plan
Benefits Relating to the Option Exchange Program
Because participation in the exchange program is voluntary, the
benefits or amounts that will be received by any participant, if
this proposal is approved and the exchange program is
implemented, are not currently determinable, since we are not
able to predict who or how many participants will elect to
participate, how many options will be surrendered for exchange
or the number of replacement options that may be granted. None
of the members of our senior leadership team or our board of
directors will be eligible to participate in the exchange
program. Based on the assumptions described above, including an
assumed $1.43 52-week
intra-day-high
trading price of our common shares and a $0.11 share price,
the maximum number of shares underlying options that would be
cancelled would be 1,680,975 shares, and the maximum number
of shares underlying new options that would be granted would be
624,775 shares.
Effect on
Shareholders
We are unable to predict the precise impact of the exchange
program on our shareholders because we are unable to predict how
many or which employees will exchange their eligible options.
The exchange program was designed in the aggregate to be
expense-neutral to our shareholders while reducing the overhang.
Based on the assumptions described above, including an assumed
$1.43 52-week
intra-day-high
trading price of our common shares and a $0.11 share price,
if all eligible options are exchanged, options to purchase
approximately 1,680,975 shares will be surrendered, while
replacement options covering approximately 624,775 shares
will be granted and conditions will be removed on 467,500
options granted conditionally in December 2008 resulting in
a net reduction in the equity award overhang by approximately
588,700 shares. Following the exchange program, if all
eligible options are exchanged, we will have approximately
4,186,300 options outstanding as of August 1, 2009, with a
weighted average exercise price of $2.78 (including
approximately 500,000 options with a strike price of more than
$9.00) and a weighted average remaining term of 5.33 years.
As of April 29, 2009, the total number of common shares of
TLC
Vision
outstanding was 50,565,219.
Your board of directors unanimously recommends a vote
FOR
the approval of the one-time stock option exchange program
for employees.
Approvals
Required
TLC
Vision
management is asking shareholders to pass
Resolution 2, the full text of which is set out in
Appendix A to this management information circular, to
approve the one-time stock option exchange program for
employees. The affirmative vote of the majority of the votes
cast at the meeting is required to approve the one-time stock
option exchange program.
The management representatives
designated in the enclosed form of proxy intend to vote the
common shares for which they have been appointed FOR the
approval of the One-Time Stock Option Exchange Program unless
the shareholder who has given such proxy directs otherwise.
Approval
of Increase in Number of Shares Reserved for Existing Option
Plan (as the same may be amended and restated as the Long-Term
Incentive Plan)
Description
of Amendment
Our board of directors has unanimously approved increasing the
number of common shares which may be issued under the Existing
Option Plan (as the same may be amended and restated as the
Long-Term Incentive Plan) (the Plan) by 1,000,000
common shares from 9,116,000 to 10,116,000 common shares, but
only in the event that shareholders do not approve the one-time
option exchange program described above. See Business to
be Conducted at the Meeting Approval of the One-Time
Stock Option Exchange Program for Employees.
If the
one-time option exchange program is approved by shareholders at
the meeting, the limit under the Plan will not be increased.
25
The number of common shares remaining available for issuance
pursuant to the Plan after the proposed increase will represent
approximately 3% of the Companys currently issued and
outstanding common shares. As of April 29, 2009, options to
acquire 4,775,000 common shares remained outstanding and
unexercised under the Plan and 301,000 common shares
remained available to be granted under the Plan. In the
aggregate, the number of common shares issuable under
outstanding and unexercised options under the Plan and those
remaining available for options to be granted under the Plan,
after giving effect to the amendment to add 1,000,000 common
shares to the amount reserved, represents 12% of the
Companys currently issued and outstanding common shares.
The purpose of the amendment to increase the number of shares
available for issuance pursuant to the Plan is to ensure that
there remains for issuance under the Plan a sufficient number of
options to allow the Company to maintain its current policy of
awarding options as an alternative to cash compensation, and as
bonus remuneration, for all corporate office employees and
directors of the Company. As well, the Company granted a total
of 548,000 options (of which 467,500 options remain
outstanding) in December 2008 to directors and officers
conditional upon either (1) shareholders authorizing an
increase in the shares reserved for issuance under the Plan or
(2) the number of shares reserved for issuance under the
Plan being increased by termination of unexercised options,
sufficient to cover all options granted on December 10,
2008.
Description
of the Existing Option Plan
The following describes the principal terms of the Existing
Option Plan. If shareholders approve amending and restating the
Existing Option Plan as the Long-Term Incentive Plan, the Plan
will have the material attributes described under Business
to be Conducted at the Meeting Approval of the
Amended and Restated Long-Term Incentive Plan.
The board of directors of the Company has appointed its
Compensation Committee to administer the Existing Option Plan.
The purpose of the Existing Option Plan is to advance the
interest of the Company by (i) providing directors,
officers, employees and other eligible persons with additional
incentive; (ii) encouraging stock ownership by eligible
persons; (iii) increasing the proprietary interests of
eligible persons in the success of the Company;
(iv) encouraging eligible persons to remain with the
Company or its subsidiaries; and (v) attracting new
employees, officers or directors to the Company or its
subsidiaries. In determining whether to grant options and how
many options to grant to eligible persons under the Existing
Option Plan, consideration is given to each individuals
past performance and contribution to the Company as well as the
individuals expected ability to contribute to the Company
in the future. The Compensation Committee has the authority to
determine the limitations, restrictions and conditions,
including with respect to vesting, applicable to each award of
options. The Compensation Committee also intends that some
options granted to senior officers of the Company will be
subject to performance goals based on the Companys
financial performance which will need to be achieved as a
condition to the vesting of such option awards.
Any employee, officer, director or service provider (being any
person or company who provides ongoing marketing or promotional
services to or endorsements for the Company) of the Company or
any affiliate of the Company is eligible to receive options
pursuant to the Existing Option Plan. The aggregate number of
common shares which are available for issuance under the
Existing Option Plan to any one person is 5% of the number of
the Companys common shares outstanding at the time of
grant.
The exercise price of an option awarded pursuant to the Existing
Option Plan is equal to the closing market price of the
Companys common shares on the market with the largest
trading volume of the Companys common shares on the last
trading date preceding the date of the grant. If there is no
trading on that date, the exercise price will be the average of
the bid and ask prices on the date preceding the date of grant
or, if there is no active market for the Companys common
shares, the Compensation Committee shall make a good faith
determination of the exercise price based on the fair market
value of the common shares on the date of grant. A copy of the
Existing Option Plan was included as Exhibit 4.2 to the
Companys Registration Statement on
Form S-8
filed with the SEC.
Certain
U.S. Federal Tax Consequences of the Existing Option
Plan
The following discussion summarizes certain U.S. federal
tax considerations for the U.S. participants in the
Existing Option Plan and certain U.S. tax effects to the
Company. Canadian, state and local tax consequences may
26
differ. All options granted under the Existing Plan are
nonqualified stock options for U.S. federal income tax
purposes. An individual generally will not recognize any taxable
income upon the grant of the option but will generally
recognize, for U.S. federal tax purposes, ordinary
compensation income at the time of exercise of the option in an
amount equal to the excess, if any, of the fair market value of
the common shares on the date of exercise over the exercise
price. The Companys U.S. subsidiary which employs the
individual should generally be entitled to a corresponding tax
deduction for U.S. federal income tax purposes at the time
of exercise.
When an individual sells the common shares acquired pursuant to
the exercise of an option, the individual generally will
recognize a capital gain or loss in an amount equal to the
difference between the amount realized upon the sale of the
common shares and the individuals basis in the common
shares (that is, the exercise price plus the amount, if any,
taxed as compensation income).
The Companys U.S. subsidiaries will not be entitled
to deductions for U.S. federal income tax purposes in
connection with options exercised under the Existing Option Plan
by certain senior executive officers to the extent that the
amount of income derived from the exercise of options in a year
by any such officer, together with that officers other
compensation from the Company, exceeds the $1 million
dollar limitation of the Code.
Approvals
Required
TLC
Vision
management is asking shareholders to pass
Resolution 3, the full text of which is set out in
Appendix A to this management information circular, to
approve the increase to the number of common shares available
under the Plan if shareholders reject the one-time option
exchange program. The affirmative vote of the majority of the
votes cast at the meeting is required to approve the increase to
the number of shares available under the Plan.
If the
one-time option exchange program is approved by shareholders at
the meeting, the limit under the Plan will not be increased. The
management representatives designated in the enclosed form of
proxy intend to vote the common shares for which they have been
appointed FOR the approval of the increase unless the
shareholder who has given such proxy directs otherwise.
Appointment
of Auditors
Our board of directors proposes that Ernst & Young LLP
be appointed as auditors of the Company until the next annual
meeting of shareholders of the Company. Ernst & Young
LLP have been our auditors since 1997. Representatives of
Ernst & Young LLP are expected to attend our annual
and special meeting, will be provided with an opportunity to
make a statement, should they desire to do so, and will be
available to respond to appropriate questions from our
shareholders.
The affirmative vote of the majority of the votes cast at the
meeting at which a quorum is present is required to appoint
Ernst & Young LLP as our auditors for the ensuing year
and to authorize the directors to fix the remuneration to be
paid to the auditors.
Unless otherwise directed, the
management representatives designated in the enclosed form of
proxy intend to vote the common shares for which they have been
appointed
FOR
the appointment of Ernst & Young
LLP as our auditors and for the authorization of the directors
to fix the remuneration to be paid to the auditors.
If our
shareholders do not approve the appointment of Ernst &
Young LLP, our board of directors will reconsider their
appointment.
Your board of directors unanimously recommends a vote
FOR
the appointment of Ernst & Young LLP as our
auditors for the ensuing year.
27
Fees
Billed by External Auditors
Ernst & Young LLP billed us for the following fees in
the past two fiscal years:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
Fees for Audit Services
|
|
$
|
1,408,300
|
|
|
$
|
1,228,000
|
|
Fees for Audit-related Services
|
|
$
|
4,845
|
|
|
$
|
|
|
Fees for Tax Services
|
|
$
|
11,228
|
|
|
$
|
11,329
|
|
All Other Fees
|
|
$
|
|
|
|
$
|
|
|
Audit fees for the financial years ended December 31, 2008
and 2007 were for professional services rendered for the audits
of our consolidated financial statements, quarterly reviews of
the consolidated financial statements included in our quarterly
filings and consents. Audit-related fees for the financial year
ended December 31, 2007 were for due diligence services in
connection with the board of directors review of strategic
alternatives. Fees for tax services relate to preparation of the
Companys Canadian tax returns. We do not have any other
services provided by Ernst & Young LLP other than
those stated above.
Pre-Approval
Policies and Procedures
All 2008 fees were approved in advance by the Audit Committee.
All audit and non-audit services to be provided by
Ernst & Young LLP are and will be pre-approved by the
Audit Committee.
Of the fees reported in this management information circular for
2008, none of the fees billed by Ernst & Young
LLP were approved by the Audit Committee of our board of
directors pursuant to the de minimis exception provided by
Section (c)(7)(i)(C) of
Rule 2-01
of
Regulation S-X.
The Audit Committee has concluded that the foregoing non-audit
services did not adversely impact the independence of
Ernst & Young LLP.
EXECUTIVE
OFFICERS
The following are brief summaries of the business experience
during the past five years of each of our executive officers who
are not nominees for the board of directors:
James B. Tiffany,
age 52, was appointed as our
President and Chief Operating Officer on April 23, 2009. He
was appointed as President of Sightpath Medical, Inc.
(Sightpath Medical, formerly, MSS, Inc.), a
subsidiary of the Company, in August 2003. Prior thereto,
Mr. Tiffany served as Vice President of Sales and Marketing
of LaserVision from January 1999 to July 2000 and General
Manager of MSS, Inc. from July 2000 to August 2003.
Mr. Tiffany received his undergraduate degree from Arizona
State University and a Master of Business Administration Degree
from Washington University in St. Louis, Missouri.
Steven P. Rasche
, age 49, became our Chief Financial
Officer and Treasurer in August 2004. Prior thereto,
Mr. Rasche served as the Chief Financial Officer of Public
Safety Equipment, Inc., a marketer of safety equipment from May
1996 to July 2004. He began his professional career in 1983 with
Price Waterhouse, LLP (now PricewaterhouseCoopers, LLP) and
later moved to United Van Lines, Inc., a household goods mover,
where he progressed through a variety of financial leadership
roles. Mr. Rasche is a Certified Public Accountant and
holds a Bachelors of Science degree in Accounting from the
University of Missouri-Columbia and a Master of Business
Administration Degree from Northwestern University.
Brian L. Andrew
, age 57, became our General Counsel
and Secretary in February 2005. Prior thereto, Mr. Andrew
was the Chair of the Health Law Practice Group and a member in
the St. Louis, Missouri office of Husch &
Eppenberger, LLC (now Husch Blackwell Sanders, LLC), a large
multi-office law firm. Mr. Andrew has also served as
Assistant Counsel to the American Optometric Association and
Associate General Counsel for MetLife HealthCare Management
Corporation. He holds an undergraduate degree from the
University of Missouri-Columbia, a Masters degree from Webster
University and a law degree from the Saint Louis University
School of Law.
28
Larry D. Hohl,
age 54, was appointed President of
Refractive Centers in January 2008. Prior to that, Mr. Hohl
served as Vice-President of Operations and Owner
Operator/Franchisee for Robeks Corporation, a franchisor of
health food stores, from January 2004 through December 2007. He
began his professional career in 1976 with International
Business Machines Corporation, a multinational computer
technology corporation. He has held executive management
positions with a variety of consumer products and services
companies since that time, including Procter & Gamble,
a consumer goods manufacturer, PepsiCo, Inc., a leading global
snack and beverage company, and Nike, Inc. a supplier of
athletic shoes, apparel and sports equipment. He also served as
Chief Executive Officer of Spectrum Health Clubs. He holds a
Bachelor of Science degree in Business Administration/Marketing
from Arizona State University.
James J. Hyland
, age 56, joined the Company as Vice
President, Investor Relations in 2007. Prior to joining
TLC
Vision
, Mr. Hyland was Vice President, Investor
Relations and Corporate Communications for USF Corp, a
multi-billion dollar Chicago based transportation holding
company. In addition, Mr. Hyland was Senior Vice President
Investor Relations for Comdisco, a Rosemont, Illinois based
Fortune 500 financial and technology services firm.
Mr. Hyland is a graduate of the University of Illinois with
a Bachelors of Science degree in Business Administration, with a
specialization in Finance.
Henry Lynn
, age 58, became Chief Information Officer
(CIO) of TLC
Vision
in March 1998.
Mr. Lynn has executive management responsibilities
regarding the various information systems utilized throughout
the Company. Prior to joining TLC
Vision
, he was employed
as the CIO for Beacon Eye, Inc., a laser vision correction
company. He holds a Data Processing degree from Glasgow College
of Technology, Scotland.
Dr. Glenn Ellisor
, age 51, is the founder and
President of Vision Source, a subsidiary of the Company which
was acquired by the Company in 1997. At the present time,
Dr. Ellisor continues to practice as a licensed optometrist
at an optical eye care center. He has served on advisory panels
for Ciba Vision, Optos plc, Optical Dynamics, Bausch &
Lomb and Alcon Laboratories, Inc. He is a member of the American
Optometric Association, the Texas Optometric Association and
Harris County Optometric Association. Dr. Ellisor graduated
from Stephen F. Austin University in 1982 with a degree in
Biology and a minor in business and graduated from the
University of Houston College of Optometry in 1984.
Charles H. Judy
, age 39, joined the Company in 2007
as Vice President, Human Resources. Prior to joining TLCVision,
Mr. Judy was a National Human Resources Director at
Deloitte, one of the worlds largest professional services
firms, where he provided human resources and recruiting
services. Mr. Judy was also the Vice President, Human
Resources for Maverick Technologies LLC, an independent control
systems integrator and industrial automation consultancy. He is
a graduate of Tulane University with a Bachelors of Science in
Management. He is also a Certified Public Accountant
(non-practicing) and a certified Senior Professional of Human
Resources (SPHR).
Michael Gries
, age 54, joined the Company in April,
2009 as Chief Restructuring Officer. He is a principal of
Conway, Del Genio, Gries & Co. LLC, a financial
advisory firm based in New York, NY and is a nationally
recognized leader in the restructuring profession with more than
25 years experience advising companies and creditors on
complex corporate reorganizations. Prior to founding Conway Del
Genio Gries & Co. LLC, Mr. Gries was a Partner
and Director of the Northeast Restructuring and Reorganization
practice of Ernst & Young LLP. He received his
Bachelor of Science Degree in Business Administration, with a
Major in Accounting from Northeastern University. Mr. Gries
is a Certified Public Accountant and a Certified Restructuring
and Reorganization Accountant.
INFORMATION
ON EXECUTIVE COMPENSATION
Compensation
Discussion and Analysis
Overview
The responsibilities of our Compensation Committee, discussed in
detail in the Compensation Committees charter, include
overseeing the total compensation package for our named
executive officers; administering our equity compensation plans;
approving all executive officer employment and severance
contracts; and evaluating the
29
performance of our Chief Executive Officer or Chief Operating
Officer, as applicable, and determining and approving the Chief
Executive Officers or Chief Operating Officers
compensation level in light of that evaluation.
On April 23, 2009, we announced that our President and
Chief Executive Officer, James C. Wachtman, would be leaving the
Company and that James B. Tiffany would become President and
Chief Operating Officer. It is expected that Mr. Tiffany,
in his capacity as President and Chief Operating Officer, will
perform the functions of the Chief Executive Officer with
respect to the responsibilities described below.
Objectives
of Compensation Program
Our compensation practices are intended to attract and retain
highly competent executives in a competitive marketplace. The
program provides our named executive officers with compensation
that is industry competitive, internally equitable and
commensurate with their skills, knowledge, experience and
responsibilities.
The primary objective of the program, however, is to firmly
align total executive compensation with the attainment of our
annual performance goals, which are principally based upon our
revenues, earnings per share and net income.
The compensation of our executive officers, including our named
executive officers, consists of base salary, cash bonuses
expressed as a percentage of annual salary and long-term
incentive compensation in the form of Company stock options.
Base
Salary
As noted above, the Compensation Committee evaluates the
performance of our Chief Executive Officer, and determines and
approves the Chief Executive Officers compensation level
in light of that evaluation. The Chief Executive Officers
base salary in 2008 was determined pursuant to the terms of an
employment agreement, with minimum annual increases equal to the
increase of the U.S. Consumer Price Index (see
Employment Contracts James C.
Wachtman). The Compensation Committee reviewed
Mr. Wachtmans base salary in September 2007 and set
his salary at $440,000 for 2008. Mr. Wachtmans annual
salary for 2009 remained unchanged from the prior year. The
Compensation Committee considered the following factors in
evaluating the Chief Executive Officers performance and
intends to consider the same factors in evaluating the
performance of the President and Chief Operating Officer:
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the degree to which he has displayed leadership for the senior
management team and the organization as a whole;
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strategic planning and the execution of the Companys
strategic plans;
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the Companys financial results;
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the succession planning undertaken by the Chief Executive
Officer;
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communications and relations with shareholders, our board of
directors, senior management and employees; and
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third party salary survey data of comparable companies compiled
by Tower Perrin.
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Base salaries of executives other than the Chief Executive
Officer are approved by the Compensation Committee after
consultation with, and upon the recommendation of, the Chief
Executive Officer. The base salary of each executive officer is
determined by the terms of our employment agreement with the
executive officer and may be increased, but not decreased, on an
annual basis (see Employment Contracts).
After evaluating each executive officers performance over
the year in light of (i) the Companys overall
financial performance, (ii) the individuals
performance during the year and contributions to the Company,
and (iii) other relevant factors (for example, market
conditions), the Chief Executive Officer may deem it appropriate
to recommend executive officer base salary adjustments to the
Compensation Committee.
The Compensation Committee considers a number of factors when
evaluating the Chief Executive Officers recommendations
regarding base salary adjustments. We participate in industry
specific compensation surveys that
30
provide detailed information regarding the compensation
practices of industry peers and competitors. Information that
the Committee deems relevant such as general business trends,
the competitiveness of the markets in which we operate and
unusual circumstances also may be considered in its evaluation.
During 2007, the Compensation Committee retained Towers Perrin
to review executive compensation and make recommendations as to
appropriate levels of compensation for our executive officers.
Towers Perrin reviewed data for comparable public companies in
developing its recommendations to the Compensation Committee.
At their most recent annual reviews, the Compensation Committee
set Mr. Rasches base salary at $238,000,
Mr. Tiffanys base salary at $235,000,
Mr. Hohls base salary at $275,000 and
Mr. Andrews base salary at $231,700. In connection
with Mr. Tiffanys appointment as President and Chief
Operating Officer on April 23, 2009, his base salary was
set at $350,000.
Annual
Cash Bonuses
The second element of our compensation program is an annual cash
bonus. All of our executive officers are entitled to receive
annual cash bonuses based on corporate and individual
performance. Our employment agreements with our named executive
officers set out the parameters for the amount of such bonuses,
with our Chief Executive Officer being entitled to a bonus of up
to 100% of his annual base salary and our other named executive
officers being entitled to an annual bonus of up to 50% of base
salary (see Employment Contracts). We
believe these bonuses play a key role in enabling us to attract,
retain and motivate our employees.
The Compensation Committee has broad discretion in approving the
amount of the annual cash bonuses to our executive officers.
Within 90 days after the beginning of each year, the
Compensation Committee approves our performance goals for that
year. Those performance goals are generally based upon revenues,
earnings per share and net income. At the end of the fiscal
year, the Compensation Committee reviews the Companys
performance for that year generally, and its success in
achieving the performance goals in particular. The Compensation
Committee then determines the annual bonus for our Chief
Executive Officer as a percentage of his maximum bonus under his
employment agreement, and considers the Chief Executive
Officers recommendations in determining the cash awards
for our other executive officers. The Chief Executive
Officers recommendations are guided by his evaluation of
the Companys actual financial performance compared with
our performance goals and his assessment of the effectiveness of
the individual and collective efforts of our executive officers
in achieving the Companys business objectives. The
Compensation Committee and the Chief Executive Officer also
consider extraordinary efforts by executive officers in various
projects or initiatives during the year.
In December 2008, the Compensation Committee determined not to
award bonuses to the named executive officers.
Equity
Compensation
The third element of our compensation program is equity
compensation. Equity compensation is intended to more closely
align annual incentive compensation, as well as total
compensation, with the financial interests of our shareholders.
The equity compensation component of our compensation program is
based upon awards of stock options.
We were incorporated in 1993 and operated in an emerging market.
Consequently our board of directors initially placed
considerable emphasis upon stock options as an incentive in
determining executive compensation in order to align the
interests of the executive officers with the long-term interests
of our shareholders. As the Company has matured, there has been
less emphasis placed upon stock options as an incentive for
executives.
Our board of directors administers our stock option plan. The
purpose of the stock option plan is to advance the interests of
the Company by:
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providing directors, officers, employees and other eligible
persons with additional incentives;
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encouraging stock ownership by eligible persons;
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increasing the proprietary interests of eligible persons in the
success of the Company;
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31
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encouraging eligible persons to remain with the Company or its
affiliates; and
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attracting new employees, officers or directors to the Company
or its affiliates.
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In determining whether to grant options and how many options to
grant to eligible persons under our stock option plan,
consideration is given to each individuals past
performance and contribution to the Company as well as that
individuals expected ability to contribute to the Company
in the future.
Effective December 2008, the Compensation Committee authorized
awards of options to our named executive officers and a number
of other employees. The awards to each of our named executive
officers were conditional on either (1) shareholders
authorizing an increase in the shares reserved for issuance
under our Existing Option Plan or (2) the number of shares
reserved for issuance under the Existing Option Plan being
increased by termination of unexercised options, sufficient to
cover all options granted on December 10, 2008. As of
December 31, 2008, neither of the conditions described was
met. However, in the event that either condition is met in
future periods, such option grants will have an exercise price
of $0.20, vest one-fourth annually starting on the first
anniversary of December 10, 2008 and expire on
December 10, 2015. On December 10, 2008:
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Mr. Wachtman was granted conditional options to acquire
80,000 common shares (which options expired upon
Mr. Wachtmans separation from the Company);
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Mr. Rasche was granted conditional options to acquire
65,000 common shares;
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Mr. Tiffany was granted conditional options to acquire
65,000 common shares;
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Mr. Hohl was granted conditional options to acquire 65,000
common shares; and
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Mr. Andrew was granted conditional options to acquire
55,000 common shares.
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Employment
Agreements
The Compensation Committee reviews and approves every employment
agreement entered into with our senior executives. We have
entered into employment agreements with Messrs. Wachtman,
Rasche, Tiffany, Hohl and Andrew. The agreements provide each
named executive officer with what the Compensation Committee
believes to be a suitable base salary and target maximum bonus.
These employment agreements are described in detail under
Employment Contracts.
Stock
Ownership Guidelines
We do not have a formal policy regarding minimum stock ownership
requirements for our named executive officers. We encourage
ownership through option grants.
Retirement
Plans
We sponsor a defined contribution 401(k) plan, which extends
participation eligibility to substantially all of our
U.S. employees, including our named executive officers. We
provide a match of 25% of participants before-tax
contributions up to 8% of eligible compensation. Our named
executive officers do not participate in any special or separate
executive retirement plans. We consider our 401(k) plan to be an
important factor in our ability to hire, retain and motivate our
employees by providing an added measure of financial security
for our employees.
Perquisites
We have no formal perquisites program. Personal benefits may be
provided from time to time under employment agreements when we
determine that such personal benefits are a useful part of an
executives compensation package. Specifically,
Mr. Wachtman had been provided with an annual auto
allowance, partial payment of club dues and a $500,000 life
insurance policy that is owned by him. In addition, we have
agreed to provide each of Messrs. Rasche and Andrew with a
$500,000 life insurance policy that is owned by them. No
perquisites are provided to our other named executive officers.
32
Tax
Deductibility of Compensation
Section 162(m) of the Code generally precludes a public
corporation from taking a deduction for compensation in excess
of $1 million for its chief executive officer or any of its
four other highest paid executive officers, unless, in addition
to other requirements, the compensation qualifies as performance
based compensation. The Companys U.S. subsidiaries
are not currently entitled to a deduction in connection with
options exercised under our stock option plan by such executive
officers to the extent that the amount of income derived from
the exercise of options in a year by any such officer, together
with that officers other compensation, exceeds the
$1 million limitation. The Compensation Committee will
continue to consider Section 162(m) implications in making
compensation recommendations and in designing compensation
programs for our named executive officers. However, the
Compensation Committee reserves the right to pay non-deductible
compensation if it determines that to be in our best interests
and in the best interests of our stockholders.
Report of
the Compensation Committee
The information contained in this report shall not be deemed
to be soliciting material or filed or
incorporated by reference in future filings with the SEC, or
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
except to the extent that we specifically incorporate it by
reference into a document filed under the Securities Act of
1933, as amended, or the Exchange Act.
Our Compensation Committee, which is composed solely of
independent directors, assists our board of directors in
fulfilling its responsibilities with regard to compensation
matters, and is responsible under its committee charter for
recommending the compensation of the Companys executive
officers to the Corporate Governance and Nominating Committee
for approval by our board of directors. The Compensation
Committee has reviewed and discussed the Compensation
Disclosure and Analysis section of the management
information circular with management, including our Chief
Operating Officer and Chief Financial Officer. Based on this
review and discussion, the Compensation Committee recommended to
the board of directors that the Compensation Discussion
and Analysis section be included, or incorporated by
reference, in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and in this
management information circular.
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Jay T. Holmes
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Olden C. Lee
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Toby S. Wilt
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33
Executive
Compensation
The following table sets forth all compensation earned during
the fiscal years ended December 31, 2008, 2007 and 2006 by
each person who served as our Chief Executive Officer and our
Chief Financial Officer during the year ended December 31,
2008, by our three other highest executive officers who were
serving as executive officers at the end of the fiscal year
ended December 31, 2008 and whose annual salary and bonus
exceeded $100,000 for the fiscal year ended December 31,
2008, collectively referred to as our named executive officers.
Summary
Compensation Table
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Option
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All Other
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Name and
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Salary
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Bonus
(2)
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Awards
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Compensation
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Total
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Principal Position
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Year
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($)
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($)
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($)
(3)
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($)
(4)
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($)
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James C.
Wachtman
(1)
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2008
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440,000
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9,600
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12,206
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461,806
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Former Chief Executive Officer and
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2007
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428,216
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66,000
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77,284
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13,938
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585,438
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President
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2006
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407,295
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47,000
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46,911
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16,485
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517,691
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Steven P. Rasche
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2008
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238,000
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7,800
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4,358
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250,158
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Chief Financial Officer
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2007
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229,540
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39,270
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57,138
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1,854
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327,802
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2006
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221,867
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27,000
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28,352
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5,402
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282,621
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James B. Tiffany
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2008
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235,000
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7,800
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4,737
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247,537
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President and Chief Operating
Officer
(5)
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2007
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232,982
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35,250
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61,025
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1,075
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330,332
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2006
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220,667
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64,545
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36,793
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4,442
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326,447
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Larry D. Hohl
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2008
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262,308
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30,000
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7,800
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513
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300,621
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President of Refractive Services
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Brian L. Andrew
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2008
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227,507
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6,600
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4,894
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239,000
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General Counsel and Secretary
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2007
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223,421
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33,580
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47,075
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1,026
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305,102
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2006
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216,286
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21,630
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24,685
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8,115
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270,716
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(1)
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As of April 23, 2009, Mr. Wachtman separated from the
Company and resigned from our board of directors.
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(2)
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Bonuses are typically based on annual performance and paid in
the first quarter following the end of the fiscal year. As such,
the bonus amounts disclosed above for the fiscal year ended
December 31, 2007 were paid during the first quarter of
fiscal 2008. There were no bonuses awarded for 2008 other than
the signing bonus of $30,000 received by Mr. Hohl.
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(3)
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Reflects the dollar amount recognized for financial statement
reporting purposes for the applicable fiscal year, in accordance
with Statement of Financial Accounting Standards No. 123R,
Share-Based Payments (SFAS 123R), with
respect to stock options. Amounts therefore include expense
related to stock options granted in and prior to fiscal 2008, as
applicable. Assumptions used in calculating these amounts are
included in Note 16 to the Companys financial
statements included in its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008. Awards granted
in 2008 were conditional. As such, the value reflected for 2008
is hypothetical and was calculated as if the conditions under
the grants did not exist as of December 10, 2008. The fair
value of such options will be evaluated once the conditions are
lifted based on the market value at such time.
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(4)
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Includes Company matching contributions to the 401(k) plan,
long-term disability insurance premiums, life insurance
premiums, auto allowances, partial club dues and service awards.
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(5)
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In 2008, Mr. Tiffany was the President of Sightpath
Medical. He was appointed President and Chief Operating Officer
of the Company on April 23, 2009.
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34
Grants of
Plan-Based Awards
The following table sets forth the individual grants of
plan-based awards for the fiscal year ended December 31,
2008 to the named executive
officers.
(1)
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All Other
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Option Awards:
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Exercise or
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Grant Date
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Number of Securities
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Base Price of
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Fair Value of
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Underlying Options
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Option Awards
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Option Awards
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Name
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Grant
Date
(1)
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(#)
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($/sh)
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($)
(2)
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James C. Wachtman
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12/10/08
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80,000
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0.20
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9,600
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Steven P. Rasche
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12/10/08
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65,000
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0.20
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7,800
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James B. Tiffany
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12/10/08
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65,000
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0.20
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7,800
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Larry D. Hohl
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12/10/08
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65,000
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0.20
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7,800
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Brian L. Andrew
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12/10/08
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55,000
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|
|
0.20
|
|
|
|
6,600
|
|
|
|
|
(1)
|
|
The awards to each of our named executive officers were
conditional on either (1) shareholders authorizing an
increase in the shares reserved for issuance under our Existing
Option Plan or (2) the number of shares reserved for
issuance under our Existing Option Plan being increased by
termination of unexercised options, sufficient to cover all
options granted on December 10, 2008. As of
December 31, 2008, neither of the conditions described was
met.
|
|
(2)
|
|
Hypothetical value reflected. Calculated as if the conditions
under the grants did not exist as of December 10, 2008.
Once the conditions are lifted, the fair value of such options
will be evaluated based on the market value of our shares at
such time, amongst other factors.
|
35
The Companys named executive officers did not exercise any
stock option awards during the fiscal year ended
December 31, 2008. The following table sets forth details
of all of the outstanding equity awards of the named executive
officers as at the end of the fiscal year ended
December 31, 2008:
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
Name
|
|
Grant Date
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
($)
|
|
|
date
|
|
James C. Wachtman
|
|
January 2, 2008
|
|
|
47,500
|
|
|
|
|
|
|
|
1.16
|
|
|
January 2,
2008
(2)
|
|
|
May 15, 2002
|
|
|
17,500
|
|
|
|
|
|
|
|
1.88
|
|
|
January 7,
2008
(2)
|
|
|
May 15, 2002
|
|
|
142,500
|
|
|
|
|
|
|
|
3.45
|
|
|
June 15,
2008
(2)
|
|
|
December 15, 2003
|
|
|
25,000
|
|
|
|
|
|
|
|
6.10
|
|
|
December 15,
2008
(2)
|
|
|
December 13, 2004
|
|
|
33,000
|
|
|
|
|
|
|
|
10.42
|
|
|
December 13, 2009
|
|
|
January 3, 2006
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
6.45
|
|
|
January 3, 2011
|
|
|
December 11, 2006
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
4.66
|
|
|
December 11, 2013
|
|
|
December 28, 2007
|
|
|
15,000
|
|
|
|
45,000
|
|
|
|
3.04
|
|
|
December 28, 2014
|
|
|
December 10, 2008
|
|
|
|
|
|
|
80,000
|
(1)
|
|
|
0.20
|
|
|
December 10, 2015
|
Steven P. Rasche
|
|
July 19, 2004
|
|
|
50,000
|
|
|
|
|
|
|
|
10.80
|
|
|
July 19, 2009
|
|
|
December 13, 2004
|
|
|
30,000
|
|
|
|
|
|
|
|
10.42
|
|
|
December 13, 2009
|
|
|
January 3, 2006
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
6.45
|
|
|
January 3, 2011
|
|
|
December 11, 2006
|
|
|
22,250
|
|
|
|
22,500
|
|
|
|
4.66
|
|
|
December 11, 2013
|
|
|
December 28, 2007
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
3.04
|
|
|
December 28, 2014
|
|
|
December 10, 2008
|
|
|
|
|
|
|
65,000
|
(1)
|
|
|
0.20
|
|
|
December 10, 2015
|
James B. Tiffany
|
|
January 2, 2003
|
|
|
20,000
|
|
|
|
|
|
|
|
1.16
|
|
|
January 2,
2008
(2)
|
|
|
December 15, 2003
|
|
|
18,000
|
|
|
|
|
|
|
|
6.10
|
|
|
December 15,
2008
(2)
|
|
|
April 1, 2004
|
|
|
500
|
|
|
|
|
|
|
|
11.47
|
|
|
March 31, 2009
|
|
|
December 13, 2004
|
|
|
27,000
|
|
|
|
|
|
|
|
10.42
|
|
|
December 13, 2009
|
|
|
January 3, 2006
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
6.45
|
|
|
January 3, 2011
|
|
|
December 11, 2006
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
4.66
|
|
|
December 11, 2013
|
|
|
December 28, 2007
|
|
|
12,500
|
|
|
|
37,500
|
|
|
|
3.04
|
|
|
December 28, 2014
|
|
|
December 10, 2008
|
|
|
|
|
|
|
65,000
|
(1)
|
|
|
0.20
|
|
|
December 10, 2015
|
Larry D. Hohl
|
|
December 28, 2007
|
|
|
21,250
|
|
|
|
63,750
|
|
|
|
3.04
|
|
|
December 28, 2014
|
|
|
December 10, 2008
|
|
|
|
|
|
|
65,000
|
(1)
|
|
|
0.20
|
|
|
December 10, 2015
|
Brian L. Andrew
|
|
December 13, 2004
|
|
|
40,000
|
|
|
|
|
|
|
|
10.42
|
|
|
December 13, 2009
|
|
|
January 3, 2006
|
|
|
17,500
|
|
|
|
17,500
|
|
|
|
6.45
|
|
|
January 3, 2011
|
|
|
December 11, 2006
|
|
|
17,500
|
|
|
|
17,500
|
|
|
|
4.66
|
|
|
December 11, 2013
|
|
|
December 28, 2007
|
|
|
10,000
|
|
|
|
30,000
|
|
|
|
3.04
|
|
|
December 28, 2014
|
|
|
December 10, 2008
|
|
|
|
|
|
|
55,000
|
(1)
|
|
|
0.20
|
|
|
December 10, 2015
|
|
|
|
(1)
|
|
Options are conditional on either (1) shareholders
authorizing an increase in the shares reserved for issuance
under our Existing Option Plan or (2) the number of shares
reserved for issuance under our Existing Option Plan being
increased by termination of unexercised options, sufficient to
cover all options granted on December 10, 2008. As of
December 31, 2008, neither of the conditions described was
met.
|
|
(2)
|
|
Executive under trading blackout since option expiration date.
In order to avoid forfeiture, executive has 10 days to
exercise options upon removal of blackout.
|
36
Employment
Contracts
James C.
Wachtman
In connection with our merger with LaserVision in 2002, we
entered into an employment contract with Mr. James C.
Wachtman providing for his employment as our President and Chief
Operating Officer. The term of the agreement is two years
commencing on May 15, 2002 with automatic two-year renewals
unless otherwise terminated by the parties. The base annual
salary under the agreement was, effective January 1, 2003,
$340,000, with minimum annual increases equal to the increase of
the U.S. Consumer Price Index (CPI). Effective
August 2004, the base annual salary was set at $375,000 to
reflect his employment as our President and Chief Executive
Officer. Following the completion of the compensation review by
Towers Perrin, which determined that his compensation was well
below the median of compensation for chief executive officers of
comparable companies, Mr. Wachtmans annual salary for
2008 was set at $440,000 in October 2007.
Mr. Wachtmans annual salary for 2009 was to be
unchanged from the prior year. As of April 23, 2009,
Mr. Watchman separated from the Company and resigned from
our board of directors.
Mr. Wachtmans compensation also included, effective
January 1, 2004, an annual bonus of up to 80% of his salary
upon the attainment of specified performance goals.
Mr. Wachtmans bonus was based, in part, on the
Companys achieving certain levels of budgeted sales and
earnings. These financial targets were the basis for 80% of
Mr. Wachtmans bonus and the remaining 20% was at the
discretion of the board of directors. If the Company only
achieved 80% of the budgeted financial target, Mr. Wachtman
was entitled to a partial bonus with respect to such target.
Effective August 2004, he became entitled to an annual bonus of
up to 100% of his salary. Financial targets were the basis of
85% of his bonus and the remaining 15% was at the discretion of
the board of directors.
The agreement provided for severance payments equal to two times
Mr. Wachtmans annual base salary plus bonus in the
event of Mr. Wachtmans death, termination of his
employment without cause or Mr. Wachtmans resignation
for specified reasons. Among these reasons, Mr. Wachtman
could terminate his employment with us upon at least
90 days written notice in the event of a material
adverse change in his job responsibilities following a change of
control of the Company. If Mr. Wachtmans employment
was terminated by us without cause after expiration of the
initial two-year term of the agreement, he would be entitled to
receive a severance payment equal to the greater of:
(i) two times his annual base salary plus bonus, or
(ii) an amount calculated by reference to the longest time
period to be used for purposes of calculating severance that
Elias Vamvakas, as Chief Executive Officer of the Company, was
entitled to receive at any time during the term of the
agreement. Additionally, the agreement provided for termination
upon payment of six months salary and bonus in the event of
disability.
Mr. Wachtmans agreement also contained
non-competition and non-solicitation covenants in the event of
Mr. Wachtmans resignation or termination with cause
that run for a minimum of one year following his employment and
prohibit Mr. Wachtman from engaging in or having a
financial interest in, or permitting the use of his name by, an
entity engaged in the refractive laser corrective surgery
business or that competes with us. The agreement also prohibited
him from employing any of our employees or soliciting any of our
patients during the same time period. Additionally, the
agreement contained confidentiality covenants preventing
Mr. Wachtman from disclosing confidential or proprietary
information relating to the Company at any time during or after
his employment.
Steven P.
Rasche
We entered into an employment agreement with Steven P. Rasche on
July 1, 2004, providing for his employment as our Chief
Financial Officer. The term of the agreement is two years
commencing on July 14, 2004 with automatic one-year
renewals unless otherwise terminated by the parties. The base
annual salary was initially set at $210,000. Mr. Rasche is
also entitled to receive options under our stock option plan.
Mr. Rasches compensation also includes an annual
bonus of up to 50% of his annual salary based on his personal
performance and the financial performance of the Company as a
whole. Mr. Rasches annual salary for 2008 was set at
$238,000 in October 2007. Mr. Rasches annual salary
for 2009 remains unchanged from the prior year.
Mr. Rasches employment may be terminated for just
cause, as defined in the agreement. If terminated for other than
just cause, Mr. Rasche will be entitled to receive
12 months base salary plus an additional month of
37
salary for each year worked following the second anniversary of
the effective date of the agreement to a maximum of six
additional months of salary. The agreement contains change of
control provisions that provide that Mr. Rasche would be
entitled to 12 months base salary, payable in monthly
installments, if his employment is terminated following a change
of control as a result of the Company taking actions which would
materially and adversely affect his duties under the employment
agreement.
Mr. Rasches agreement also contains non-competition
and non-solicitation covenants which run for a minimum of one
year following his employment and prohibit Mr. Rasche from
engaging in or having a financial interest in, or permitting the
use of his name by, an entity engaged in the refractive laser
corrective surgery business or which competes with us. The
agreement also prohibits him from employing any of our employees
or soliciting any of our patients during the same time period.
Additionally, the agreement contains confidentiality covenants
preventing Mr. Rasche from disclosing confidential or
proprietary information relating to the Company at any time
during or after his employment.
James B.
Tiffany
We entered into an employment agreement with James B. Tiffany
effective November 1, 2005, providing for his employment as
our President, Sightpath Medical The term of the agreement is
one year commencing on November 1, 2005 and shall continue
until terminated pursuant to the terms of the agreement. The
base annual salary was initially set at $220,667.
Mr. Tiffany is also entitled to receive options under our
stock option plan. Mr. Tiffanys compensation also
includes an annual bonus of up to 50% of his annual salary based
on his personal performance and the financial performance of the
Company as a whole. Mr. Tiffanys annual salary for
2008 was set at $235,000 in March 2007. James B. Tiffany was
appointed President and Chief Operating Officer of the Company
as of April 23, 2009 and his base salary was set at
$350,000.
Mr. Tiffanys employment may be terminated for just
cause, as defined in the agreement. If terminated for other than
just cause, Mr. Tiffany will be entitled to receive
12 months base salary. The agreement contains change
of control provisions that provide that Mr. Tiffany would
be entitled to 12 months base salary, payable in
monthly installments, if his employment is terminated following
a change of control as a result of the Company taking actions
which would materially and adversely affect his duties under the
employment agreement.
Mr. Tiffanys agreement also contains non-competition
and non-solicitation covenants which run for a minimum of one
year following his employment and prohibit Mr. Tiffany from
engaging in or having a financial interest in, or permitting the
use of his name by, an entity engaged in the refractive laser
corrective surgery business or which competes with us. The
agreement also prohibits him from employing any of our employees
or soliciting any of our patients during the same time period.
Additionally, the agreement contains confidentiality covenants
preventing Mr. Tiffany from disclosing confidential or
proprietary information relating to the Company at any time
during or after his employment.
Larry D.
Hohl
We entered into an employment agreement with Larry D. Hohl
effective January 14, 2008, providing for his employment as
our President of Refractive Centers. The term of the agreement
commenced January 14, 2008 and shall continue until
terminated pursuant to the terms of the agreement. The base
annual salary was initially set at $275,000. Mr. Hohl is
also entitled to receive options under our stock option plan.
Mr. Hohls compensation also includes an annual bonus
of up to 50% of his annual salary based on his personal
performance and the financial performance of the Company as a
whole. Mr. Hohls annual salary for 2009 remains
unchanged from the prior year.
Mr. Hohls employment may be terminated for just
cause, as defined in the agreement. If terminated for other than
just cause, Mr. Hohl will be entitled to receive
18 months base salary. The agreement contains change
of control provisions that provide that Mr. Hohl would be
entitled to 18 months base salary, payable in monthly
installments, if his employment is terminated following a change
of control as a result of the Company taking actions which would
materially and adversely affect his duties under the employment
agreement.
Mr. Hohls agreement also contains non-competition and
non-solicitation covenants which run for a minimum of one year
following his employment and prohibit Mr. Hohl from
engaging in or having a financial interest in, or
38
permitting the use of his name by, an entity engaged in the
refractive laser corrective surgery business or which competes
with us. The agreement also prohibits him from employing any of
our employees or soliciting any of our patients during the same
time period. Additionally, the agreement contains
confidentiality covenants preventing Mr. Hohl from
disclosing confidential or proprietary information relating to
the Company at any time during or after his employment.
Brian L.
Andrew
We entered into an employment agreement with Brian L. Andrew on
February 1, 2005, providing for his employment as our
General Counsel, Vice President and Secretary. The term of the
agreement is two years commencing on February 1, 2005 with
automatic one-year renewals unless otherwise terminated by the
parties. The base annual salary was initially set at $210,000.
Mr. Andrew is also entitled to receive options under our
stock option plan. Mr. Andrews compensation also
includes an annual bonus of up to 50% of his annual salary based
on his personal performance and the financial performance of the
Company as a whole. Mr. Andrews annual salary for
2009 was set at $231,700 in February 2008.
Mr. Andrews annual salary for 2009 remains unchanged
from the prior year.
Mr. Andrews employment may be terminated for just
cause, as defined in the agreement. If terminated for other than
just cause, Mr. Andrew will be entitled to receive
12 months base salary. The agreement contains change
of control provisions that provide that Mr. Andrew would be
entitled to 12 months base salary, payable in monthly
installments, if his employment is terminated following a change
of control as a result of the Company taking actions that would
materially and adversely affect his duties under the employment
agreement.
Mr. Andrews agreement also contains non-competition
and non-solicitation covenants that run for a minimum of one
year following his employment and prohibit Mr. Andrew from
engaging in or having a financial interest in, or permitting the
use of his name by, an entity engaged in the refractive laser
corrective surgery business or that competes with us. The
agreement also prohibits him from employing any of our employees
or soliciting any of our patients during the same time period.
Additionally, the agreement contains confidentiality covenants
preventing Mr. Andrew from disclosing confidential or
proprietary information relating to the Company at any time
during or after his employment.
39
Potential
Payments Upon Termination or Change of Control Table
The following table shows the estimated incremental compensation
to our named executive officers, in the event a termination or
change of control had occurred on December 31, 2008. The
table does not include benefits generally available to all
employees, or payments and benefits that the named executive
officers would have already earned during their employment with
us whether or not a termination or change of control event had
occurred. Actual amounts payable can only be determined at the
time of termination or change of control.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
without Cause
|
|
|
|
|
|
following a
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Before Change
|
|
|
Change of
|
|
|
Change of
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
for Cause
|
|
|
of
Control
(3)
|
|
|
Control
|
|
|
Control
|
|
|
Disability
|
|
|
Death
|
|
|
James C. Wachtman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
(1)
|
|
|
|
|
|
$
|
913,000
|
|
|
$
|
|
|
|
$
|
913,000
|
|
|
$
|
|
|
|
$
|
|
|
Accelerated vesting of
options
(2)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Health and Life Insurance
Benefits
(4)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
220,000
|
|
|
$
|
913,000
|
|
Total
|
|
|
|
|
|
$
|
913,000
|
|
|
$
|
|
|
|
$
|
913,000
|
|
|
$
|
220,000
|
|
|
$
|
913,000
|
|
Steven P. Rasche
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
(1)
|
|
|
|
|
|
$
|
277,666
|
|
|
$
|
|
|
|
$
|
238,000
|
|
|
$
|
|
|
|
$
|
|
|
Accelerated vesting of
options
(2)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Health and Life Insurance
Benefits
(4)
|
|
|
|
|
|
$
|
15,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
119,000
|
|
|
$
|
500,000
|
|
Total
|
|
|
|
|
|
$
|
292,666
|
|
|
$
|
|
|
|
$
|
238,000
|
|
|
$
|
119,000
|
|
|
$
|
500,000
|
|
James B. Tiffany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
(1)
|
|
|
|
|
|
$
|
235,000
|
|
|
$
|
|
|
|
$
|
235,000
|
|
|
$
|
|
|
|
$
|
|
|
Accelerated vesting of
options
(2)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Health and Life Insurance
Benefits
(4)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
117,500
|
|
|
$
|
|
|
Total
|
|
|
|
|
|
$
|
235,000
|
|
|
$
|
|
|
|
$
|
235,000
|
|
|
$
|
117,500
|
|
|
$
|
|
|
Larry D. Hohl
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
(1)
|
|
|
|
|
|
$
|
412,500
|
|
|
$
|
|
|
|
$
|
412,500
|
|
|
$
|
|
|
|
$
|
|
|
Accelerated vesting of
options
(2)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Health and Life Insurance
Benefits
(4)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
137,500
|
|
|
$
|
|
|
Total
|
|
|
|
|
|
$
|
412,500
|
|
|
$
|
|
|
|
$
|
412,500
|
|
|
$
|
137,500
|
|
|
$
|
|
|
Brian L. Andrew
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
(1)
|
|
|
|
|
|
$
|
231,700
|
|
|
$
|
|
|
|
$
|
231,700
|
|
|
$
|
|
|
|
$
|
|
|
Accelerated vesting of
options
(2)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Health and Life Insurance
Benefits
(4)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
115,850
|
|
|
$
|
500,000
|
|
Total
|
|
|
|
|
|
$
|
231,700
|
|
|
$
|
|
|
|
$
|
231,700
|
|
|
$
|
115,850
|
|
|
$
|
500,000
|
|
|
|
|
(1)
|
|
Reflects cash severance based on executives base salary in
effect at December 31, 2008.
|
|
(2)
|
|
All options had exercise prices exceeding market value as of
December 31, 2008. Therefore, accelerated vesting of
options would provide no value to executives.
|
|
(3)
|
|
In the case of Messrs. Wachtman and Rasche, this includes
termination by the employee for good reason.
|
|
(4)
|
|
In the case of the death of Messrs. Wachtman, Rasche or
Andrew, approximately $500,000 to be reimbursed through life
insurance policies.
|
40
Performance
Graph
The information contained in this Performance Graph section
shall not be deemed to be soliciting material or
filed or incorporated by reference in future filings
with the SEC, or subject to the liabilities of Section 18
of the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into a document filed
under the Securities Act of 1933, as amended, or the Exchange
Act.
The following graph shows the cumulative total shareholder
return (assuming reinvestment of dividends) from
December 31, 2003 through the fiscal year ended
December 31, 2008 compared to the cumulative total return
on the S&P/TSX Composite Index and the Nasdaq Health
Services Stocks Index.
COMPARISON
OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among TLC Vision Corporation, The S&P/TSX Composite Index
And The NASDAQ Health Services Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/03
|
|
|
12/31/04
|
|
|
12/31/05
|
|
|
12/31/06
|
|
|
12/31/07
|
|
|
12/31/08
|
TLC Vision Corporation
|
|
|
$
|
100.00
|
|
|
|
$
|
157.16
|
|
|
|
$
|
97.29
|
|
|
|
$
|
78.88
|
|
|
|
$
|
50.23
|
|
|
|
$
|
2.56
|
|
S&P/TSX Composite
|
|
|
$
|
100.00
|
|
|
|
$
|
114.48
|
|
|
|
$
|
142.10
|
|
|
|
$
|
166.63
|
|
|
|
$
|
183.01
|
|
|
|
$
|
122.61
|
|
NASDAQ Health Services
|
|
|
$
|
100.00
|
|
|
|
$
|
127.29
|
|
|
|
$
|
135.26
|
|
|
|
$
|
141.82
|
|
|
|
$
|
142.06
|
|
|
|
$
|
100.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* $100 invested on
12/31/03
in
stock & index-including reinvestment of dividends.
Fiscal year ending December 31.
Copyright
©
2009 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved.
41
Compensation
of Directors
The following table sets forth the compensation of our directors
during the financial year ended December 31, 2008, other
than those who are also named executive officers (in such case,
their compensation as directors is included above under
Summary Compensation Table):
Non-Executive
Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Option
|
|
|
|
|
|
|
in Cash
|
|
|
Awards
(2)(3)
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Michael D. DePaolis, O.D.
|
|
$
|
61,000
|
|
|
$
|
1,500
|
|
|
$
|
62,500
|
|
Jay T. Holmes
|
|
$
|
40,000
|
|
|
$
|
5,400
|
|
|
$
|
45,400
|
|
Olden C. Lee
|
|
$
|
36,500
|
|
|
$
|
5,400
|
|
|
$
|
41,900
|
|
Richard L.
Lindstrom, M.D.
(1)
|
|
$
|
|
|
|
$
|
1,500
|
|
|
$
|
1,500
|
|
Warren S. Rustand
|
|
$
|
79,000
|
|
|
$
|
2,000
|
|
|
$
|
81,000
|
|
Toby S. Wilt
|
|
$
|
54,000
|
|
|
$
|
1,500
|
|
|
$
|
55,000
|
|
|
|
|
(1)
|
|
Dr. Lindstrom did not receive any fees for attending board
meetings in 2008. However, he received $62,500 as medical
director and member of the Companys clinical advisory
group and $22,500 as a consultant to Sightpath Medical.
Additionally, the Company granted Dr. Lindstrom a total of
105,000 options in 2008 related to his services as medical
director.
|
|
(2)
|
|
As of December 31, 2008, non-executive members of the board
of directors had the following aggregate number of options
outstanding, including conditional option awards:
Dr. DePaolis, 50,000; Mr. Holmes, 15,000,
Mr. Lee, 15,000, Dr. Lindstrom, 259,500 (includes
options granted to Dr. Lindstrom in his capacity as medical
director); Mr. Rustand, 75,000; and Mr. Wilt, 60,000.
|
|
(3)
|
|
The value of the option awards includes the conditional options
described below.
|
Directors who are not executive officers of the Company are
entitled to receive an attendance fee of $2,500 for each board
meeting attended in person, $1,000 for each committee meeting
attended in person and $500 for each meeting attended by phone.
Directors also receive an annual fee of $25,000, however, the
non-executive chair of the board receives an annual fee of
$42,000. The chair of each of the Compensation and Corporate
Governance and Nominating Committees also receives an annual fee
of $5,000 and the chair of the Audit Committee receives an
annual fee of $8,000. Directors are also compensated for special
assignments and strategic studies if applicable. Non-executive
directors are reimbursed for out-of-pocket expenses incurred in
connection with attending meetings of the board of directors.
In addition, outside directors are also entitled to receive
options to acquire common shares under our stock option plan. As
medical director, Dr. Lindstrom was granted options to
acquire 100,000 common shares at an exercise price of $1.00 in
July 2008 and to acquire 5,000 common shares at an exercise
price of $0.20 in December 2008. Mr. Holmes and
Mr. Olden each received options to acquire 7,500 common
shares at an exercise price of $1.48 upon joining our board of
directors in June 2008. The Company also granted conditional
options to acquire common shares to all non-executive board
members in December 2008. The conditional option awards to each
of our non-executive directors were conditional on either
(1) shareholders authorizing an increase in the shares
reserved for issuance under our Existing Option Plan or
(2) the number of shares reserved for issuance under our
Existing Option Plan being increased by termination of
unexercised options, sufficient to cover all options granted on
December 10, 2008. As of December 31, 2008, neither of
the conditions described were met. However, in the event that
either condition is met in future periods, such option grants
will have an exercise price of $0.20, vest immediately and
expire on December 10, 2015. Conditional options granted
were as follows: Mr. Rustand, 20,000; Dr. Lindstrom,
15,000; Mr. Wilt, 15,000; Mr. DePaolis, 15,000;
Mr. Holmes, 7,500; and Mr. Lee, 7,500.
42
STATEMENT
OF CORPORATE GOVERNANCE PRACTICES
We are committed to maintaining high standards of corporate
governance and continue to refine our policies and practices in
light of regulatory initiatives designed to improve corporate
governance. Our corporate governance practices are described
below in accordance with National Instrument
58-101
Disclosure of Corporate Governance Practices
of the
Canadian securities regulatory authorities.
Mandates
of the Board of Directors and Management
The mandate of the board of directors is to supervise the
management of our business and affairs and to act with a view to
the best interests of the Company. A copy of the board of
directors written mandate is attached to this management
information circular as Appendix C. The role of the board
of directors focuses on governance and stewardship rather than
on the responsibility of management to run our day-to-day
operations. Its role is to set corporate direction, assign
responsibility to management for achievement of that direction,
define executive limitations and monitor performance against
those objectives and executive limitations.
Our board of directors has developed position descriptions for
the Chair of the Board and the chairs of each committee of the
board of directors. It has also developed a position description
for our Chief Executive Officer. Responsibilities of the Chair
of the Board include providing overall leadership to the board
of directors, assuming primary responsibility for the operation
and functioning of the board of directors, ensuring compliance
with the governance policies of the board of directors and
taking a leadership role in ensuring effective communication and
relationships between the Company, shareholders, stakeholders
and the general public.
Responsibilities of the Chief Executive Officer include the
development and recommendation of corporate strategies and
business and financial plans for approval of the board of
directors, managing the operations of the business in accordance
with the strategic direction set by the board of directors,
reporting management and performance information to the board of
directors and developing a list of risk factors and informing
the board of directors of the mechanisms in place to address
those risks.
When the Chief Executive Officer also holds the position of
Chair of the Board, the board of directors may elect a
non-executive Vice Chair or lead director. The Chair of the
Board is currently Mr. Rustand, who has been determined to
be independent in accordance with the standards described below.
On April 23, 2009, we announced the formation of an Office
of the Chairman. The new three-person Office of the Chairman
will report to the Board of Directors and is comprised of the
Chair of the Board, Mr. Rustand, our President and Chief
Operating Officer, Mr. Tiffany, and our newly appointed
Chief Restructuring Officer, Michael Gries.
Composition
of the Board of Directors
Our board of directors is currently comprised of six directors,
a majority of whom are independent as defined by applicable
Canadian securities laws and under the current listing standards
of the NASDAQ. A director will be considered to be independent
if he or she has no direct or indirect material relationship
with us, being a relationship that could, in the view of the
board of directors, be reasonably expected to interfere with the
exercise of the directors independent judgment. Applicable
Canadian securities laws and the NASDAQ listing standards
specify circumstances in which directors will be deemed not to
be independent, including additional criteria applicable to
audit committee members. The board has determined that
Messrs. Wilt, Rustand, Holmes, Lee and Dr. DePaolis,
are independent and that Dr. Lindstrom is a non-independent
director given his relationship with the Company and our
subsidiaries. Our board of directors has also determined that
Mr. Jonas will be independent upon his election as
director. Mr. Wachtman, who served as President and Chief
Executive Officer of the Company and as a director until
April 23, 2009, was non-independent.
There were 18 meetings of the board of directors in the fiscal
year ended December 31, 2008. Each of the meetings was
attended by all of the directors who were members of the board
of directors at the time of such meeting except that
Mr. Wilt missed attendance at one meeting, Mr. Lee
missed attendance at one meeting, Dr. Lindstrom missed
attendance at three meetings and Dr. DePaolis missed
attendance at one meeting. In addition to attending board and
applicable committee meetings, our independent directors meet
regularly in executive
43
sessions independent of management and non-independent directors
to discuss our business and affairs. During the fiscal year
ended December 31, 2008, six such meetings were held.
The board of directors takes steps to educate new directors upon
their appointment or election to the board of directors
including a day-long
on-site
visit to the Companys corporate headquarters. Each new
director receives a binder with up-to-date information on the
corporate organization, financial information and copies of key
documents, including the Code of Conduct, Insider Trading
Policy, and board and committee mandates and charters.
Presentations are made regularly to the board and committees to
educate and keep them informed of changes within the Company and
the industry.
The Corporate Governance and Nominating Committee is responsible
for annually assessing the effectiveness of the board as a whole
as well as individual directors. This process includes the
circulation of a confidential Board Self-Assessment survey as
well as informal discussions. The Survey is summarized and
reviewed in depth by the board.
Board
Committees
Our board of directors has established three committees: the
Audit Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee. The charters of each of the
committees of our board are available on the Companys
website at www.tlcv.com. The following is a brief description of
each committee and its composition.
The Audit Committee currently consists of Messrs. Rustand,
Holmes and Wilt and Dr. DePaolis, all of whom are
independent directors. The Audit Committee is responsible for
the engagement, compensation and oversight of our independent
auditors and reviews with them the scope and timing of their
audit services and any other services they are asked to perform,
their report on the accounts of the Company following the
completion of the audit and our policies and procedures with
respect to internal accounting and financial controls. The Audit
Committee reports its findings with respect to such matters to
the board of directors. During the fiscal year ended
December 31, 2008, there were seven meetings of the
Audit Committee. Each of the meetings was attended by all of the
members except that Mr. Wilt missed attendance at
one meeting. It is expected that the Audit Committee will
consist of Messrs. Rustand, Holmes and Wilt and
Dr. DePaolis after the annual meeting of shareholders and
that all members will continue to be independent directors. The
Audit Committee operates under the Audit Committee Charter
adopted by the board of directors. See Audit Committee
Report below.
During the fiscal year ended December 31, 2008, the
Compensation Committee consisted of Messrs. Holmes, Lee and
Wilt. The Compensation Committee operates under a written
charter established by our board of directors pursuant to which
it is responsible for the development of compensation policies
and makes recommendations on compensation of executive officers
for approval by the board of directors. There were eight
meetings of the Compensation Committee relating to the fiscal
year ended December 31, 2008. Each of the meetings was
attended by all of the members except that Mr. Wilt missed
attendance at one meeting. It is expected that the Compensation
Committee will consist of Messrs. Holmes, Lee and Wilt
after the meeting and that all members will continue to be
independent directors. See Information on Executive
Compensation Report of the Compensation
Committee above.
During the fiscal year ended December 31, 2008, the
Corporate Governance and Nominating Committee consisted of
Messrs. Lee, Rustand and Dr. DePaolis, all of whom are
independent directors. The Corporate Governance and Nominating
Committee operates under a written charter established by our
board of directors pursuant to which it has been charged with
responsibility for:
|
|
|
|
|
developing and monitoring the effectiveness of the
Companys system of corporate governance;
|
|
|
|
establishing procedures for the identification of new nominees
to the board of directors and leading the candidate selection
process;
|
|
|
|
developing and implementing orientation procedures for new
directors;
|
|
|
|
assessing the effectiveness of directors, the board of directors
as a whole and the various committees of the board of directors;
|
44
|
|
|
|
|
ensuring appropriate corporate governance and proper delineation
of the roles, duties and responsibilities of management, the
board of directors and its various committees; and
|
|
|
|
assisting the board of directors in setting the objectives for
our Chief Executive Officer and evaluating his or her
performance.
|
For purposes of identifying potential candidates to serve on our
board of directors, the Corporate Governance and Nominating
Committee has not established specific minimum age, education,
years of business experience or specific types of skills for
potential candidates, but in general, expects qualified
candidates will have personal and professional integrity,
demonstrated ability and judgment and ample business experience.
The Corporate Governance and Nominating Committee will review
and consider director nominees recommended by shareholders. The
Corporate Governance and Nominating Committee intends to
evaluate director nominees recommended by shareholders on the
same bases as director nominees recommended by management.
The Corporate Governance and Nominating Committee received no
shareholder recommendations for nomination to the Board of
Directors in connection with the meeting. Shareholders wishing
to recommend director candidates for consideration by the
Corporate Governance and Nominating Committee may do so in
writing to our Secretary at 16305 Swingley Ridge Road,
Suite 300, Chesterfield, Missouri 63017 giving the
recommended nominees name, biographical data and
qualifications, accompanied by the written consent of the
recommended nominee. Nominations for director made by
shareholders must be received by the Secretary at least
90 days prior to the anniversary date of our prior
years management information circular.
During the fiscal year ended December 31, 2008, there were
four meetings of the Corporate Governance and Nominating
Committee. Each of the meetings was attended by all of the
members except that Messrs. Lee and Wilt each missed
attendance at one meeting. It is expected that the Corporate
Governance and Nominating Committee will consist of
Messrs. Lee and Wilt and Dr. DePaolis after the
meeting and that all members will continue to be independent
directors.
Code of
Business Conduct and Ethics
On April 28, 2004, our board of directors adopted a Code of
Business Conduct and Ethics that applies to our directors,
officers and employees and that is intended to promote honest
and ethical conduct, full and accurate reporting and compliance
with laws. A copy of the Code of Business Conduct and Ethics can
be requested free of charge by writing or calling the
Companys Vice President of Investor Relations at 16305
Swingley Ridge Road, Suite 300, Chesterfield, Missouri
63017
(888) 289-5824.
If a directors business or personal relationships present
a material conflict of interest or the appearance of a conflict
of interest, that director is required to refer the matter to
the Chair of the Board or Chief Executive Officer for review and
presentation to the board where appropriate. Each matter is
reviewed individually on its merits and a decision in one matter
has no bearing on another. The board reviews the Code annually
and ensures that it is sent to all employees of the Company on a
routine basis. Further, each director is required annually to
disclose transactions and holdings that may be, or appear to be,
in conflict with the Code of Business Conduct and Ethics.
Outside
Advisors
We have implemented a system which enables an individual
director to engage an outside advisor at our expense in
appropriate circumstances. The engagement of an external advisor
by an individual director, as well as the terms of the retainer
and the fees to be paid to the advisor, are subject to the prior
approval of the Corporate Governance Committee.
Shareholder
Communications
Our board of directors places great emphasis on its
communications with shareholders. Shareholders receive timely
dissemination of information and we have procedures in place to
permit and encourage feedback from our shareholders. Our senior
officers are available to shareholders and, through our investor
relations department, we seek to provide clear and accessible
information about the results of our business and its future
plans. We have established an investor web site on the Internet
through which we make available press releases, financial
45
statements, annual reports, trading information and other
information relevant to investors. Our President and Chief
Operating Officer may also be contacted directly by investors
through the Internet.
We also have an independent toll-free Workplace Alert Program at
1-888-475-8376 which is available 24 hours a day, seven
days a week. Any person may submit a good faith complaint or
report a concern regarding accounting or auditing matters
related to the Company or our subsidiaries or violations of any
of our policies to the Audit Committee through the Workplace
Alert Program. Shareholders may also contact our non-management
directors by calling the Workplace Alert Program or may contact
our board of directors or any of its members by writing to our
Secretary at TLC Vision Corporation, 16305 Swingley Ridge Road,
Suite 300, Chesterfield, Missouri 63017 or by email through
the Investor Relations page on our website at www.tlcv.com.
All correspondence directed to a particular board member is
referred, unopened, to that member. Correspondence not directed
to a particular board member is referred, unopened, to the Chair
of the board of directors.
All directors are encouraged, but not required, to attend our
annual meeting of shareholders. All of our then-current
directors attended our last annual and special meeting of the
shareholders held on June 10, 2008.
46
AUDIT
COMMITTEE REPORT
The information contained in this report shall not be deemed
to be soliciting material or filed or
incorporated by reference in future filings with the SEC, or
subject to the liabilities of Section 18 of the Exchange
Act, except to the extent that we specifically incorporate it by
reference into a document filed under the Securities Act of
1933, as amended, or the Exchange Act.
The members of the Audit Committee currently are
Messrs. Holmes, Rustand and Wilt and Dr. DePaolis.
Each member of the Audit Committee is independent in the
judgment of the board of directors as required by the current
listing standards of NASDAQ. Messrs. Rustand and Wilt have
been designated by the board of directors as Audit Committee
financial experts. The SEC has indicated that the designation as
an audit committee financial expert does not make a person an
expert for any purpose, impose on him or her any
duties, obligations or liability that are greater than the
duties, obligations or liability imposed on him or her as a
member of the Audit Committee and the Board of Directors in the
absence of such designation, or affect the duties, obligations
or liability of any other member of the Audit Committee or Board
of Directors.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal control, and the independent auditors are responsible
for auditing those financial statements. The Audit
Committees primary responsibility is to oversee our
financial reporting process on behalf of the board of directors
and to report the result of its activities to the board, as
described in the Audit Committee Charter. The principal
recurring duties of the Audit Committee in carrying out its
oversight responsibility include reviewing and discussing with
management and the independent auditors our quarterly and annual
financial statements, evaluating the audit efforts of our
independent auditors and evaluating the reasonableness of
significant judgments and the clarity of disclosures. The
Committee also monitors with management and the independent
auditors the adequacy and effectiveness of our accounting and
financial controls, as well as the Companys compliance
with Section 404 of the Sarbanes-Oxley Act of 2002.
The Audit Committee has reviewed and discussed with management
of the Company our audited financial statements for the fiscal
year ended December 31, 2008. The Audit Committee has also
discussed with Ernst & Young LLP, our independent
auditors, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit
Committees), as amended and as adopted by the Public Company
Accounting Oversight Board in Rule 3200T. The Audit
Committee has also received from the independent auditors
written affirmation of their independence as required by Public
Company Accounting Oversight Board Ethics and Independence
Rule 3526, Communication with Audit Committees Concerning
Independence and the Audit Committee has discussed with
Ernst & Young LLP the firms independence.
Based upon the review and discussions summarized above, the
Audit Committee recommended to the board of directors that our
audited financial statements as of December 31, 2008 and
for the year then ended be included in our annual report on
Form 10-K
for the year ended December 31, 2008 for filing with the
SEC and the Canadian securities regulatory authorities.
|
|
|
|
Warren S.
Rustand
|
Dr. Michael D. DePaolis
|
Jay T.
Holmes
|
Toby S. Wilt
|
47
DIRECTORS
AND OFFICERS LIABILITY INSURANCE
We maintain directors and officers liability
insurance. Under this insurance coverage the insurer pays on our
behalf for losses for which we indemnify our directors and
officers, and on behalf of individual directors and officers for
losses arising during the performance of their duties for which
we do not indemnify them. The total limit for the policy is
$30,000,000 per policy term subject to a deductible of $100,000
per occurrence with respect to corporate indemnity provisions
and $500,000 if the claim relates to securities law claims. The
total premiums in respect of the directors and
officers liability insurance for the fiscal year ended
December 31, 2008 were approximately $435,600. The
insurance policy does not distinguish between directors and
officers as separate groups.
INDEBTEDNESS
OF DIRECTORS AND OFFICERS
No officer, director or employee, or former officer, director or
employee, of us or any of our subsidiaries, or associate of any
such officer, director or employee is currently or has been
indebted (other than routine indebtedness of employees and
non-executive officers) at any time since January 1, 2008
to the Company or any of our subsidiaries.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Review
and Approval of Related Party Transactions
Our General Counsel is primarily responsible for reviewing all
relationships and transactions in which the Company, on the one
hand, and its significant shareholders or the Companys
directors and executive officers, or members of their respective
immediate families, on the other hand, are participants and for
assessing whether any of such persons has a direct or indirect
material interest. Our General Counsel is also primarily
responsible for developing and implementing processes to obtain
information relevant to such review from the Companys
significant shareholders and its directors and executive
officers. Transactions that are determined to necessitate
disclosure pursuant to the SECs rules or the rules of the
Canadian provincial securities regulatory authorities are
disclosed in our proxy statement and are brought to the board of
directors for pre-approval or ratification, as the case may be.
The Company is also subject to the requirements of Multilateral
Instrument
61-101
Protection of Minority Security Holders in Special
Transactions
of the Ontario and Quebec securities regulatory
authorities which imposes certain procedural and other approval
requirements on certain related party transactions.
Any director who has a material interest in such a transaction
(or whose family member has such a material interest) will
declare his or her interest and will recuse himself or herself
from any decision of the board of directors in connection with
such matter.
Related
Party Transactions
The Company has an agreement with Minnesota Eye Consultants to
provide refractive access services. Dr. Richard Lindstrom,
a director of TLC
Vision
, is founder, partner and
attending surgeon of Minnesota Eye Consultants. The Company
received revenue of $0.8 million, $1.0 million and
$0.8 million as a result of the agreement for the years
ended December 31, 2008, 2007 and 2006, respectively.
Dr. Lindstrom also receives annual compensation from the
Company in his capacity as medical director of TLC
Vision
and as a consultant to Sightpath Medical.
In 2008, Dr. Lindstrom also earned a total of $85,000 and
105,000 options in compensation from us in his capacity as the
medical director of the Company, member of the Companys
Clinical Advisory Group, and as a consultant to Sightpath
Medical, a cataract services provider and wholly owned
subsidiary of the Company.
As of December 31, 2008, the Company owned approximately 8%
of OccuLogix, Inc. One of the Companys current directors
(Dr. Lindstrom) is also a director of OccuLogix. Further
Mr. Davidson, who resigned from the Companys board of
directors in January 2008, was also a director of OccuLogix.
48
None of our principal shareholders, senior officers or
directors, or any of their associates or subsidiaries, has any
other interest in any other transaction since January 1,
2008 or any other proposed transaction that has materially
affected or would materially affect the Company or its
subsidiaries.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as at April 29, 2009, the
number of our common share beneficially owned by each of our
directors, management nominees for director and named executive
officers, our directors, nominee directors and executive
officers as a group, and each person who, to the knowledge of
our directors or officers, beneficially owns, directly or
indirectly, or exercises control or direction over common shares
carrying more than 5% of the voting rights attached to all our
outstanding common shares.
|
|
|
|
|
|
|
|
|
Directors, Nominee Directors,
|
|
Shares
|
|
|
Percentage of
|
|
Named Executive Officers and
|
|
Beneficially
|
|
|
Common Shares
|
|
5% Shareholders
|
|
Owned
|
|
|
Beneficially Owned
|
|
|
Highland Capital
|
|
|
8,213,508
|
|
|
|
16.2
|
%
|
Black River Asset Management
|
|
|
5,606,578
|
|
|
|
11.1
|
%
|
James C. Wachtman
|
|
|
447,000
|
|
|
|
*
|
|
Steven P. Rasche
|
|
|
191,800
|
|
|
|
*
|
|
James B. Tiffany
|
|
|
153,600
|
|
|
|
*
|
|
Richard L Lindstrom, M.D**
|
|
|
139,000
|
|
|
|
*
|
|
Brian L. Andrew
|
|
|
113,750
|
|
|
|
*
|
|
Warren S. Rustand**
|
|
|
55,180
|
|
|
|
*
|
|
Toby S. Wilt**
|
|
|
55,000
|
|
|
|
*
|
|
Michael D. DePaolis, O.D**
|
|
|
35,000
|
|
|
|
*
|
|
Larry D. Hohl
|
|
|
21,250
|
|
|
|
*
|
|
Gary P. Jonas
|
|
|
15,000
|
|
|
|
*
|
|
Jay T. Holmes**
|
|
|
7,500
|
|
|
|
*
|
|
Olden C. Lee**
|
|
|
7,500
|
|
|
|
*
|
|
All directors, management nominees for director and executive
officers as a group (16 persons
)
|
|
|
1,416,248
|
|
|
|
2.8
|
%
|
|
|
|
*
|
|
Less than one percent.
|
**
|
|
Excludes conditional options
granted on December 10, 2008. Such options granted to board
of directors will vest immediately upon satisfaction of
conditions.
|
Under the rules of the SEC, common shares which an individual or
group has a right to acquire within 60 days by exercising
options or warrants are deemed to be outstanding for the purpose
of computing the percentage of ownership of that individual or
group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in
the table.
Highland Capital refers to Highland Capital
Management, L.P. The share information for Highland Capital is
based on a report on Form 13F, as amended filed with the
SEC on March 27, 2009. This report indicates that Highland
Capital Management, L.P. has sole voting and dispositive power
with respect to all common shares owned. The principal address
of Highland Capital Management, L.P. is Two Galleria Tower,
13455 Noel Road, Suite 800, Dallas, Texas 75240. James D.
Dondero, the President of Highland Distressed Opportunities
Fund, Inc. and the President and a director of Strand Advisors,
Inc. (the general partner of Highland Capital), may be deemed to
beneficially own shares owned
and/or
held
by
and/or
for the account of
and/or
for
the benefit of Highland Capital.
Black River Asset Management refers to Black River
Asset Management LLC. The share information for Black River
Asset Management is based on a report on Form 13F filed
with the SEC on February 17, 2009. This report indicates
that Black River Asset Management LLC has sole voting and
dispositive power with respect to 5,606,578 common shares. The
principal address of Black River Asset Management LLC is 12700
Whitewater
49
Drive, Minnetonka, MN 55343. Black River Asset Management is a
wholly owned subsidiary of Cargill, Incorporated.
Messrs. Wachtman, Rasche, Tiffany and Andrew respectively
beneficially own 17,446, 7,369, 9,600 and 752 common shares
in their individual 401(k) plans.
Messrs. Rasche, Tiffany and Andrew respectively
beneficially own 23,440, 16,000 and 12,964 common shares in the
employee share purchase plan.
Unless otherwise disclosed, the shareholders named in the table
have sole voting power and sole investment power with respect to
all shares beneficially owned by them.
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of
December 31, 2008 with respect to each equity plan or
arrangement pursuant to which warrants or options to purchase
our common shares have been granted.
Equity
Compensation Plan Information as of December 31,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
Number of Shares
|
|
|
|
|
|
for Future Issuance
|
|
|
|
to be Issued Upon
|
|
|
Weighted-Average
|
|
|
Under Equity
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
(excluding shares
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
reflected in first
|
|
Plan Category
|
|
and Rights (000s)
|
|
|
and Rights
|
|
|
column) (000s)
|
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
5,015
|
|
|
$
|
4.14
|
(1)
|
|
|
61
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,015
|
|
|
$
|
4.14
|
(1)
|
|
|
61
|
|
|
|
|
(1)
|
|
Represents the weighted-average
exercise price of outstanding options, warrants and rights
denominated in U.S. dollars. The weighted-average exercise price
of outstanding options, warrants and rights denominated in
Canadian dollars was Cdn. $4.79.
|
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act, requires our directors,
certain officers and persons who own more than 10% of a
registered class of our equity securities to file reports of
ownership on Form 3 and changes in ownership on Form 4
or 5 with the SEC. Such directors, officers and 10% shareholders
are also required by the SECs rules to furnish us with
copies of all Section 16(a) reports they file. We assist
our directors and officers in preparing their Section 16(a)
reports. To our knowledge, all Section 16(a) filing
requirements applicable to our officers, directors and 10%
shareholders were complied with during the fiscal year ended
December 31, 2008.
SHAREHOLDER
PROPOSALS FOR NEXT YEARS ANNUAL MEETING
Any proposal of a shareholder intended to be presented for a
vote by the Companys shareholders at our annual meeting of
shareholders for the fiscal year ended December 31, 2009
must be received by our executive office not later than
March 22, 2010 to be considered for inclusion in the
management information circular for that meeting. Shareholder
proposals received after such date may not be included in the
management information circular for that meeting. Shareholder
proposals not included in the management information circular
may not be considered at the meeting. In addition, if the
Company receives notice of a shareholder proposal after
March 22, 2010, the persons named as proxies for the 2010
annual meeting will have discretionary authority to vote on such
proposal.
50
ANNUAL
INFORMATION
You can obtain our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 (which includes
our most recently filed annual financial statements, together
with the accompanying report of our independent auditors) and
any pertinent pages of any documents incorporated by reference
therein, Quarterly Reports that have been filed for periods
after the end of the 2008 fiscal year, and additional copies of
this management information circular without charge on our
website at (www.tlcvision.com) or by writing or calling our
Secretary at 16305 Swingley Ridge Road, Suite 300,
Chesterfield, Missouri 63017,
636-534-2275.
You may also obtain such documents and additional information
about the Company on SEDAR at www.sedar.com or on EDGAR at
www.sec.gov.
OTHER
BUSINESS
We know of no other matter to come before the meeting other than
the matters referred to in the notice of meeting.
DIRECTORS
APPROVAL
The contents and sending of this management information circular
have been approved by our board of directors.
By Order of the Board of Directors
Brian L. Andrew
General Counsel and Secretary
April 30, 2009
51
APPENDIX A
TLC
VISION CORPORATION
RESOLUTION NO. 1
Resolved
that:
1. The TLC Vision Corporation Amended and Restated Share
Option Plan be and is hereby amended and restated in its
entirety as the TLC Vision Corporation 2009 Long-Term Incentive
Plan attached as Appendix B to this management information
circular.
2. Any director or officer of the Company is hereby
authorized and directed for and in the name of and on behalf of
the Company to do all acts and things and execute, whether under
the corporate seal of the Company or otherwise, and deliver or
cause to be delivered all documents and instruments as in the
opinion of such director or officer may be necessary or
desirable to carry out the intent of the foregoing resolution.
TLC
VISION CORPORATION
RESOLUTION NO. 2
Resolved
that:
1. The one-time stock option exchange program for employees
other than directors and executive officers as described in this
management information circular is hereby approved.
2. Any director or officer of the Company is hereby
authorized and directed for and in the name of and on behalf of
the Company to do all acts and things and execute, whether under
the corporate seal of the Company or otherwise, and deliver or
cause to be delivered all documents and instruments as in the
opinion of such director or officer may be necessary or
desirable to carry out the intent of the foregoing resolution.
TLC
VISION CORPORATION
RESOLUTION NO. 3
Resolved
that:
1. The TLC Vision Corporation Amended and Restated Share
Option Plan (as the same may be amended and restated as the TLC
Vision Corporation 2009 Long-Term Incentive Plan) be and is
hereby amended to increase the number of common shares reserved
for issuance under such plan by 1,000,000, from 9,116,000 common
shares to 10,116,000 common shares; provided that, such
amendment shall only be effective if Resolution No. 2
regarding the one-time stock option exchange program is not
approved.
2. Any director or officer of the Company is hereby
authorized and directed for and in the name of and on behalf of
the Company to do all acts and things and execute, whether under
the corporate seal of the Company or otherwise, and deliver or
cause to be delivered all documents and instruments as in the
opinion of such director or officer may be necessary or
desirable to carry out the intent of the foregoing resolution.
A-1
APPENDIX B
TLC
VISION CORPORATION
2009 LONG-TERM INCENTIVE PLAN
The purposes of the Plan are (a) to promote the long-term
success of the Corporation and its Affiliates, and to increase
shareholder value by providing Eligible Individuals with
incentives to contribute to the long-term growth and
profitability of the Corporation, and (b) to assist the
Corporation to attract, retain and motivate highly qualified
individuals who are in a position to make significant
contributions to the Corporation and its Affiliates.
|
|
|
|
2.
|
Definitions and Rules of Construction
|
(a)
Definitions
. For purposes of the Plan, the
following capitalized words shall have the meanings set forth
below, unless otherwise defined elsewhere in this Plan:
Affiliate
means any entity which is an
affiliate of the Corporation for the purposes of
Ontario Securities Commission National Instrument
45-106
Prospectus and Registration Exemptions, as amended from time to
time, or, in the absence of such definition, means any
corporation that is an affiliate of the Corporation as defined
under the
Securities Act
(Ontario).
Applicable Law
means any and all
applicable laws, rules, regulations and other legal
requirements, including, as applicable, the
Securities Act
(Ontario), Section 16(b) of the Exchange Act, Section
162(m) and Section 409A(a) of the Code, the Income Tax Act,
and the listing standards of NASDAQ and the TSX.
Award
means any of a Performance Cash
Award, Stock Appreciation Right, Option, Restricted Share,
Restricted Share Unit, Performance Share, Performance Share
Unit, or Other Award granted by the Board pursuant to the terms
of the Plan.
Award Document
means an agreement,
certificate or other document approved by the Board from time to
time that sets forth the terms and conditions of an Award. An
Award Document may be in written, electronic or other media and
shall be signed by the Participant.
Blackout Period
means the period
imposed by the Corporation, during which specified individuals,
including insiders of the Corporation, may not trade in the
Corporations securities (and includes any period in which
a Participant has material information affecting the Corporation
that has not been publicly disclosed), but does not include any
period when a regulator has halted trading in the
Corporations securities.
Board
means the Board of Directors of
the Corporation or a committee appointed pursuant to
Section 3(a) the Plan.
Canadian Taxpayer
means an Eligible
Individual who is resident in Canada for purposes of the Income
Tax Act.
Cause
has the meaning assigned to
cause or just cause in the employment agreement, if any, between
a Participant and the Employer; provided, that if there is no
such employment agreement or no such definition,
Cause means (1) the failure of the Participant
to perform his duties with the Employer (other than failure
resulting from death or the inability of the Participant to
perform the essential functions of his job, with or without a
reasonable accommodation) if the Employer gives notice of such
breach and it remains uncured for five (5) days following
such notice; (2) any act by the Participant of fraud or
dishonesty with respect to any aspect of the business of the
Corporation or an Affiliate of the Corporation;
(3) misappropriation of funds or any corporate opportunity;
(4) a conviction or affirmative finding by an appropriate
court or administrative agency that the Participant is guilty of
an indictable offence or crime of moral turpitude; (5) acts
by the Participant attempting to secure or securing any personal
profit not fully disclosed to and approved by the Employer in
connection with any transaction entered into on behalf of the
Employer; (6) gross, willful or wanton negligence or
misconduct by the Participant; or (7) any other conduct
determined by a Court of competent jurisdiction to constitute
cause.
B-1
Change in Control
means the occurrence
of any of the following:
(i) Any Person directly or indirectly acquires, within a
twelve month period, beneficial ownership (as defined in
Rule 13d-3
under the Exchange Act), of securities of the Corporation
representing 50% or more of the combined voting power of the
Corporations then outstanding securities; or
(ii) A sale of all or substantially all of the
Corporations assets to any Person, other than a sale
immediately following which the shareholders of the Corporation
immediately prior to the sale own at least 51% of the voting
power, directly or indirectly, of (A) the surviving
corporation in any such sale; (B) the purchaser of or
successor to the Corporations assets; (C) both the
surviving corporation and the purchaser in the event of any
combination of sales; or (D) the parent Corporation owning
100% of such surviving corporation, purchaser or both the
surviving corporation and the purchaser, as the case may
be; or
(iii) Within any
12-month
period, the persons who were members of the Board of Directors
immediately before the beginning of such period (the
Incumbent Directors
) cease (for any
reason other than death) to constitute at least a majority of
the Board or the board of directors of a successor to the
Corporation. For this purpose, any director who was not a
director at the beginning of such period shall be deemed to be
an Incumbent Director if such director was elected to the Board
by, or on the recommendation of or with the approval of, at
least two thirds of the directors who then qualified as
Incumbent Directors, so long as such director was not nominated
by a Person who commenced or threatened to commence an election
contest or proxy solicitation by or on behalf of a Person (other
than the Board).
Change in Control Price
means the
highest price paid for a Share in a Change in Control
transaction.
Code
means the Internal Revenue Code
of 1986, as amended, and the applicable Treasury regulations
issued thereunder.
Consultant
has the meaning given to
such term in Ontario Securities Commission National Instrument
45-106
Trades to Employees, Senior Officers, Directors and Consultants,
as amended from time to time.
Corporation
means TLC Vision
Corporation.
Effective Date
means the date on which
the Plan is approved by shareholders of the Corporation.
Eligible Individuals
means any
officer, employee, director or Consultant of the Company or any
of its Affiliates who should also constitute an
employee for purposes of
Form S-8
under the Securities Act of 1933, as amended.
Employer
means the Corporation or the
Affiliate of the Corporation that employs the Participant.
Exchange Act
means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exercise Price
has the meaning set out
in Section 7(b).
Fair Market Value
means, the closing
selling price of a Share on the day prior to the applicable day
as reported on the NASDAQ, the TSX, or a national securities
exchange or automated quotation system that may be designated by
the Board (or, if there were no sales on the determination date,
the average of the highest and lowest quoted selling prices as
reported on the most recent date on which a sale occurred) and
if the Shares are not then traded on any such exchange, means,
the fair market value of a Share determined by the Board through
the reasonable application of a reasonable valuation methodology
in accordance with Section 409A of the Code.
Good Reason
for a Participants
termination of employment following a Change in Control has the
meaning assigned to good reason or justification for resignation
in the employment or change of control agreement, if any,
between such Participant and the Employer; provided, however,
that if there is no such agreement or no such definition,
Good Reason shall mean any of the following acts by
the Employer without the consent of the Participant, in each
case which is not remedied by the Employer promptly after
receipt of notice thereof given by the Participant):
(i) material diminution of the Participants position,
authority, title,
B-2
reporting requirements, duties, or responsibilities as in effect
on the date immediately prior to the Change in Control, or
(ii) a reduction by the Employer in the Participants
base salary as in effect on the date immediately prior to the
Change in Control, or (iii) a material adverse change to
the Employers incentive plans from the plans in effect
immediately prior to the Change in Control other than a
reduction in incentive compensation resulting from the failure
of the Participant or the Employer to achieve targets; or
(iv) a requirement that the Participant be based at any
office or location more than 50 miles from the office or
location at which the Participant was based on the date
immediately prior to the Change in Control, or to travel on
Employer business to a substantially greater extent than
required immediately prior to the Change in Control or
(v) any other adverse change determined by a Court of
competent jurisdiction to constitute constructive dismissal.
In The Money Amount
has the meaning
set out in Section 9(a).
Incentive Stock Option
means an Option
that complies with the requirements of Section 422 of the
Code or any successor provision.
Income Tax Act
means the Income Tax
Act (Canada) and the Regulations promulgated thereunder as
amended from time to time.
NASDAQ
means The Nasdaq Stock Market
or successors thereto.
Non-Employee Director
means any member
of the Board who is not an officer or employee of the
Corporation or any Affiliate.
Nonqualified Stock Option
means an
Option that does not comply with the requirements of
Section 422 of the Code or any successor provision.
Option
means an Option granted
pursuant to Section 7.
Other Award
means any form of Award
granted pursuant to Section 11.
Participant
means an Eligible
Individual who has been granted an Award under the Plan.
Performance Cash Award
means an award
granted pursuant to Section 10(a).
Performance Conditions
means any
performance based terms or conditions to which the Board makes
an Award subject.
Performance Goal
means any performance
measure established by the Board pursuant to Section 6(h).
Performance Period
means the period
established by the Board and set forth in the applicable Award
Document in respect of which Performance Goals are measured.
Performance Share
means an award
granted pursuant to Section 10(b).
Performance Share Unit
means an award
granted pursuant to Section 10(c).
Permitted Transferee
means (i) a
Participants family member, (ii) one or more trusts
established in whole or in part for the benefit of one or more
of the Participants family members, (iii) one or more
entities that are beneficially owned in whole or in part by one
or more of the Participants family members, or (iv) a
charitable or not-for-profit organization.
Person
means any person, entity or
group within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, except for
(i) the Corporation or any of its Affiliates, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its Affiliates,
(iii) an underwriter temporarily holding securities of the
Corporation pursuant to an offering of the securities,
(iv) a corporation owned, directly or indirectly, by the
shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation, or
(v) a person or group as used in
Rule 13d-1(b)
under the Exchange Act.
Plan
means this TLC Vision Corporation
2009 Long-Term Incentive Plan, as amended or restated from time
to time.
B-3
Plan Limit
means the maximum aggregate
number of Shares that may be issued for all purposes under the
Plan as set forth in Section 5(a).
Restricted Share
means an award
granted pursuant to Section 8(a).
Restricted Share Unit
means an award
granted pursuant to Section 8(b).
RRSP
means a registered retirement
savings plan pursuant to the Income Tax Act.
Section 409A Award
means an Award
that provides for a deferral of compensation within
the meaning of Section 409A of the Code.
Section 162(m) Award
means an
Award that is intended to constitute qualified
performance-based compensation within the meaning of
Section 162(m) of the Code.
Share
means a common share of the
Corporation or another class of share or other securities that
may be applicable in accordance with Section 13 and as
adjusted pursuant to Section 13(b).
Stock Appreciation Right
means an
award granted pursuant to Section 9.
Target Number
means the target number
of Shares established by the Board for an Award and set forth in
the applicable Award Document.
Target Payment
means the target cash
payment for an Award established by the Board and set forth in
the applicable Award Document.
Termination Date
means the date on
which a Participant ceases to be an Eligible Individual and does
not include any period of statutory, reasonable or contractual
notice or any period of salary continuation or deemed employment.
TSX
means the Toronto Stock Exchange
or successors thereto.
U.S. Taxpayer
means an Eligible
Individual who is a U.S. citizen or U.S. permanent
resident for purposes of the Code.
(b)
Rules of Construction
. The masculine pronoun
shall be deemed to include the feminine pronoun, and the
singular form of a word shall be deemed to include the plural
form, unless the context requires otherwise. Unless the text
indicates otherwise, references to sections are to sections of
the Plan.
3. Administration
(a) The Plan shall be administered by the Board or a
committee of the Board duly appointed for this purpose by the
Board and consisting of not less than three directors. If a
committee is appointed for this purpose, all references to the
term Board will be deemed to be references to the
committee.
(b) Subject to the limitations of this Plan, the Board has
the authority: (1) to grant Awards to Eligible Individuals;
(2) to determine the terms, including the limitations,
restrictions, conditions and Performance Conditions, if any,
applicable to such grants; (3) to interpret this Plan and
to adopt, amend and rescind such administrative guidelines and
other rules and regulations relating to this Plan as it may from
time to time deem advisable, subject to prior approval by an
applicable regulatory authority, if required; and (4) to
make all other determinations and to take all other actions in
connection with the implementation and administration of this
Plan as it may deem necessary or advisable. The Boards
guidelines, rules, regulations, interpretations and
determinations will be conclusive and binding upon all parties.
4. Eligibility
(a)
Eligible Individuals
. Awards may be granted to
any Eligible Individual. Only employees of an Employer may be
granted Incentive Stock Options. The Board shall have the
authority to select the Eligible Individuals to whom Awards are
granted and to determine the type, number and terms of Awards to
be granted to each Participant. Under the Plan, references to
employment or employed include the
engagement of Participants who are Consultants and the service
of Participants who are Non-Employee Directors, except for
purposes of determining eligibility to be granted Incentive
Stock Options.
B-4
(b)
Grants to Participants
. The Board shall have no
obligation to grant any Eligible Individual an Award or to
designate an Eligible Individual as a Participant solely by
reason of the Eligible Individual having received a prior Award
or having been previously designated as a Participant. The Board
may grant more than one Award to a Participant and may designate
an Eligible Individual as a Participant for overlapping periods
of time.
5. Shares Subject to the Plan
(a)
Plan Limit
. Subject to adjustment in accordance
with Section 13, the maximum aggregate number of Shares
that may be issued for all purposes under the Plan shall be
[10,116,000 or 9,116,000 depending on approval of exchange
and plan increase]
.
(b)
Rules Applicable to Determining Shares
Available for Issuance
. The number of Shares remaining
available for issuance shall be reduced by the number of Shares
subject to outstanding Awards and, for Awards that are not
denominated by Shares, by the number of Shares actually
delivered upon settlement or payment of the Award. For purposes
of determining the number of Shares that remain available for
issuance under the Plan, (i) the number of Shares that are
tendered by a Participant or withheld by the Corporation to pay
the exercise price of an Award or to satisfy the
Participants tax withholding obligations in connection
with the exercise or settlement of an Award and (ii) the
number of Shares corresponding to Awards under the Plan that are
forfeited or cancelled or otherwise expire for any reason
without having been exercised or settled or that are settled
through issuance of consideration other than Shares (including,
without limitation, cash) shall be added back to the Plan Limit
and again be available for the grant of Awards.
(c)
Special Limits
. Anything to the contrary in
Section 5(a) above notwithstanding, but subject to
adjustment under Section 13, the following special limits
shall apply to Shares available for Awards under the Plan:
(1) the maximum number of Shares that may be issued
pursuant to Options and Stock Appreciation Rights granted to any
Eligible Individual in any calendar year may not exceed 5% of
the Shares outstanding;
(2) the maximum dollar value of Awards (other than those
Awards set forth in Section 5(c)(1)) that may be awarded to
any Eligible Individual and an RRSP (in accordance with
Section 6(k)) is the lesser of $5,000,000 measured as of
the date of grant (with respect to Awards denominated in cash)
or 5% of the Shares outstanding, on a non-diluted basis,
measured as of the date of grant (with respect to Awards
denominated in Shares);
(3) the maximum number of Shares that may be issued
pursuant to Awards may not exceed the number of Shares required
by an applicable regulatory authority;
(4) no more than 10% of the Corporations total issued
and outstanding securities may be issued to insiders of the
Corporation within any one year period or be issuable to
insiders at any time under the Plan and all of the
Corporations other security based compensation
arrangements. Insider and security based
compensation arrangement for this purpose have the
meanings attributed thereto in the TSX Company Manual;
(5) the maximum number of Shares that may be issued
pursuant to Options or Stock Appreciation Rights granted to any
Non-Executive Director, other than the Chairman of the Board of
Directors, may not exceed 15,000 Shares (subject to
adjustment as provided in Section 13(b)) in the aggregate
in any calendar year;
(6) the maximum number of Shares that may be issued
pursuant to Options or Stock Appreciation Rights granted to the
Chairman of the Board of Directors may not exceed
60,000 Shares (subject to adjustment as provided in
Section 13(b)) in the aggregate in any calendar year;
(7) and the maximum aggregate number of Shares that may be
issued through Incentive Stock Options under the Plan is
1,000,000.
(8) The maximum number of Shares with respect to which
Options and Stock Appreciation Rights may be awarded to any
Eligible Individual under the Plan in any calendar year of the
Corporation is 1,000,000.
(a)
Types of Awards
. Any Award may be granted singly
or in combination or tandem with any other Award, as the Board
may determine. Awards under the Plan may be made in combination
with, in replacement of, or as
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alternatives to awards or rights under any other compensation or
benefit plan of the Corporation, including the plan of any
acquired entity.
(b)
Terms Set Forth in Award Document
. The terms and
conditions of each Award shall be set forth in an Award Document
in a form approved by the Board for the Award. The Award
Document shall contain terms and conditions that are consistent
with the Plan. Notwithstanding the foregoing, and subject to
Section 409A(a)(3) of the Code where applicable to a
U.S. Taxpayer and to other Applicable Law, the Board may
accelerate (i) the vesting or payment of any Award,
(ii) the lapse of restrictions on any Award or
(iii) the date on which any Award first becomes
exercisable. The terms of Awards may vary among Participants,
and the Plan does not impose upon the Board any requirement to
make Awards subject to uniform terms. Accordingly, the terms of
individual Award Documents may vary.
(c)
Termination of Employment
. The Board shall
specify at the time of grant of an Award and in the Award
Document the provisions governing the disposition of an Award in
the event of a Participants termination of employment with
his Employer. Subject to Section 409A(a)(3) of the Code
where applicable to a U.S. Taxpayer to and other Applicable
Law, in connection with a Participants termination of
employment, the Board shall have the discretion to accelerate
the vesting, exercisability or settlement of, eliminate the
restrictions and conditions applicable to, or extend the
post-termination exercise period of an outstanding Award but not
beyond the original term of the Award.
(d)
Change in Control
. Except as otherwise specified
in an Award Document (or a Participants written employment
agreement with the Employer), upon termination of a
Participants employment by the Company without Cause, or
by the Participant for Good Reason, within a period of one year
following the occurrence of a Change in Control:
(1) any and all Options and Stock Appreciation Rights
outstanding as of the effective date of the Change in Control
may, in the discretion of the Board become fully and immediately
exercisable;
(2) any restrictions imposed on Restricted Shares and
Restricted Share Units outstanding as of the effective date of
the Change in Control may, in the discretion of the Board lapse;
(3) any Performance Goals or Performance Conditions with
respect to all Awards that are outstanding as of the effective
date of the Change in Control may, in the discretion of the
Board be deemed to have been attained at the specified target
level of performance; and
(4) the vesting of all Awards denominated in Shares
outstanding as of the effective date of the Change in Control
may, in the discretion of the Board be accelerated to such date.
Subject to Section 162(m) and Section 409A(a)(3) of
the Code where applicable to a U.S. Taxpayer and to other
Applicable Law, the Board may, in its discretion, provide, in an
Award Document or subsequent to the grant of an Award, for the
accelerated vesting, exercisability
and/or
the
deemed attainment of a Performance Goal with respect to an Award
upon specified events similar to a Change in Control.
Notwithstanding any other provision of the Plan or any Award
Document, the provisions of this Section 6(d) may not be
terminated, amended, or modified upon or after a Change in
Control in a manner that would adversely affect a
Participants rights with respect to an outstanding Award
without the prior written consent of the Participant. Subject to
Section 16, the Board may terminate, amend or modify this
Section 6(d) at any time and from time to time prior to a
Change in Control.
In connection with a Change of Control or proposed Change of
Control, the Board may, on 5 days notice and in a fair and
equitable manner, determine the manner in which each outstanding
Award and all rights granted under the Plan shall be treated
including, for example, requiring the acceleration of the expiry
time for the exercise of Awards by the Participants and of the
time for the fulfillment of any conditions or restrictions on
such exercise,
and/or
declaring that each outstanding Award shall be automatically
vested and exercisable or paid out in full conditional on the
completion of the Change of Control. All determinations of the
Board pursuant to this Section (including a determination that
it would be appropriate not to make an adjustment in the
circumstances) shall be conclusive and final.
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(e)
Dividends and Dividend Equivalents
. The Board
may provide Participants with the right to receive dividends or
payments equivalent to dividends or interest with respect to an
outstanding Award (other than an Option or Stock Appreciation
Right), which right, if any, shall be set out in the Award
Document. The payments may be paid currently or be deemed to be
reinvested in Awards or Shares, and made in Awards, Shares,
cash, or a combination of thereof, as the Board shall determine.
The terms of any reinvestment of dividends shall comply with
Section 409A of the Code and other Applicable Law.
(f)
Fractional Shares
. No fractional Shares shall be
issued or delivered pursuant to any Award under the Plan and any
right to receive a fractional Share shall be forfeited.
(g)
Rights of a Shareholder
. A Participant shall
have no rights as a shareholder with respect to Shares covered
by an Award (including voting rights) until (and, except as
provided in Section 13, no adjustment shall be made for
dividends or other rights for which the record date is prior to)
the date the Participant or his nominee becomes the holder of
record of the Shares.
(h)
Performance-Based Awards
. i) The Board may
determine whether any Award under the Plan is a
Section 162(m) Award. Section 162(m) Awards shall be
conditioned on the achievement of one or more Performance Goals
to the extent required by the exemption for qualified
performance-based compensation under Section 162(m)
of the Code and shall be subject to all other conditions and
requirements of the exemption under Section 162(m). The
Performance Goals shall be comprised of specified levels of one
or more objective financial performance measures as the Board
determines appropriate. The Performance Goals may relate to the
individual Participant, the Corporation or an Affiliate,
division, department, region, function or business unit of the
Corporation.
The Participants to receive Section 162(m) Awards shall be
designated, and the applicable Performance Goals shall be
established, by the Board within 90 days following the
commencement of the applicable Performance Period (or an earlier
or later date permitted or required by Section 162(m) of
the Code) and shall be set out in the applicable Award Document.
Each Participant shall be assigned a Target Number or Target
Payment payable if Performance Goals are achieved. Any payment
of a Section 162(m) Award granted with Performance Goals is
conditional on the written certification of the Board in each
case that the Performance Goals and any other material
conditions were satisfied. The Board may determine, at the time
of grant, that if performance exceeds the specified Performance
Goals, the Award may be settled with payment greater than the
Target Number or Target Payment, but in no event may the payment
exceed the limits set forth in Section 5(c).
(i)
Deferrals
. In accordance with the procedures
authorized by, and subject to the approval of, the Board,
Participants may be given the opportunity to defer the payment
or settlement of an Award to one or more dates selected by the
Participant. The terms of any deferrals shall: (i) comply
with Section 409A(a) and Section 162(m) of the Code
where applicable to a U.S. Taxpayer; (ii) be
interpreted and administered in a manner in which the deferral
shall not be considered a salary deferral
arrangement within the meaning of the Income Tax Act where
applicable to a Canadian tax payer; and (iii) comply with
other Applicable Law. No deferral opportunity shall exist with
respect to an Award unless explicitly permitted by the Board at
or after the time of grant.
(j)
Repricing of Options and Stock Appreciation
Rights
. Notwithstanding anything in the Plan to the
contrary, an Option or Stock Appreciation Right shall not be
granted in substitution for a previously granted Option or Stock
Appreciation Right being cancelled or surrendered as a condition
of receiving a new Award, if the new Award would have a lower
exercise price than the Award it replaces, nor shall the
exercise price of an Option or Stock Appreciation Right be
reduced once the Option or Stock Appreciation Right is granted,
except with the prior approval of the Corporations
shareholders. The foregoing shall not prevent adjustments
permitted pursuant to Section 13.
(k)
Grant to Participants RRSP
. Upon written
notice from the Participant, an Award that might otherwise be
granted to that Participant, will be granted, in whole or in
part, to an RRSP established by and for the sole benefit of the
Participant. The determination of whether and the extent to
which a Participant is entitled by the Income Tax Act to
contribute Awards to the Participants RRSP shall be the
responsibility of the Participant.
B-7
7. Terms and Conditions of Options
(a)
General
. The Board, in its discretion, may grant
Options to Eligible Individuals and shall determine for those
Eligible Individuals who are U.S. Taxpayers whether the
Options shall be Incentive Stock Options or Nonqualified Stock
Options. Each Option shall be evidenced by an Award Document
that shall be in the form and contain the provisions that the
Board may from time to time deem appropriate and in the case of
Eligible Individuals who are U.S. Taxpayers, shall
expressly identify the Option as an Incentive Stock Option or
Nonqualified Stock Option. The terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code, or any successor
provision, as amended from time to time.
(b)
Exercise Price
. The exercise price of an Option
(the Exercise Price) shall be fixed by the Board at
the time of grant, shall be specified in the Award Document and
may not be less than the Fair Market Value of a Share on the
date of grant.
(c)
Term
. An Option shall be effective for the term
determined by the Board and set forth in the Award Document
relating to the Option. The term of an Option may in no event
extend beyond the tenth anniversary of the date of grant.
Notwithstanding the foregoing, if an Option (other than an
Incentive Stock Option) would otherwise expire during or shortly
after the end of a Blackout Period, the term of such Option
shall automatically be extended until 10 business days after the
end of the Blackout Period.
(d)
Exercise; Payment of Exercise Price
. Options
shall be exercised by delivery of a notice of exercise in the
form attached or in any other form approved by the Corporation.
Subject to the provisions of the applicable Award Document, the
exercise price of an Option may be paid (i) in cash or cash
equivalents, (ii) subject to such limitations as may be
imposed by the Corporation from time to time to ensure
compliance with Applicable Laws, by actual delivery or
attestation to ownership of freely transferable Shares already
owned by the person exercising the Option and having a Fair
Market Value (calculated as of the date of exercise) equal in
value to the exercise price, (iii) by a combination of
(i) and (ii), (iv) through net share settlement or
similar procedure involving the withholding of Shares subject to
the Option with a value equal to the exercise price and any
required tax or other withholding obligations or (v) by
other means that the Board may authorize. In accordance with the
rules and procedures authorized by the Board for this purpose,
the Option may also be exercised through a cashless
exercise procedure authorized by the Board from time to
time that permits Participants to exercise Options by delivering
irrevocable instructions to a broker to deliver promptly to the
Corporation the amount of sale or loan proceeds necessary to pay
the exercise price and the amount of any required tax or other
withholding obligations, or through other procedures determined
by the Corporation from time to time.
(e)
Vesting and Performance Conditions
. The Board
may determine that Options or the exercise of Options is subject
to vesting requirements or the achievement of Performance
Conditions which shall be set out in the Award Document.
8. Terms and Conditions of Restricted Shares and
Restricted Share Units
(a)
Restricted Shares
. The Board, in its discretion,
may grant or sell Restricted Shares to Eligible Individuals.
Restricted Shares shall consist of one or more Shares granted to
an Eligible Individual in respect of past service or sold to an
Eligible Individual, subject to the terms, conditions and
restrictions set forth in the Plan and specified in the
applicable Award Document. Restricted Shares may, among other
things, be subject to restrictions on transferability, vesting
requirements or other specified circumstances under which it may
be cancelled.
(b)
Restricted Share Units
. The Board, in its
discretion, may grant Restricted Share Units to Eligible
Individuals. A Restricted Share Unit shall entitle a Participant
to receive, subject to the terms, conditions and restrictions
set forth in the Plan and the applicable Award Document, a Share
and/or
cash
equal to the Fair Market Value of a Share. Restricted Share
Units may, among other things, be subject to restrictions on
transferability, vesting requirements or other specified
circumstances under which they may be cancelled. Restricted
Share Units may be redeemed for Shares issued to the Participant
or, at the sole discretion of the Board, cash, or a combination
of cash and Shares, with a value equal to the Fair Market Value
of the Shares at the time of settlement.
B-8
9. Stock Appreciation Rights
(a)
General
. The Board, in its discretion, may grant
Stock Appreciation Rights to Eligible Individuals. A Stock
Appreciation Right shall entitle a Participant to receive,
subject to the terms, conditions and restrictions set forth in
the Plan and the applicable Award Document, an amount equal to
the excess, if any, of the Fair Market Value on the exercise
date over the Exercise Price for the number of Shares for which
the Stock Appreciation Right is exercised (the In The
Money Amount). The Exercise Price shall be set by the
Board in accordance with Section 7(b). Payments to a
Participant upon exercise of a Stock Appreciation Right may be
made in cash or Shares having an aggregate Fair Market Value as
of the date of exercise equal to the In The Money Amount. The
term of a Stock Appreciation Right shall not exceed ten years.
(b)
Stock Appreciation Rights in Tandem with
Options
. A Stock Appreciation Right may be granted in tandem
with an Option either at the same time as the Option or at a
later date. A Stock Appreciation Right granted in tandem with an
Option shall cover the same number of Shares as the Option and
shall be exercisable only at the same time or times and to the
same extent, and shall have the same term, as the Option. The
Exercise Price of a Stock Appreciation Right granted in tandem
with an Option shall equal the Exercise Price of the Option.
Upon exercise of a Stock Appreciation Right granted in tandem
with an Option, the Option shall be cancelled automatically to
the extent of the number of Shares covered by the Stock
Appreciation Right exercised. Upon exercise of an Option granted
in tandem with a Stock Appreciation Right, the Stock
Appreciation Right shall be cancelled automatically to the
extent of the number of Shares covered by the Option exercised.
10. Terms and Conditions of Performance Cash Awards,
Performance Shares, and Performance Share Units
(a)
Performance Cash Awards
. The Board, in its
discretion, may grant Performance Cash Awards to Eligible
Individuals. A Performance Cash Award shall entitle a
Participant to receive, subject to the terms, conditions and
restrictions set forth in the Plan and specified in the
applicable Award Document, a cash Target Payment conditional on
the achievement of Performance Conditions over the applicable
Performance Period. Performance Cash Awards shall be settled in
cash.
(b)
Performance Shares
. The Board may grant
Performance Shares to Eligible Individuals. Performance Shares
shall entitle the Participant to receive subject to the other
terms, conditions and restrictions set forth in the Plan and
specified in the applicable Award Document a Target Number of
Shares conditional on the achievement of Performance Conditions
over the applicable Performance Period.
(c)
Performance Share Units
. The Board, in its
discretion, may grant Performance Share Units to Eligible
Individuals. A Performance Share Unit shall entitle a
Participant to receive, subject to the terms, conditions and
restrictions set forth in the Plan and specified in the
applicable Award Document, a Target Number of Shares conditional
on the achievement of Performance Conditions over the applicable
Performance Period. The number of Performance Share Units which
are redeemed may be greater or less than the Target Number of
Shares, depending on the level of achievement of the Performance
Conditions. At the sole discretion of the Board, Performance
Share Units may be redeemed for Shares issued to the
Participant, cash, or a combination of Shares and cash, with a
value equal to the Fair Market Value of the Shares underlying
the Performance Share Unit at the applicable date.
11. Other Awards
The Board may grant to Eligible Individuals other forms of
equity-based or equity-related Awards not described above that
the Board determines to be consistent with the purpose of the
Plan and in the interests of the Corporation. The Awards may
provide for cash payments based in whole or in part on the value
or future value of Shares, for the acquisition or future
acquisition of Shares, or any combination of the foregoing.
12. Certain Restrictions
(a)
Transfers
. No Award shall be transferable other
than pursuant to a beneficiary designation under
Section 12(c), by last will and testament or by the laws of
descent and distribution or, except in the case of an Incentive
Stock Option, pursuant to a domestic relations order, as the
case may be. The Board may, however, subject to Applicable Law
and the terms and conditions that it shall specify, permit the
transfer of an Award, other than an Incentive Stock Option, for
no consideration to a Permitted Transferee. Any Award
transferred to a Permitted
B-9
Transferee shall be further transferable only by last will and
testament or the laws of descent and distribution or, for no
consideration, to another Permitted Transferee of the
Participant.
(b)
Award Exercisable Only by Participant
. During
the lifetime of a Participant, an Award shall be exercisable
only by the Participant or by a Permitted Transferee to whom the
Award has been transferred in accordance with Section 12(a)
above. The grant of an Award shall impose no obligation on a
Participant to exercise or settle the Award.
(c)
Beneficiary Designation
. A Participant may, from
time to time, name any beneficiary or beneficiaries to receive
any benefit in case of his death before he receives any or all
of the benefit. Each beneficiary designation shall revoke all
prior designations by the same Participant, and shall be
effective only when filed by the Participant in writing with the
Corporation during the Participants lifetime, in the form
or manner that the Board may prescribe from time to time and
consistent with Applicable Laws.
13. Recapitalization or Reorganization
(a)
Authority of the Corporation and Shareholders
.
The existence of the Plan, the Award Documents and the Awards
granted under the Plan shall not affect or restrict in any way
the right or power of the Corporation or the shareholders of the
Corporation to make or authorize any adjustment,
recapitalization, reorganization or other change in the
Corporations capital structure or business, any merger or
consolidation of the Corporation, any issue of stock or of
options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights
are superior to or affect the Shares or the rights under Shares
or which are convertible into or exchangeable for Shares, or the
dissolution or liquidation of the Corporation, or any sale or
transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar
character or otherwise.
(b)
Change in Capitalization
. Notwithstanding any
provision of the Plan or any Award Document, the number and kind
of Shares authorized for issuance under Section 5,
including the maximum number of Shares available under the
special limits provided for in Section 5(c), shall be
equitably adjusted in the manner deemed necessary by the Board
in the event of a share split, share consolidation, stock
dividend, recapitalization, reorganization, partial or complete
liquidation, reclassification, merger, consolidation,
separation, extraordinary cash dividend,
split-up,
spin-off, combination, exchange of Shares, warrants or rights
offering to purchase Shares at a price substantially below Fair
Market Value, or any other corporate event or distribution of
securities or property of the Corporation affecting the Shares
in order to preserve, but not increase, the benefits or
potential benefits intended to be made available under the Plan.
In addition, upon the occurrence of any of the foregoing events,
the number and kind of Shares subject to any outstanding Award
and the exercise price per Share, if any, under any outstanding
Award shall be equitably adjusted in the manner deemed necessary
by the Board (including by payment of cash to a Participant to
the extent permitted under Section 409A of the Code where
applicable to a U.S. Taxpayer and under other Applicable
Law) in order to preserve the benefits or potential benefits
intended to be made available to Participants. The adjustments
shall be made by the Board. Unless otherwise determined by the
Board, the adjusted Awards shall be subject to the same
restrictions and vesting or settlement schedule as applied to
the Award prior to such adjustment.
14. Term of the Plan
Unless earlier terminated pursuant to Section 16, the Plan
shall terminate on the tenth anniversary of the Effective Date,
except with respect to Awards then outstanding. After
termination of the Plan, the Board shall continue to have all
the powers and rights to deal with outstanding Awards it would
have had if the Plan had remained in full force and effect. No
Awards may be granted under the Plan after the tenth anniversary
of the Effective Date.
15. Effective Date
The Plan shall become effective on the Effective Date.
16. Amendment and Termination
(a) Subject to Applicable Law, the Board may at any time
terminate or, from time to time, amend, modify or suspend the
Plan. However, no termination, amendment, modification or
suspension (i) shall be effective without
B-10
the approval of the shareholders of the Corporation if
shareholder approval is required under the rules and listing
standards of NASDAQ, the TSX or other Applicable Law and
(ii) shall materially and adversely alter or impair the
rights of a Participant in any Award previously made under the
Plan without the consent of the holder of the Award.
(b) Notwithstanding the foregoing and subject to
Section 16(c), the Board shall have broad authority to
amend the Plan or any Award under the Plan without the approval
of shareholders and without the consent of a Participant to the
extent it deems necessary or desirable to (a) comply with,
take into account changes in, or interpretations of, applicable
tax laws, securities laws, employment laws, accounting rules and
other Applicable Law, (b) take into account unusual or
nonrecurring events or market conditions (including, without
limitation, the events described in 13(b)), (c) take into
account significant acquisitions or dispositions of assets or
other property by the Corporation, or (d) make any other
changes, not materially adverse to any outstanding Award, that
the Board, in its absolute discretion, determines are in the
interests of the Corporation.
(c) The Board shall not be entitled to make any of the
following types of amendments to the Plan without shareholder
approval:
(1) Any increase to the number of Shares issuable under the
Plan or change from a fixed number of shares issuable under the
Plan to a percentage;
(2) Any amendment to the Plan that increases the length of
the period after a Blackout Period during which Options may be
exercised;
(3) Any amendment which reduces the Exercise Price or would
result in the Exercise Price for any Option or Stock
Appreciation Rights granted under the Plan being lower than the
Fair Market Value of the Shares at the time the Option or Stock
Appreciation Rights is granted, except adjustments pursuant to
Section 13(b);
(4) Any amendment expanding the categories of Eligible
Individuals which would have the potential of broadening or
increasing insider participation under the Plan;
(5) Any amendment extending the term of an Option or Stock
Appreciation Right held by an insider beyond its original term,
except an extension of an Option that would otherwise expire
during a Blackout Period, to 10 days following the end of
the Blackout Period; and
(6) Amendments required to be approved by shareholders
under Applicable Law.
17. Miscellaneous
(a)
Tax Withholding
. The Employer may require any
individual entitled to receive a payment or issuance of a Share
pursuant to an Award to remit to the Employer, prior to payment,
an amount sufficient to satisfy any applicable tax withholding
requirements. In the case of an Award payable in Shares, the
Employer may permit or require a Participant to satisfy, in
whole or in part, the obligation to remit taxes by directing the
Corporation to withhold Shares that would otherwise be received
by the individual, or may repurchase, at a price equal to the
Fair Market Value of such Shares (calculated as of the date the
Award is payable) that were issued to the Participant, to
satisfy the minimum statutory withholding rates for any
applicable tax withholding purposes, in accordance with
Applicable Law and pursuant to any rules that the Board may
establish from time to time. The Employer shall also have the
right to deduct from all cash payments made to a Participant
(whether or not the payment is made in connection with an Award)
any applicable taxes required to be withheld with respect to
payments under the Plan.
(b)
No Right to Awards or Employment
. No person
shall have any claim or right to receive Awards. Neither the
Plan, the grant of Awards nor any action taken or omitted to be
taken under the Plan shall be deemed to create or confer on any
Eligible Individual any right to be retained in the employ of
the Employer, or to interfere with or to limit in any way the
right of the Employer to terminate the employment of the
Eligible Individual at any time. No Award shall constitute
salary, recurrent compensation or contractual compensation for
the year of grant, any later year or any other period of time.
Payments received by a Participant under any Award made pursuant
to the Plan shall not be included in, nor have any effect on,
the determination of employment-related rights or benefits under
any other employee benefit plan or similar arrangement provided
by the Corporation and the Affiliates, unless otherwise
specifically provided for under the terms of the plan or
arrangement or by the Board.
B-11
(c)
Securities Law Restrictions
. An Award may not be
exercised or settled, and no Shares may be issued in connection
with an Award, unless the issuance of the Shares (i) has
been registered under the Securities Act of 1933, as amended,
(ii) has qualified under applicable state blue
sky laws (or the Corporation has determined that an
exemption from registration and from qualification under state
blue sky laws is available) and (iii) complies
with foreign securities laws and other Applicable Law. The Board
may require each Eligible Individual purchasing or acquiring
Shares pursuant to an Award under the Plan to represent to and
agree with the Corporation in writing that the Eligible
Individual is acquiring the Shares for investment purposes and
not with a view to the distribution of the Shares.
(d)
Section 162(m) of the Code
. The Plan is
intended to comply in all respects with the requirements of the
exemption for qualified performance-based
compensation under Section 162(m) of the Code.
However, in the event the Board determines that compliance with
Section 162(m) of the Code is not desired with respect to a
particular Award, compliance with Section 162(m) of the
Code shall not be required. In addition, if any provision of the
Plan would cause Awards that are intended to constitute
qualified performance-based compensation under
Section 162(m) of the Code, to fail to so qualify, that
provision shall be severed from, and shall be deemed not to be a
part of, the Plan, but the other provisions of the Plan shall
remain in full force and effect. All Section 162(m) Awards
shall be established by a committee comprised solely of two or
more outside directors within the meaning of Section 162(m)
of the Code and the Treasury regulations issued thereunder.
(e)
Section 409A of the Code
. Notwithstanding
any contrary provision in the Plan or an Award Document, if any
provision of the Plan or an Award Document contravenes the
requirements of, or would cause an Award to a U.S. Taxpayer
to be subject to additional taxes, accelerated taxation,
interest
and/or
penalties under, Section 409A of the Code, the provision
may be modified by the Board without consent of the Participant
in any manner the Board deems reasonable or necessary to avoid
such result. In making the modifications the Board shall
attempt, but shall not be obligated, to maintain, to the maximum
extent practicable, the original intent of the applicable
provision without contravening the requirements of
Section 409A of the Code. Moreover, any discretionary
authority that the Board may have pursuant to the Plan shall not
be applicable to a Section 409A Award to the extent the
discretionary authority would contravene the requirements of
Section 409A of the Code.
(f)
Awards to Individuals Subject to Laws of a
Jurisdiction Outside of the United States or Canada (North
America)
. To the extent that Awards under the Plan are
awarded to Eligible Individuals who are domiciled or resident
outside of Canada or the United States, or who are domiciled or
resident in Canada or the United States but who are subject to
the tax laws of a jurisdiction outside of Canada or the United
States, the Board may adjust the terms of the Awards granted to
the Eligible Individual (i) to comply with the laws, rules
and regulations of the applicable jurisdiction and (ii) to
permit the grant of the Award not to be a taxable event to the
Participant. The authority granted under the previous sentence
shall include the discretion for the Board to adopt, on behalf
of the Corporation, one or more sub-plans applicable to separate
classes of Eligible Individuals who are subject to the laws of
jurisdictions outside of Canada or the United States.
(g)
Satisfaction of Obligations
. Subject to
Section 409A(a)(3) of the Code where applicable to a
U.S. Taxpayer and to other Applicable Law, the Corporation
may apply any cash, Shares, securities or other consideration
received upon exercise or settlement of an Award to any
obligations a Participant owes to the Corporation and the
Affiliates in connection with the Plan or otherwise, including,
without limitation, any tax obligations or obligations under a
currency facility established in connection with the Plan.
(h)
No Limitation on Corporate Actions
. Nothing
contained in the Plan shall be construed to prevent the
Corporation or any Affiliate from taking any corporate action,
whether or not it would have an adverse effect on any Awards
made under the Plan. No Participant, beneficiary or other person
shall have any claim against the Corporation or any Affiliate as
a result of any corporate action.
(i)
Unfunded Plan
. The Plan is intended to
constitute an unfunded plan for incentive compensation. Prior to
the issuance of Shares, cash or other form of payment in
connection with an Award, nothing contained in the Plan shall
give any Participant any rights that are greater than those of a
general unsecured creditor of the Corporation. The Board may,
but is not obligated, to authorize the creation of trusts or
other arrangements to meet the obligations created under the
Plan provided that with respect to any Section 409A Award
for a U.S. Taxpayer any such trust will be established in
compliance with Section 409A.
B-12
(j)
Successors
. All obligations of the Corporation
under the Plan with respect to Awards shall be binding on any
successor to the Corporation, whether the existence of the
successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all
of the business
and/or
assets of the Corporation.
(k)
Application of Funds
. The proceeds received by
the Corporation from the sale of Shares pursuant to Awards shall
be used for general corporate purposes.
(l)
Award Document
. In the event of any conflict or
inconsistency between the Plan and any Award Document, the Plan
shall govern and the Award Document shall be interpreted to
minimize or eliminate the conflict or inconsistency.
(m)
Headings
. The headings of Sections in the Plan
are included solely for convenience of reference and shall not
affect the meaning of any of the provisions of the Plan.
(n)
Severability
. If any provision of the Plan is
held unenforceable, the remainder of the Plan shall continue in
full force and effect without regard to the unenforceable
provision and shall be applied as though the unenforceable
provision were not contained in the Plan.
(o)
Expenses
. The costs and expenses of
administering the Plan shall be borne by the Corporation.
(p)
Governing Law
. The Plan and all actions taken
under the Plan shall be governed by and construed in accordance
with the laws of the Province of Ontario and the applicable
federal laws of Canada.
B-13
APPENDIX C
BOARD
MANDATE
CORPORATE
GOVERNANCE POLICY
BOARD
MANDATE & DIVISION OF RESPONSIBILITIES BETWEEN
THE BOARD OF
DIRECTORS & MANAGEMENT
POLICY
STATEMENT
The purpose of this document is to clarify the respective
governance and management roles and responsibilities of the
Board and management.
BOARD
OF DIRECTORS
The Board is responsible for the supervision of management of
the Corporations business and its affairs. It has the
statutory authority and obligation to protect and enhance the
assets of the Corporation in the interest of all shareholders.
The Board Mandate, which includes the terms of reference of the
Board and individual directors, sets out the purpose, procedures
and organization, and responsibilities and duties of the Board
and its committees.
The Board has the responsibility to review and approve the
stated missions of the business, its objectives and goals, and
the strategy by which it proposes to reach those goals.
The initiative for developing corporate strategy comes from
management. The Board has the power to make suggestions and
participates in the discussion of the strategy, responds to and
contributes ideas and approves or amends the strategy. However,
management leads this process. The Board is responsible for
monitoring managements success in implementing the
strategy.
The role of the Board focuses on governance and stewardship
rather than on the responsibility of management to run the
day-to-day operations of the Corporation. Its role is to set
corporate direction, assign responsibility to management for
achievement of that direction, define executive limitations, and
monitor performance against those objectives and executive
limitations. In fulfilling this role, the Board will regularly
review corporate objectives to ensure that they continue to be
responsive to the changing business environment in which the
Corporation operates.
RESPONSIBILITIES
:
In order to ensure that the Board fulfills its role and is in a
position to be held to account by its shareholders, the Board
acknowledges its responsibility for the stewardship of the
Corporation and will, with the assistance from the appropriate
Committee:
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1)
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Define
Shareholder Expectations for Corporate Performance Through
Effective Communication with Shareholders
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The Board will encourage effective communication between the
Board and the Corporations shareholders, other
stakeholders, and the public, the Board will determine, from
time to time, the appropriate criteria for evaluating
performance against shareholder expectations, and will set
corporate strategic goals and objectives within this context.
The Board will regularly review its criteria for the evaluation
of shareholder expectations to ensure that they remain relevant
to changing circumstances.
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2)
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Establish
Strategic Goals, Performance Objectives and Operational
Policies
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Based on the best interests of the Corporation and the
determination of long-term shareholder expectations for
performance, the Board will develop broad strategic corporate
objectives and establish corporate values against which
corporate performance will be measured. This will include:
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satisfying itself as to the integrity of the Chief Executive
Officer and other executive officers and ensuring that they
create a culture of integrity throughout the Corporation;
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annually approving both long-term and short-term corporate
vision and strategies to maximize shareholder value and which
take into account, among other things, the opportunities and
risks of the business of the Corporation;
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adopting a written code of business conduct and ethics,
applicable to the Corporations directors, officers and
employees, and monitoring compliance with the code;
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reviewing and approving managements strategic and
operational plans to ensure they are consistent with long-term
and short-term vision;
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setting annual targets against which to measure corporate and
executive performance;
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ensuring that appropriate internal control and management
information systems are in place for the Corporation;
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ensuring that executive compensation is linked appropriately to
corporate performance; and
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ensuring that a process is in place with respect to the
appointment, development, evaluation and succession of senior
management.
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3)
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Delegate
Management Authority to the Chief Executive
Officer
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The Board will delegate to the Chief Executive Officer the
authority to manage and supervise the business of the
Corporation, including making of all decisions regarding the
Corporations operations that are not specifically reserved
to the Board under the terms of this Mandate and appropriate law
and regulation.
The Board will determine what, if any, executive limitations may
be required in the exercise of the authority delegated to
management, and in this regard will approve operational policies
within which management will operate.
It is the Boards responsibility to hire, evaluate and
discharge the Chief Executive Officer.
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4)
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Monitor
Corporate Performance
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The Board will understand, assess and monitor the principal
risks of all aspects of the business in which the Corporation is
engaged and, while recognizing that business decisions require
the Corporation to incur a level of risk which achieves a proper
balance between the risk incurred and the potential return to
shareholders, will ensure the implementation of systems to
manage the principal risks of the Corporation.
The Board will also monitor corporate performance against both
short-term and long-term strategic plans, annual performance
targets, compliance with Board policies and the effective
management of risk.
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5)
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Establish
Appropriate Board Processes
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The Board will develop procedures relating to the conduct of its
business and the fulfillment of the responsibilities of the
Board. Processes may include those related to the conduct of
directors, compliance and Board meeting procedures, Board agenda
formulation, management reporting, and evaluation of Board
performance. The Board, through its Corporate Governance and
Nominating Committee, will ensure that all directors receive a
comprehensive orientation permitting them to understand the
roles of the Board and its committees, their roles as directors
and the nature and operation of the Corporations business.
The Board, through its Corporate Governance and Nominating
Committee, will also encourage directors to participate in
continuing education.
BOARD
STRUCTURE and GUIDELINES
1. The Board will be comprised of a majority of independent
directors, as defined by securities regulatory authorities and
stock exchanges in Canada and the United States of America.
2. All directors will stand for election every year.
C-2
3. When the Chief Executive Officer also holds the position
of Chairperson of the Board, the Board will elect a
non-executive Vice Chair or lead director.
4. Every year the Board will review and approve a strategic
plan, an annual operating plan and a budget for the Corporation,
and conduct periodic reviews of progress.
5. The Board will establish three committees: an Audit
Committee, a Compensation Committee, and a Corporate Governance
and Nominating Committee. These committees will consist entirely
of independent directors. The Board will appoint all chair and
committee members and will develop and review from time to time
a position description for the chair of each committee.
6. The Board will be responsible for ensuring the
development of a written charter for each of its committees that
establishes the committees purpose, responsibilities,
member qualifications, member appointment and removal, structure
and operations (including any authority to delegate to
individual members or subcommittees), and the manner of
reporting to the Board. In addition, each committee will have
authority to engage and compensate any outside advisor that it
determines to be necessary to permit it to carry out its duties.
7. The Board will meet on a quarterly basis or as deemed
appropriate.
8. The Board does not believe it should establish term
limits.
9. The independent directors will hold quarterly meetings
at which non-independent directors and members of management
will not be in attendance. These meetings will conclude with a
discussion with the Chief Executive Officer on each occasion.
10. The Corporate Governance and Nominating Committee will
be responsible for developing the Corporations approach to
corporate governance principles and guidelines specifically
applicable to the Corporation.
11. The Corporate Governance and Nominating Committee will
annually evaluate the effectiveness of the Board and of the
effectiveness of all committees.
12. In conjunction with the Corporate Governance and
Nominating Committee, the Board will consider what competencies
and skills the Board as a whole should possess, what
competencies and skills each director possesses, and the size of
the Board.
13. The Chair of the Board will establish the agenda for
each Board meeting. Each Board member is free to suggest the
inclusion of item(s) on the agenda.
14. Whenever feasible, directors will receive materials
seven days in advance of meetings for items to be acted upon.
Management will make every attempt to see that the material is
as succinct as possible while providing the desired information.
15. Interlocking directorships will not be allowed, except
with respect to joint ventures. (An interlocking directorship
would occur if an officer or director of the Corporation served
on the Board of Company X and an officer or director of Company
X served on the Corporations Board, or if a major supplier
or customer served on the Corporations Board.)
16. Directors are required to own at least
2,000 shares of the Corporations stock within one
year of election and 5,000 shares within three years of
election.
17. A report on succession planning and management
development will be provided annually by the Chief Executive
Officer to the Board.
18. No director shall be a potential or actual
representative of, or hold an executive position or directorship
with, interests that may have reason to make an unsolicited or
hostile attempt to acquire a controlling interest in the
Corporation or its subsidiaries. Neither shall any director have
vested interests in benefits from external intervention in the
Corporations affairs.
19. The Corporate Governance and Nominating Committee will
establish a directors questionnaire designed to assure
that Board members have the requisite qualifications and have no
conflicts of interests. In addition, each director will be
required to adopt and support the Corporations ethics
policy.
C-3
EXPECTATIONS
and CONDUCT OF ALL MEMBERS OF THE BOARD
1. Board members know and understand the Corporations
vision, strategic precepts, strategic plan and operating plan,
and understands the corresponding corporate policies.
2. A Board members actions reflect
his/her
understanding of the Corporations vision, strategic
precepts, strategic plan and operating plan in
his/her
discussion and actions on key issues throughout the year.
3. Board meetings are conducted in a manner that ensures
open communication, meaningful participation and timely
resolution of issues. The proceedings of meetings are held in
strict confidence and not divulged to outsiders.
4. Board members are diligent in preparing for meetings and
have adequate time available to perform their duties as
directors.
5. Board members will not enter into relationships with the
Corporation that would in any way compromise them being
designated as independent directors.
6. Board members have complete access to the
Corporations senior executives. It is assumed that Board
members will use judgment to be sure that this contact is not
distracting to the business operations of the Corporation and
that such contact, if in writing, be copied to the Chief
Executive Officer and Chair. Specific requests and action items
should be requested through the office of the Chief Executive
Officer.
7. In tracking the Corporations performance, the
Board regularly considers the performance of peer companies.
8. Attendance is essential to the good performance of the
Board process. Therefore, Board Members are expected to attend
all meetings of the Board, whether in person or via
teleconference, but in any event, not less than 75 percent
of the meetings.
FEEDBACK
The Corporations shareholders may provide written input
and comments to the Board by forwarding same to the General
Counsel at the Corporations U.S. headquarters.
CHAIR
OF THE BOARD
The Chair of the Board is accountable to the Board for the
fulfillment of the responsibilities of the office of Chair as
outlined in the Corporations by-laws and will lead the
Board in establishing effective corporate governance processes
and practices.
Role/Responsibilities
:
The role and responsibilities of the Chair of the Board will
include:
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assuming principal responsibility for the operation and
functioning of the Board;
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providing overall leadership to the Board without limiting the
principle of collective responsibility and the ability of the
Board to function as a unit;
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fulfilling his or her Board leadership responsibilities in a
manner that will ensure that the Board is able to function
independently of management. This should include ensuring that
the appropriate procedures are in place for the Board to meet
regularly without management present, and to allow for directors
to engage outside advisors at the expense of the Corporation in
appropriate circumstances, subject to the approval of the
Corporate Governance and Nominating Committee;
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consulting with the Board and the Secretary to set Board agendas
that are based on the responsibilities of the Board and reflect
current priorities;
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C-4
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chairing Board meetings effectively, including ensuring that
appropriate briefing materials are delivered in a timely
fashion, encouraging full participation and discussion by
individual directors, stimulating debate, facilitating
consensus, and ensuring that clarity regarding decisions is
reached and duly recorded;
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requesting that another director chair a particular meeting, or
a particular agenda item should the Chair determine that in the
interests of making a proposal to the Board in
his/her
role
as Chair,
he/she
would
not be the most effective chair of that particular meeting, or
that particular agenda item;
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ensuring compliance with the governance policies of the Board
regarding conduct of Board meetings, managing and reporting
information and other policies related to the conduct of the
Boards business; and
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taking a leadership role in ensuring effective communication and
relationships among the Corporation, shareholders, stakeholders
and the general public.
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CHIEF
EXECUTIVE OFFICER
The Chief Executive Officer is delegated the authority to
supervise the business and affairs of the Corporation, subject
to the direction of the Board and the executive limitations
established by the Board. This delegation shall include the
authority to make all decisions on behalf of the Corporation
that do not require shareholder approval, or have not been
reserved by the Board to itself or to a Committee of the Board,
under the terms of this Mandate.
All Board authority delegated to management is delegated through
the Chief Executive Officer, so that all authority and
accountability of management, unless otherwise stated in this
Mandate, is considered to be the authority and accountability of
the Chief Executive Officer. This shall not be interpreted as
precluding interaction among the members of the Board and senior
management, and relates solely to the accountability link
between the Board and the Chief Executive Officer.
The Chief Executive Officer shall have the authority to delegate
operational decision making as
he/she
may
determine as necessary and appropriate for the effective
operation of the business. In this regard, the Chief Executive
Officer shall put in place a delegation of operational authority
policy within the organization.
Role/Responsibilities
:
The role and responsibilities of the Chief Executive Officer
will include:
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developing and recommending corporate strategies, and business
and financial plans for the approval of the Board;
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managing the operations of the business in accordance with the
strategic direction set by the Board and within operational
policies as approved by the Board in relation to the conduct of
the business;
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reporting management information back to the Board in a manner
and time so that the Board may effectively monitor and evaluate
corporate performance against stated objectives and within
executive limitations; including:
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submitting monitoring and performance information required by
the Board in a timely and accurate fashion, and based on
industry benchmarked standards;
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ensuring that the Board is aware of relevant trends, anticipated
adverse media and analyst coverage, material external or
internal changes, and any changes in the assumptions upon which
any Board decision or approval has previously been made; and
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advising the Board if, in the Chief Executive Officers
opinion, the Board is not in compliance with its own policies,
or legal
and/or
regulatory requirements, in particular, in the case of behavior
of one or more directors which is detrimental to best interests
of the Corporation or to the working relationship between the
Board and the Chief Executive Officer;
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developing a list of risk factors and informing the Board of
what mechanisms are in place to address the identified risks;
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C-5
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providing the Board with information, both internal and
external, that the Board may require in order to make
fully-informed decisions regarding policies governing the
operation of the business;
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dealing with the Board as whole except when:
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(a) fulfilling individual requests for information; or
(b) responding to officers or committees duly charged by
the Board; and
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reporting in a timely manner on actual or anticipated
non-compliance with any Board approved policy or decision.
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The
Chief Executive Officer will be evaluated on the following
criteria
:
1.
Leadership
: Leads the
Corporation based on its vision, mission and values so that they
are widely understood, widely supported, consistently applied
and effectively implemented and ensures that practices are
consistent with the strategic plan.
2.
Strategic Planning
: Ensures the
development of and gains Board approval for a strategic plan
that meets the needs of stockholders, customers, employees and
all corporate stakeholders; ensures consistent and timely
progress toward strategic objectives; obtains and allocates
resources consistent with strategic objectives.
3.
Financial Results
: Establishes
Board-approved appropriate annual and longer-term financial
objectives and manages consistently to achieve these goals;
ensures that appropriate systems are maintained to protect
assets and maintain effective control of operations.
4.
Succession Planning
: Develops,
attracts, retains, motivates, manages and is accountable for an
effective top management team capable of achieving objectives;
provides for a detailed, written management succession plan.
5.
Human Resources
: Ensures the
development of effective recruitment, training, retention and
personnel communications plans and programs to provide and
motivate the necessary human resources to achieve objectives;
establishes and monitors programs to provide equal opportunity
employment for all employees.
6.
Communications
: Serves as chief
spokesperson, communicating effectively with stockholders and
all internal and external stakeholders.
7.
External Relations
: Ensures
that the Corporation and its operating units contribute
appropriately to the well being of their communities and
industries. Represents the Corporation in community and industry
affairs.
8.
Board and Stockholder
Relations
: Works closely with the Board and
stockholders to keep them fully informed on all important
aspects of the status and development of the Corporation.
Facilitates the Boards governance, composition and
committee structure. Implements Board policies and recommends
policies for Board consideration.
C-6
TLC VISION CORPORATION
PROXY
Annual and Special Meeting of Shareholders of TLC Vision Corporation
to be held on June 19, 2009
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TLC VISION CORPORATION
The
undersigned shareholder of
TLC Vision Corporation
(TLC
Vision) hereby appoints
James B. Tiffany, President and Chief
Operating Officer of TLC Vision, or, failing him, Brian L. Andrew,
General Counsel and Secretary of TLC Vision,
or instead of any of the foregoing,
, as proxy of the undersigned, to attend, vote and act for and on behalf
of the undersigned
at the annual and special meeting of shareholders of TLC Vision to be held on
June 19, 2009 at 10:00 a.m., Eastern Time, at the offices of Torys LLP, 79 Wellington Street West,
33rd Floor, Toronto, Ontario, and at all adjournments thereof,
upon the following matters:
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1.
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TO VOTE FOR all nominees (except as marked to the contrary)
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WITHHOLD VOTE FOR all nominees
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or,
if no specification is made, vote FOR
the election of the following directors for the ensuing year:
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Dr. Michael DePaolis
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Dr. Richard Lindstrom
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Jay T. Holmes
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Warren S. Rustand
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Gary F. Jonas
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Toby S. Wilt
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Olden C. Lee
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Provided that the undersigned wishes to withhold vote for the following directors:
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2. TO VOTE FOR
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AGAINST
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ABSTAIN
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or,
if no specification is made, vote FOR
a resolution approving the TLC Vision Corporation 2009 Long-Term Incentive Plan.
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3. TO VOTE FOR
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AGAINST
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ABSTAIN
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or,
if no specification is made, vote FOR
a resolution approving a one-time stock option exchange program for employees.
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4. TO VOTE FOR
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AGAINST
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ABSTAIN
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or,
if no specification is made,
vote FOR
a resolution approving the amendment of the TLC Vision Corporation Amended and
Restated Share Option Plan (as the same may be amended and restated as the TLC Vision
Corporation 2009 Long-Term Incentive Plan) to increase the aggregate number of common shares
reserved for issuance under the plan in the event that shareholders do not approve the
resolution referred to above in item 3.
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5. TO VOTE FOR
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WITHHOLD
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or,
if no specification is made, vote FOR
the continued appointment of Ernst & Young LLP as
auditors of TLC Vision and authorizing the directors to fix the remuneration of the auditors;
and
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6.
In the discretion of the proxy holder, such other business as may properly come before the
meeting. The shares represented by this proxy will be voted as directed. If no direction is
indicated as to any item(s), they will be voted FOR such item(s).
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EXECUTED on the
day of
, 2009
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Number of Common Shares
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Signature of Shareholder
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Name of Shareholder
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(Please print clearly)
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* Please see other side for notes on how to use this proxy.
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NOTES:
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1.
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A shareholder has the right to appoint a person to represent the shareholder at the meeting
other than the management representatives designated in this proxy.
Such right may be exercised by
inserting in the space provided the name of the other person the shareholder wishes to appoint.
Such other person need not be a shareholder.
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2.
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To be valid, this proxy must be signed and deposited with the Secretary of the Corporation, c/o
CIBC Mellon Trust Company, Proxy Dept., P.O. Box 721, Agincourt, Ontario, M1S 0A1 (Facsimile No.
(416) 368-2502) not later than 5:00 p.m. (Eastern time) on June 17, 2009, or, if the meeting is
adjourned, 48 hours (excluding Saturdays and holidays) before any adjourned meeting.
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3.
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If an individual, please sign exactly as your shares are registered. If the shareholder is a
corporation, this proxy must be executed by a duly authorized officer or attorney of the
shareholder and, if the corporation has a corporate seal, its corporate seal should be affixed. If
the shares are registered in the name of an executor, administrator or trustee, please sign exactly
as the shares are registered. If the shares are registered in the name of the deceased or other
shareholder, the shareholders name must be printed in the space provided, the proxy must be signed
by the legal representative with his name printed below his signature and evidence of authority to
sign on behalf of the shareholder must be attached to this proxy.
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4.
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Reference is made to the accompanying management information circular (which is also a proxy
statement under U.S. law) for further information regarding completion and use of this proxy and
other information pertaining to the meeting. Before completing this proxy, non-registered holders
should carefully review the section in the accompanying management information circular entitled
Non-Registered Shareholders and should carefully follow the instructions of the securities dealer
or other intermediary who sent this proxy.
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5.
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If this proxy is not dated in the space provided, it is deemed to bear the date on which it is
mailed.
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6.
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If a share is held by two or more persons, any one of them present or represented by proxy at a
meeting of shareholders may, in the absence of the other or others, vote in respect thereof, but if
more than one of them are present or represented by proxy, they shall vote together in respect of
each share so held.
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