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Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[GSI Lumonics Logo]
39 Manning Road
Billerica, Massachusetts 01821
(978) 439-5511
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
To Be Held on Thursday, May 26, 2005
(a) | to elect directors; |
(b) | to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2005; |
(c) | to ratify, confirm and approve adoption of the Company’s Shareholder Rights Plan, as described in the management proxy circular accompanying this notice; |
(d) | to amend the Company’s Articles of Continuance to change the name of the Company from GSI Lumonics, Inc. to GSI Companies Inc.; |
(e) | to ratify, confirm and approve an amendment to the Company’s By-Law Number 1, as described in the management proxy circular accompanying this notice; and |
(f) | to transact such further or other business as may properly come before the meeting or any adjournment or postponement thereof. |
GSI Lumonics Inc.
Secretary
[Insert GSI Lumonics Logo]
MANAGEMENT PROXY CIRCULAR
Solicitation of Proxies
Appointment and Revocation of Proxies
Voting of Proxies
• | the vote for the election as directors of the nominees named in this management proxy circular is cumulative and is described in more detail below; |
• | the vote for the ratification of the appointment of the independent registered public accounting firm requires the approval of a majority of the common shares represented and cast in respect of such matter to be effective; |
• | the vote for the approval of the Shareholder Rights Plan requires the approval of a majority of the common shares represented and cast by the Independent Shareholders (as described in more detail below in the Section entitled, Approval of the Company’s Shareholder Rights Plan, Subsection, Features of the Rights Plan; Defined Terms) in respect of such matter to be effective; |
• | the vote for the approval of the amendment to the Articles of Continuance requires the approval of two thirds of the common shares represented and entitled to vote on such matter to be effective; and |
• | the vote for the approval of the amendment to the Company’s By-Law Number 1 requires the approval of a majority of the common shares represented and cast in respect of such matter to be effective. |
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Voting and Ownership of Shares
Broker Non-Votes
ELECTION OF DIRECTORS
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Name, Principal Occupation and Municipality of Residence (1) | Age | Year Became Director | ||||||
---|---|---|---|---|---|---|---|---|
Richard B. Black President and Chief Executive Officer, ECRM, Inc. Tewksbury Massachusetts, U.S.A. | 71 | 1999 | ||||||
Phillip A. Griffiths, Ph.D. Faculty Member, School of Mathematics Institute for Advanced Study Princeton, New Jersey, U.S.A. | 66 | 2001 | ||||||
Byron O. Pond Chairman, President and Chief Executive Officer, Amcast Industrial Corp. Dayton, Ohio, U.S.A. | 68 | 2000 | ||||||
Benjamin J. Virgilio President & Chief Executive Officer, BKJR, Inc. Toronto, Ontario, Canada | 65 | 1998 | ||||||
Garrett A. Garrettson Retired CEO and Consultant Pebble Beach, California 93953 | 61 | 2005 | ||||||
Marina Hatsopoulos Chief Executive Officer Z Corporation Burlington, Massachusetts, U.S.A. | 39 | 2005 | ||||||
Charles D. Winston President & Chief Executive Officer, GSI Lumonics Inc. Billerica, Massachusetts, U.S.A. | 64 | 1999 |
(1) | The mailing address of each of Ms. Hatsopoulos and Messrs. Black, Griffiths, Pond, Virgilio, Garrettson and Winston is c/o GSI Lumonics Inc. at 39 Manning Road, Billerica, Massachusetts 01821, Telephone: (978) 439-5511. |
Board Committee Membership of Incumbent Directors
Name | Audit Committee | Compensation Committee | Technology Committee | Nominating and Corporate Governance Committee | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Black | X (Chairman) | X | |||||||||||||||
Griffiths | X (Chairman) | X | |||||||||||||||
Pond | X | X | X (Chairman) | ||||||||||||||
Virgilio | X | X (Chairman) | |||||||||||||||
Winston | X | ||||||||||||||||
Ferrari | X |
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RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accountant Fees and Services
FY 2004 | FY 2003 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Audit Fees (1) | $ | 1,738,000 | $ | 769,000 | ||||||
Audit Related Fees (2) | 21,000 | 16,000 | ||||||||
Tax Fees (3) | 771,000 | 434,000 | ||||||||
All Other Fees (4) | 2,000 | 46,000 | ||||||||
Total | $ | 2,532,000 | $ | 1,265,000 |
(1) | Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s annual consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filing requirements, including, commencing in 2004, the audit of management’s assertion as to the effectiveness of internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. Of this amount, $86,000 had been billed as of December 31, 2004. Of the $769,000 charged for Audit Fees in fiscal 2003, an aggregate amount of $364,000 had been billed through December 31, 2003. |
(2) | Audit-Related Fees consist of fees billed for assurance and related services that were reasonably related to the performance of the audit or review of the Company’s financial statements and are not disclosed under “Audit Fees” above. |
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(3) | Tax Fees consist of fees billed for professional services rendered for federal, state and international tax compliance. |
(4) | All other fees in fiscal 2004 relate to access to Ernst & Young’s online research tool and in fiscal 2003 included primarily payroll and miscellaneous services in foreign locations. |
Pre-Approval Policies and Procedures
APPROVAL OF THE COMPANY’S SHAREHOLDER RIGHTS PLAN
Background
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Rights Plan) and its associates and affiliates. As of the date of this circular, the Company is not aware of any shareholder that would not be considered an Independent Shareholder, and therefore it is anticipated that all shareholders will be eligible to vote their common shares with respect to the Rights Plan Resolution set forth in Schedule A hereto.
Features of the Rights Plan; Defined Terms
A summary of the key features of the Rights Plan is included below. All capitalized terms used in this section of this management proxy circular (including the summary of the Rights Plan below) have the meanings set forth in the Rights Plan unless otherwise indicated. The complete text of the Rights Plan is available to any shareholder on request from the Secretary of the Company. Shareholders wishing to receive a copy of the Rights Plan should contact the Company by telephone 1-800-342-3757, or write to the Assistant Secretary, GSI Lumonics Inc. 39 Manning Road, Billerica, Massachusetts 01821, U.S.A. Alternatively, the full text of the Rights Plan is available from the SEC Edgar website, www.sec.gov or on the SEDAR Web site maintained by the Canadian securities regulators at www.sedar.com.
Objectives of the Rights Plan
(a) | Time. Current Canadian legislation permits a take-over bid to expire in 35 days. The Board of Directors is of the view that this generally is not sufficient time to permit shareholders to consider a take-over bid and to make a reasoned and considered decision. The Rights Plan provides a mechanism whereby the minimum expiry period for a Take-over Bid must be 60 days after the date of the bid and the bid must remain open for a further period of 10 Business Days after the Offeror publicly announces that the common shares deposited or tendered and not withdrawn constitute more than 50% of the common shares outstanding held by Independent Shareholders (generally, shareholders other than the Offeror or Acquiring Person (someone who beneficially owns greater than 20% of the outstanding common shares), their Associates and Affiliates, and Persons acting jointly or in concert with the Offeror or Acquiring Person). The Rights Plan is intended to provide shareholders with adequate time to properly evaluate the offer and to provide the Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value. Those alternatives could include identifying other potential bidders, conducting an orderly auction or developing a restructuring alternative that could enhance shareholder value. |
(b) | Pressure to Tender. A shareholder may feel pressured to tender to a bid that the shareholder considers to be inadequate out of a concern that failing to tender may result in the shareholder being left with illiquid or minority discounted securities in the issuer. This is particularly so in the case of a partial |
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bid for less than all securities of a class, where the bidder wishes to obtain a control position but does not wish to acquire all of the common shares. The Rights Plan provides a mechanism in the Permitted Bid provision that is intended to ensure that a shareholder may remove the uncertainty as to whether a majority of shareholders will support a take-over bid from the decision to tender to the take-over bid by requiring that a take-over bid remain open for acceptance for a further 10 Business Days following public announcement that more than 50% of the common shares held by Independent Shareholders have been deposited and not withdrawn as at the initial date of take-up or payment by the buyer. This mechanism therefore will lessen any undue pressure to tender that may be encountered by a security holder of an issuer that is the subject of a take-over bid. |
(c) | Unequal Treatment. While existing securities legislation has substantially addressed many concerns of unequal treatment, there remains the possibility that control of an issuer may be acquired pursuant to a private agreement in which a small group of security holders dispose of their securities at a premium to market price which premium is not shared with other security holders. In addition, a person may slowly accumulate securities through stock exchange acquisitions that may result, over time, in an acquisition of control without payment of fair value for control or a fair sharing of a control premium among all securityholders. The Rights Plan addresses these concerns by applying to all acquisitions of greater than 20% of the common shares, to better ensure that shareholders receive equal treatment. |
General Impact of the Rights Plan
Summary of Shareholder Rights Plan
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(a)Issuance of Rights
(b)Trading of Rights
(c)Separation Time
(d)Acquiring Person
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(i) | a “Voting Share Reduction” means an acquisition or redemption of common shares by the Company which, by reducing the number of outstanding common shares, increases the percentage of common shares Beneficially Owned by any Person to over 20% of the outstanding common shares; |
(ii) | a “Permitted Bid Acquisition” means an acquisition of common shares made pursuant to a Permitted Bid or a Competing Permitted Bid; |
(iii) | an “Exempt Acquisition” means an acquisition of common shares in respect of which the Board of Directors has waived the application of the Rights Plan, which was made pursuant to a dividend reinvestment plan of the Company, which was made pursuant to the receipt or exercise of rights issued by the Company to all the holders of common shares (other than holders resident in a jurisdiction where such distribution is restricted or impracticable as a result of applicable law) to subscribe for or purchase common shares or Convertible Securities (provided that such rights are acquired directly from the Company and not from any other Person and provided that the Person does not hereby acquire a greater percentage of common shares or Convertible Securities so offered than the Person’s percentage of common shares or Convertible Securities beneficially owned immediately prior to such acquisition), which was made pursuant to a distribution by the Company of common shares or Convertible Securities made pursuant to a prospectus (provided that the Person does not thereby acquire a greater percentage of the common shares or Convertible Securities so offered than the percentage owned immediately prior to such acquisition), which was made pursuant to a distribution by the Company of common shares or Convertible Securities by way of a private placement or a securities exchange Take-over Bid circular or upon the exercise by an individual employee of stock options granted under a stock option plan of the Company or rights to purchase securities granted under a share purchase plan of the Company, or which is made pursuant to an amalgamation, merger or other statutory procedure requiring shareholder approval; |
(iv) | a “Pro Rata Acquisition” means an acquisition by a Person as a result of a stock dividend, a stock split or other event pursuant to which such Person receives or acquires common shares or Convertible Securities on the same pro rata basis as all other holders of common shares of the same class; and |
(v) | a “Convertible Security Acquisition” means an acquisition of common shares upon the exercise of Convertible Securities received by such Person pursuant to a Permitted Bid Acquisition, Exempt Acquisition or a Pro Rata Acquisition. |
(e)Beneficial Ownership
General
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selling group members with respect to a distribution to the public or pursuant to a private placement of securities; or (2) pursuant to a pledge of securities in the ordinary course of business).
Institutional Shareholder Exemptions from Beneficial Ownership
performance of its duties for the account of any other Person (a “Client”) including, the acquisition or holding of securities for non-discretionary accounts held on behalf of a Client by a broker or dealer registered under applicable securities laws); (ii) a licensed trust corporation (“Trust Corporation”) acting as trustee or administrator or in a similar capacity in relation to the estates of deceased or incompetent persons (each an “Estate Account”) or in relation to other accounts (each an “Other Account”) and which holds such security in the ordinary course of its duties for such accounts; (iii) the administrator or the trustee (a “Plan Trustee”) of one or more pension funds or plans (a “Plan”) registered under applicable law; (iv) a Person who is a Plan or is a Person established by statute (the “Statutory Body”), and its ordinary business or activity includes the management of investment funds for employee benefit plans, pension plans, insurance plans, or various public bodies; (v) a Crown Agent; (iv) a manager or trustee (“Manager”) of a mutual fund (“Mutual Fund”) that is registered or qualified to issue its securities to investors under the securities laws of any province of Canada or the laws of the United States of America or is a Mutual Fund. The foregoing exemptions only apply so long as the Investment Manager, Trust Corporation, Plan Trustee, Plan, Statutory Body, Crown Agent, Manager or Mutual Fund is not then making or has not then announced an intention to make a Take-over Bid, other than an Offer to Acquire common shares or other securities pursuant to a distribution by the Company or by means of ordinary market transactions.
Exemption for Permitted Lock-up Agreement
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(f) | Flip-in Event |
(g) | Permitted Bid and Competing Permitted Bid |
(i) | the Take-over Bid is made to all holders of record of common shares, other than the Offeror; |
(ii) | the Take-over Bid contains irrevocable and unqualified conditions that: |
A. | no common shares shall be taken up or paid for pursuant to the Take-over Bid prior to the Close of Business on a date which is not less than 60 days following the date of the Take-over Bid and the provisions for the take-up and payment for common shares tendered or deposited thereunder shall be subject to such irrevocable and unqualified condition; |
B. | unless the Take-over Bid is withdrawn, common shares may be deposited pursuant to the Take-over Bid at any time prior to the Close of Business on the date of first take-up or payment for common shares and all common shares deposited pursuant to the Take-over Bid may be withdrawn at any time prior to the Close of Business on such date; |
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C. | more than 50% of the outstanding common shares held by Independent Shareholders must be deposited to the Take-over Bid and not withdrawn at the Close of Business on the date of first take-up or payment for common shares; and |
D. | in the event that more than 50% of the then outstanding common shares held by Independent Shareholders have been deposited to the Take-over Bid and not withdrawn as at the date of first take-up or payment for common shares under the Take-over Bid, the Offeror will make a public announcement of that fact and the Take-over Bid will remain open for deposits and tenders of common shares for not less than 10 Business Days from the date of such public announcement. |
(h) | Redemption, Waiver and Termination |
(i) | Redemption of Rights on Approval of Holders of Common Shares and Rights. The Board of Directors acting in good faith may, after having obtained the prior approval of the holders of common shares or Rights, at any time prior to the occurrence of a Flip-in Event, elect to redeem all but not less than all of the then outstanding Rights at a redemption price of $0.00001 per Right, appropriately adjusted for anti-dilution as provided in the Rights Agreement (the “Redemption Price”). |
(ii) | Discretionary Waiver respecting Acquisition not by Take-over Bid Circular. The Board of Directors acting in good faith may, with the prior consent of the holders of common shares, determine, at any time prior to the occurrence of a Flip-in Event as to which the application of the Rights Plan has not been waived, if such Flip-in Event would occur by reason of an acquisition of common shares otherwise than pursuant to a Take-over Bid made by means of a Take-over Bid circular to holders of common shares and otherwise than by inadvertence when such inadvertent Acquiring Person has then reduced its holdings to below 20%, to waive the application of the Rights Plan to such Flip-in Event. However, if the Board of Directors waives the application of the Rights Plan, the Board of Directors shall extend the Separation Time to a date subsequent to and not more than 10 Business Days following the meeting of shareholders called to approve such a waiver. |
(iii) | Discretionary Waiver with Mandatory Waiver of Concurrent Bids. The Board of Directors acting in good faith may, prior to the occurrence of a Flip-in Event as to which the Rights Plan has not been waived under this clause, upon prior written notice to the Rights Agent, waive the application of the Rights Plan to a Flip-in Event that may occur by reason of a Take-over Bid made by means of a Take-over Bid circular to all holders of record of common shares. However, if the Board of Directors waives the application of the Rights Plan, the Board of Directors shall be deemed to have waived the application of the Rights Plan in respect of any other Flip-in Event occurring by reason of such a Takeover Bid made prior to the expiry of a bid for which a waiver is, or is deemed to have been, granted. |
(iv) | Waiver of Inadvertent Acquisition. The Board of Directors acting in good faith may waive the application of the Rights Plan in respect of the occurrence of any Flip-in Event if (i) the Board of Directors has determined that a Person became an Acquiring Person under the Rights Plan by inadvertence and without any intent or knowledge that it would become an Acquiring Person; and (ii) the Acquiring Person has reduced its Beneficial Ownership of common shares such that at the time of waiver the Person is no longer an Acquiring Person |
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(v) | Deemed Redemption. In the event that a Person who has made a Permitted Bid or a Takeover Bid in respect of which the Board of Directors has waived or has deemed to have waived the application of the Rights Plan consummates the acquisition of the common shares, the Board of Directors shall be deemed to have elected to redeem the Rights for the Redemption Price without any further formality. |
(vi) | Redemption of Rights on Withdrawal or Termination of Bid. Where a Take-over Bid that is not a Permitted Bid is withdrawn or otherwise terminated after the Separation Time and prior to the occurrence of a Flip-in Event, the Board of Directors may elect to redeem all the outstanding Rights at the Redemption Price. |
(i) | Anti-Dilution Adjustments |
(i) | if there is a dividend payable in common shares or Convertible Securities (other than pursuant to any optional stock dividend program, divided reinvestment plan or a dividend payable in common shares in lieu of a regular periodic cash dividend) on the common shares; or |
(ii) | a subdivision or consolidation of the common shares; or |
(iii) | an issuance of common shares or Convertible Securities in respect of, in lieu of or in exchange for common shares; or |
(iv) | if the Company fixes a record date for the distribution to all holders of common shares of certain rights or warrants to acquire common shares or Convertible Securities, or for the making of a distribution to all holders of common shares of evidences of indebtedness or assets (other than regular periodic cash dividend or a dividend payable in common shares) or rights or warrants. |
(j) | Supplements and Amendments |
(k) | Expiration |
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continued existence of the Rights Plan, in which case the Rights Plan would expire at the earlier of the Termination Time and the termination of the 2011 annual meeting of the Company’s shareholders.
Canadian Federal Income Tax Consequences
United States Federal Income Tax Consequences
Eligibility for Investment in Canada
Vote Required
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Recommendation of the Board of Directors
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APPROVAL OF THE AMENDMENT TO THE COMPANY’S ARTICLES OF CONTINUANCE
APPROVAL OF THE AMENDMENT TO THE COMPANY’S BY-LAW NUMBER 1
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BOARD OF DIRECTORS AND COMMITTEE MEETINGS
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expectation that recommendations from shareholders probably would be considered generally in the same manner as recommendations by a director or an officer of the Company. Under the Company’s By-Law Number 1, a shareholder may recommend a director nominee if the recommendation is signed by one or more holders of shares representing in the aggregate not less than 5% of the common shares of the Company entitled to vote at the shareholder’s meeting to which the nomination is to be presented. Any shareholder, as described in the preceding sentence, wishing to recommend candidates for consideration by the Nominating and Corporate Governance Committee and the full Board of Directors may do so by writing to the Secretary of the Company and providing the candidate’s name, biographical data and qualifications.
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COMMUNICATIONS WITH DIRECTORS
Report of the Audit Committee
• | Serve as an independent and objective party to monitor the Company’s financial reporting process and internal control systems on behalf of the Board of Directors and to report the results of the committee’s activities to the Board of Directors; |
• | Appoint, evaluate and retain the Company’s registered independent public accounting firm each fiscal year; |
• | Maintain direct responsibility for the compensation, termination and oversight of the registered independent public accounting firm’s performance and evaluate the registered independent public accounting firm’s qualifications and performance; |
• | Review and evaluate the audit efforts of the Company’s registered independent public accounting firm; |
• | Evaluate the Company’s quarterly financial performance, reporting and compliance with applicable laws and regulations; |
• | Oversee management’s establishment and enforcement of financial policies; and |
• | Provide an open avenue of communication among the registered independent public accounting firm, financial and senior management, and the Board of Directors. |
• | Reviewed and discussed the audited financial statements of the Company for the fiscal year ended December 31, 2004 with management and Ernst & Young LLP, the Company’s independent registered public accounting firm, including a discussion of the quality and effect of the Company’s accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements; |
• | Discussed the matters required by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as currently in effect and as amended by SAS No. 89 (Audit Adjustments) and SAS No. 90 (Audit Committee Communications), with Ernst & Young LLP, including the process used by management in formulating certain accounting estimates and the basis for the conclusions of Ernst & Young LLP regarding the reasonableness of those estimates; |
• | Reviewed and discussed the results of the findings of Ernst & Young LLP relating to the Company’s internal control system, as mandated by the Sarbanes-Oxley Act of 2002; and |
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• | Met with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting. |
Report submitted by: Richard B. Black, Byron O. Pond and Benjamin J. Virgilio
Report of Compensation Committee on Executive Compensation
Report of the Compensation Committee
Goals
• | To establish compensation levels that are fair, equitable and reasonable from the viewpoint of both executives and investors; |
• | To attract, retain and motivate key personnel; |
• | To focus the efforts of key executives on specified tactical and strategic goals, including the overall strategic objective of building shareholder value over time; and |
• | To reward excellent performance, to have overall compensation vary with performance and to align executive and shareholder interests. |
Compensation Elements
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Chief Technology Officer and (3) Operating Division General Managers. The Chief Executive Officer and executive staff goals were tied to the Company’s overall performance and were specifically based on measures of operating profit, pretax income, receivable days sales outstanding, inventory turns and shipments. The Compensation Committee also considers the executive’s contribution to advancing the Company’s strategic plan, which may be difficult to quantify. The Compensation Committee established goals for the Chief Technology Officer specifically related to his area of responsibilities. The Compensation Committee established goals for Operating Division General Managers based on the performance of their Division and specifically measured by Division performance on operating profit, receivable days sales outstanding, inventory turns and shipments.
Deferred Compensation Plan
Compensation Resources
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Reasonableness and Fairness of Compensation
Compensation of the Chief Executive Officer
Report submitted by: Richard B. Black, Byron O. Pond and Benjamin J. Virgilio
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EXECUTIVE COMPENSATION
Summary Compensation Table
Annual Compensation | Long-Term Compensation Awards | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position | Fiscal Year | Salary | Bonus | Other Annual Compensation (1) | Securities Underlying Options Granted | All Other Compensation (2) | |||||||||||||||||||||
Charles D. Winston | 2004 | $ | 431,923 | $ | 502,414 | $ | 23,675 | 190,000 | $ | 8,500 | |||||||||||||||||
President & CEO | 2003 | $ | 400,000 | $ | 216,960 | — | — | $ | 8,500 | ||||||||||||||||||
2002 | $ | 400,000 | $ | 158,414 | — | 200,000 | $ | 8,500 | |||||||||||||||||||
Thomas R. Swain (3) | 2004 | $ | 249,041 | $ | 216,409 | $ | 12,856 | 80,000 | $ | 8,500 | |||||||||||||||||
V.P., Finance & CFO | 2003 | $ | 200,013 | $ | 65,700 | 15,000 | $ | 8,500 | |||||||||||||||||||
2002 | $ | 200,013 | $ | 56,580 | — | 100,000 | $ | 8,500 | |||||||||||||||||||
Kurt A. Pelsue (4) | 2004 | $ | 226,287 | $ | 121,226 | $ | 11,262 | 40,000 | $ | 8,500 | |||||||||||||||||
V.P., Technology & CTO | 2003 | $ | 209,720 | $ | 58,721 | — | — | $ | 8,500 | ||||||||||||||||||
2002 | $ | 205,762 | $ | 46,505 | — | 20,000 | $ | 8,500 | |||||||||||||||||||
Linda Palmer (5) | 2004 | $ | 195,192 | $ | 127,257 | $ | 10,068 | 30,000 | $ | 8,500 | |||||||||||||||||
V.P., Human Resources and | 2003 | $ | 180,000 | $ | 46,504 | — | $ | 8,500 | |||||||||||||||||||
Communications | 2002 | $ | 174,230 | $ | 39,342 | — | 20,000 | $ | 8,500 | ||||||||||||||||||
Felix Stukalin (6) | 2004 | $ | 201,346 | $ | 126,887 | $ | 12,410 | 40,000 | $ | 8,500 | |||||||||||||||||
V.P., Business Development | 2003 | $ | 166,153 | $ | 239,540 | — | 15,000 | $ | 8,500 | ||||||||||||||||||
2002 | $ | 166,153 | $ | 36,209 | — | 20,000 | $ | 8,500 |
(1) | Perquisites and personal benefits do not exceed the lesser of $50,000 or 10% of the total of the annual salary and bonus of the Named Executive Officer. Such perquisites and personal benefits are comprised of the following: automobile allowance and maintenance, tax preparation and supplemental long term disability insurance. |
(2) | All other compensation consists exclusively of the Company’s contribution under its retirement and savings plans established pursuant to Section 401(k) of the United States Internal Revenue Code. The terms of the retirement and savings plans permit each participant to defer up to 15% of his annual salary up to an annual maximum amount prescribed by United States Internal Revenue Service regulations ($13,000 in 2004, plus an additional $3,000 for those participants who met eligibility requirements for “catch up” contributions). The Company matches such deferrals to the extent of achievement by it of profit goals. |
(3) | Mr. Swain has held his current position of Vice President, Finance and Chief Financial Officer since September 2000. Prior to that time, Mr. Swain served as Director of Real Estate Operation from April 1999 to August 2000. He joined General Scanning, Inc. in August 1996 with the acquisition of View Engineering, Inc. and served as Vice President and General Manager, View Engineering Division until December 1997, then served as Vice President of Business Development from January 1998 through March 1999. Prior to its acquisition by General Scanning, Inc., Mr. Swain had served as President and Chief Executive Officer of View Engineering, Inc. Mr. Swain is 59 years old. |
(4) | Mr. Pelsue assumed his current position as Vice President, Technology and Chief Technology Officer in March 1999. He had served as Vice President, Corporate Engineering for General Scanning, Inc. from |
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1997 to 1999. Prior to that time, Mr. Pelsue held numerous senior level engineering assignments within General Scanning, Inc. He joined General Scanning, Inc. in 1976. Mr. Pelsue is 52 years old. |
(5) | Ms. Palmer assumed her current role as Vice President, Corporate Resources in June 2004, having served as Vice President, Human Resources since December 1999, and as Vice President of Integration from March 1999. She had been General Scanning, Inc.’s Vice President of Human Resources beginning in 1996. Prior to that time, Ms. Palmer served as Director of Human Resources for Analog Devices. Ms. Palmer is 53 years old. |
(6) | Mr. Stukalin joined the Company in November 1994. Mr. Stukalin was General Manager of the Components Product Group from 1999 to 2000 and of Wave Precision from 2000 to 2002. In May 2002 Mr. Stukalin assumed the role of Vice President of Business Development. Mr. Stukalin is 43 years old |
STOCK OPTION PLANS
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shares on the Toronto Stock Exchange on the date of grant, or in lieu thereof, the last closing price on The Nasdaq Stock Market, on the date of grant. If a SAR is granted in conjunction with an option or a portion thereof, the exercise price may not be less that the exercise price of the related option. Restricted shares will vest in equal amounts over four years unless otherwise specifically approved by the Compensation Committee. The Compensation Committee has the power to amend, modify, or terminate the 1995 Award Plan provided that the Participant’s rights are not materially adversely affected and subject to any approvals required under the applicable regulatory requirements. As of the close of business on December 31, 2004, options to purchase an aggregate of approximately 3,057,741 common shares were outstanding under the restated 1995 Award Plan to employees and directors at prices ranging from Cdn$6.38 per share to Cdn$29.00 per share, and from $4.31 per share to $19.38 per share.
EQUITY COMPENSATION PLANS
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options/Warrants | Weighted-Average Exercise Price of Outstanding Options/Warrants | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Plans approved by shareholders | 3,557,898 | $ | 10.39 | 1,889,321 | ||||||||||
Plans not approved by shareholders (the warrants) | 51,186 | $ | 13.36 | 0 | ||||||||||
Total | 3,609,084 | $ | 10.43 | 1,889,321 |
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OPTION GRANTS DURING FISCAL 2004
Potential Realizable Value at Assumed Annual Rate of Share Price Appreciation for Option Term (1) | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Underlying Options Granted | Percent of Total Options Granted to Employees in Fiscal Year (2) | Exercise or Base Price ($/SH) | Expiration Date | 5% ($) | 10% ($) | ||||||||||||||||||||||
Charles D. Winston | 190,000 | 27 | % | $ | 10.09 | 9/3/2010 | $ | 651,997 | $ | 1,479,160 | ||||||||||||||||||
Thomas R. Swain | 80,000 | 11 | % | $ | 10.09 | 9/3/2010 | $ | 274,525 | $ | 622,804 | ||||||||||||||||||
Kurt A. Pelsue | 40,000 | 6 | % | $ | 10.09 | 9/3/2010 | $ | 137,263 | $ | 311,402 | ||||||||||||||||||
Linda Palmer | 30,000 | 4 | % | $ | 10.09 | 9/3/2010 | $ | 102,947 | $ | 233,552 | ||||||||||||||||||
Felix Stukalin | 40,000 | 6 | % | $ | 10.09 | 9/3/2010 | $ | 137,263 | $ | 311,402 |
(1) | This column shows the hypothetical gain of the options granted based on assumed annual share appreciation rates of 5% and 10% above the exercise price over the full term of the option. The 5% and 10% rates of appreciation are mandated by the rules of the United States Securities and Exchange Commission and do not represent the Company’s estimate of future appreciation of the Company’s common share prices. |
(2) | All options listed above vest as to 50% on the date of grant and thereafter in equal annual installments over a two-year period. |
OPTIONS EXERCISED DURING FISCAL 2004 AND YEAR-END OPTION VALUES
Unexercised Options at December 31, 2004 | Value of Unexercised In-the-Money Options at December 31, 2004 | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position | Securities Acquired on Exercise (#) | Aggregate Value Realized (1)($) | Exercisable | Unexercisable (#) | Exercisable | Unexercisable (2)($) | |||||||||||||||||||||
Charles D. Winston | �� | 190,000 | $ | 1,278,477 | 803,574 | 257,500 | $ | 1,644,675 | $ | 604,425 | |||||||||||||||||
Thomas R. Swain | 4,500 | $ | 35,265 | 213,108 | 126,250 | $ | 436,074 | $ | 356,513 | ||||||||||||||||||
Kurt A. Pelsue | 20,000 | $ | 251,200 | 193,866 | 40,000 | $ | 544,302 | $ | 84,600 | ||||||||||||||||||
Linda Palmer | 16,500 | $ | 201,850 | 132,739 | 37,500 | $ | 304,849 | $ | 84,025 | ||||||||||||||||||
Felix Stukalin | 15,000 | $ | 149,800 | 128,625 | 48,110 | $ | 293,133 | $ | 155,434 |
(1) | Market value of the underlying shares on the date of exercise less the option exercise price. Values are in United States dollars unless otherwise specified. |
(2) | Market value of shares covered by in-the-money options on December 31, 2004, less the option exercise price. Options are in-the-money if the market value of the shares covered thereby is greater than the option exercise price. |
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EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT/CHANGE-IN-CONTROL ARRANGEMENTS
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COMPENSATION OF DIRECTORS
Director | Fees Paid FY 2004 | |||||
---|---|---|---|---|---|---|
Black | $ | 33,750 | ||||
Ferrari | $ | 49,500 | ||||
Griffiths | $ | 27,750 | ||||
Pond | $ | 36,180 | ||||
Virgillio | Cdn $41,962 |
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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CORPORATE GOVERNANCE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
INDEBTEDNESS OF DIRECTORS AND OFFICERS
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
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COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG GSI LUMONICS INC. AND S&P/TSX COMPOSITE (1)(2)
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
FISCAL YEAR ENDING | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
COMPANY/INDEX/MARKET | 12/31/1999 | 12/29/2000 | 12/31/2001 | 12/31/2002 | 12/31/2003 | 12/31/2004 | |||||||||||||||||||||
GSI Lumonics Inc. | 100.00 | 91.43 | 96.80 | 68.91 | 134.51 | 131.20 | |||||||||||||||||||||
Electronic Equipment Manufactu | 100.00 | 82.84 | 42.56 | 20.51 | 33.51 | 32.76 | |||||||||||||||||||||
NASDAQ Market Index | 100.00 | 62.85 | 50.10 | 34.95 | 52.55 | 56.97 | |||||||||||||||||||||
S&P/TSX Composite | 100.00 | 107.41 | 93.91 | 82.23 | 104.20 | 119.29 |
(1) | These Stock Performance Graphs and the information contained in the Report of the Audit Committee and the Compensation Committee Report on Executive Compensation are not deemed to be “soliciting material,” are not deemed filed with the Securities and Exchange Commission and are not deemed to be incorporated by reference by any general statement incorporating by reference this management proxy circular into any filing of the Company under the Securities Act of 1933, or any filing under the Securities Exchange Act of 1934, except to the extent that we specifically request that the information be treated as soliciting material or specifically incorporate this information by reference into any such filing, and will not otherwise be deemed incorporated by reference into any other filing under the Securities Act or the Securities Exchange Act, except to the extent that we specifically incorporate it by reference. |
(2) | The stock price performance shown on the graphs is not necessarily indicative of future price performance. Information used on the graphs was obtained from MGFS, Inc., Richmond, Virginia and from Coredata Group, Richmond, Virginia, sources believed to be reliable, but the Company is not responsible for any errors or omissions in such information. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain Beneficial Owners
Shareholder | Shares | Percentage | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Sumitomo Heavy Industries Ltd. 9-11, Kita-Shinagawa 5 Chome Shinagawa-Ku, Tokyo, 141-8686, Japan | 4,078,238 | 9.8 | % | |||||||
Franklin Resources, Inc. (1) One Franklin Parkway San Mateo, California 94403 | 3,092,888 | 7.5 | % | |||||||
FMR Corp. (Fidelity Management and Research Corporation) (2) 82 Devonshire St. Boston, Massachusetts 02109 | 2,627,690 | 6.3 | % |
(1) | Consists of shares held by investors whose accounts are managed by Franklin Templeton Investments Corp., Templeton Investment Counsel, LLC, Franklin Templeton Investment Management Limited and Templeton Global Advisors Limited. Franklin Templeton Investments Corp., Templeton Investment Counsel, LLC, Franklin Templeton Investment Management Limited and Templeton Global Advisors Limited have shared voting and dispositive power as to all such shares. |
(2) | Includes 55,165 shares owned by Fidelity Management Trust Company and 98,455 shares owned by Fidelity International Limited, Hamilton, Bermuda. |
Directors and Management
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percentage of Common Shares | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Richard B. Black, Director | 84,817 | (2) | * | |||||||
Paul F. Ferrari, Director, Chairman of the Board | 189,517 | (3) | * | |||||||
Phillip A. Griffiths, Director | 70,880 | (4) | * | |||||||
Byron O. Pond, Director | 71,000 | (5) | * | |||||||
Benjamin J. Virgilio, Director | 74,000 | (6) | * | |||||||
Garrett A. Garrettson, Director Nominee | 0 | * | ||||||||
Marina Hatsopoulos, Director Nominee | 0 | * |
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Name of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percentage of Common Shares | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Linda Palmer, Vice President, Human Resources and Communications | 150,239 | (7) | * | ||||||||||
Kurt A. Pelsue, Vice President, Technology and Chief Technology Officer | 214,295 | (8) | * | ||||||||||
Felix Stukalin, Vice President, Business Development | 147,664 | (9) | * | ||||||||||
Thomas R. Swain, Vice President, Finance and Chief Financial Officer | 277,879 | (10) | * | ||||||||||
Charles D. Winston, President, Chief Executive Officer and Director | 924,545 | (11) | 2.23 | % | |||||||||
All directors, nominees for directors and executive officers as a group (12 persons) | 2,204,836 | (12) | 5.31 | % |
* | Less than 1%. |
(1) | A person is deemed to be the beneficial owner of securities that can be acquired by such person within sixty (60) days of April 1, 2005, whether pursuant to the exercise of options or warrants, the conversion of securities or otherwise. Includes an aggregate of 1,994,701 shares, which are fully vested and may be acquired within sixty (60) days of April 1, 2005, by exercise of options and warrants. Each beneficial owner’s percentage of ownership is determined by assuming that options that are held by such person (but not those held by any other person) and which are fully vested and exercisable (or convertible) within sixty (60) days of April 1, 2005 have been exercised. Unless otherwise noted in the footnotes below, the Company believes all persons named in the table have sole voting power and investment power with respect to all common shares beneficially owned by them. Statements as to ownership of common shares are based upon information obtained from the directors, nominees and executive officers and from records available to the Company. |
(2) | Includes 78,082 common shares subject to options and warrants. |
(3) | Includes 78,082 common shares subject to options and warrants. |
(4) | Includes 65,000 common shares subject to options. |
(5) | Includes 70,000 common shares subject to options. |
(6) | Includes 55,000 common shares subject to options. |
(7) | Comprised of common shares subject to options. |
(8) | Includes 183,866 common shares subject to options. |
(9) | Comprised of common shares subject to options. |
(10) | Includes 266,858 common shares subject to options and warrants. |
(11) | Includes 916,074 common shares subject to options and warrants. |
(12) | Includes 1,994,701 common shares subject to options and warrants. |
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OTHER BUSINESS
CODE OF ETHICS
PROPOSALS
HOUSEHOLDING
INFORMATION CONCERNING THE COMPANY
35
DIRECTORS’ APPROVAL
GSI Lumonics Inc.
Secretary
Billerica, Massachusetts
April 28, 2005
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SCHEDULE A
APPROVAL OF SHAREHOLDER RIGHTS PLAN
OF GSI LUMONICS INC.
BE IT RESOLVED THAT:
1. | The Shareholder Rights Plan established pursuant to the Shareholder Rights Plan Agreement dated as of April 12, 2005 between GSI Lumonics Inc. and Computershare Trust Company of Canada, as rights agent, is hereby approved. |
2. | Any director, officer, or other person duly authorized by the Company, be and is hereby authorized and directed to execute and deliver all such deeds, documents, instruments and assurances and to do all such acts and things as in his or her option may be necessary or desirable to give effect to this resolution. |
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SCHEDULE B
AMENDMENT TO ARTICLES OF CONTINUANCE OF GSI LUMONICS INC.
BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. | The articles of continuance of the Company be amended to change the name of the Company to “GSI Companies, Inc.” |
2. | Any director, officer, or other person duly authorized by the Company, be and is hereby authorized and directed to execute and deliver all such deeds, documents, instruments and assurances and to do all such acts and things as in his or her option may be necessary or desirable to give effect to this resolution. |
3. | Notwithstanding that this resolution has been duly passed by the shareholders of the Company, the Board of Directors, in its discretion, may choose to revoke this resolution before it is implemented without further notice to or the approval of the shareholders of the Company. |
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SCHEDULE C
APPROVAL OF AMENDMENT TO BY-LAW NUMBER 1 OF GSI LUMONICS INC.
BE IT RESOLVED THAT:
1. | The amendment to the first sentence of Section 50 of By-Law Number 1 of the Company approved by resolution of the Board of Directors of the Company so that the first sentence of Section 50 of By-Law Number 1 of the Company reads as follows: |
“The holders of at least 33-1/3% of the shares entitled to vote at the meeting, present personally or represented by proxy, shall constitute a quorum of any meeting of shareholders or of any class of shareholders” |
2. | Any director, officer, or other person duly authorized by the Company, be and is hereby authorized and directed to execute and deliver all such deeds, documents, instruments and assurances and to do all such acts and things as in his or her option may be necessary or desirable to give effect to this resolution. |
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SCHEDULE D
TSX CORPORATE GOVERNANCE GUIDELINES COMPLIANCE
TSX CORPORATE GOVERNANCE GUIDELINE | DOES THE COMPANY COMPLY? | COMMENTS | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1. | The Board should explicitly assume responsibility for the stewardship of the Company, and specifically for: | |||||||||||||||
(i) adoption of a strategic planning process; | Yes | The Board of Directors is actively involved in the Company’s strategic planning process. In addition, at least one Board of Directors meeting per year is set aside for a review of management’s strategic direction, guidelines and plans | ||||||||||||||
(ii) identification of principal risks of the Company’s business and ensuring the implementation of appropriate systems to manage these risks; | Yes | the Board of Directors has specifically identified the Company’s principal risks and manages these risks through regular appraisal of management’s practices | ||||||||||||||
(iii) succession planning, including appointing, training and monitoring of senior management; | Yes | the Board of Directors reviews its organizational structure and succession planning matters at least annually | ||||||||||||||
(iv) communications policy; and | Yes | the Board of Directors has approved and reserves the right to review and approve amendments to the Company’s policies relating to communications between the Company, its shareholders and the public. In furtherance of this responsibility, the Board of Directors is obliged to approve any public information releases of a material nature | ||||||||||||||
(v)the integrity of the Company’s internal controls and management information systems. | Yes | the Board of Directors, through the appointment of various committees, or through the review and approval of the plans of various committees of management, has assured itself of an effective means of monitoring the integrity of the Company’s system of internal controls. Each of the following committees is responsible periodically for reporting to the Board of Directors on the noted areas: • Audit Committee (held9 meetings during fiscal 2004): compliance of all financial reporting with accounting principles and oversight of all financial plans |
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TSX CORPORATE GOVERNANCE GUIDELINE | DOES THE COMPANY COMPLY? | COMMENTS | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
• Compensation Committee (held5 meetings during fiscal 2004): fixing the remuneration for the chief executive officer and administration of the Company’s stock option plans • Nominating and Corporate Governance Committee (held3 meetings in fiscal 2004): evaluation of board and individual director performance • Technology Committee (held4 meetings during fiscal 2004): review/recommendation of technology investments and oversight of the Company’s technology strategy | ||||||||||||||||
2. | Majority of Directors to be “unrelated.” | Yes | Mr. Winston (President and Chief Executive Officer of the Company) is the only related director | |||||||||||||
3. | Disclosure for each Director as to whether such Director is related or unrelated and the basis for the conclusion. | Yes | Related — Charles D. Winston, President and Chief Executive Officer of the Company For the remainder of the proposed Directors, none of them or their associates have: • worked for the Company • material contracts with the Company • received remuneration from the Company in excess of Director fees Unrelated — Richard B. Black Unrelated — Garrett Garrettson Unrelated — Phillip A. Griffiths Unrelated — Marina Hatsopoulos Unrelated — Byron O. Pond Unrelated — Benjamin J. Virgilio | |||||||||||||
4. | Appoint a Committee of the Board of Directors responsible for appointment/ assessment of Directors, composed exclusively of non-management Directors the majority of whom are unrelated. | Yes | the Nominating and Corporate Governance Committee has responsibility for nominating new directors | |||||||||||||
5. | Implement a process for assessing the effectiveness of the Board of Directors, its committees and individual Directors. | Yes | the Board of Directors and the Nominating and Corporate Governance Committee monitor the effectiveness of the relationship between management and the Board of Directors, the effectiveness of the Board of Directors’ operations, the operations of its committees and that of individual directors, to recommend improvements to each of the above |
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TSX CORPORATE GOVERNANCE GUIDELINE | DOES THE COMPANY COMPLY? | COMMENTS | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6. | Provide orientation and education programs for new Directors. | Yes | the Board of Directors is responsible for the orientation and education of new Directors | |||||||||||||
7. | Review and, where appropriate, reduce the size of the Board of Directors to promote more efficient decision-making. | Yes | the membership of the Board of Directors is set at seven (7), which is considered to be optimum | |||||||||||||
8. | Review and ensure that the compensation of Directors reflects the risks and responsibilities involved. | Yes | the Board ensures director compensation levels are sufficiently reflective of responsibilities and risks involved | |||||||||||||
9. | Committees of the Board of Directors should generally be composed of outside Directors who are unrelated. | Yes | all committees, except the technology committee, are composed entirely of outside, unrelated Directors | |||||||||||||
10. | Assign responsibility for the Board of Director’s approach to governance issues to a committee of the Board of Directors. | Yes | the Nominating and Corporate Governance Committee, is chartered to review matters pertaining to governance including committee membership and mandates, making recommendations for change and for other such initiatives which may be deemed to be in the interest of the Board of Directors in order to improve corporate governance | |||||||||||||
11. | Define limits to management’s responsibilities by developing mandates for: | |||||||||||||||
(i) the Board of Directors | Yes | the Board reviews and approves significant operational and financial matters and provides direction to management on these matters | ||||||||||||||
(ii) the Chief Executive Officer, and approving the Chief Executive Officer’s corporate objectives. | Yes | the Chief Executive Officer’s mandate, which includes the general mandate to maximize shareholder value is established year to year in the form of annual corporate objectives and strategic directions which are subject to Board of Directors approval | ||||||||||||||
12. | Ensure that the Board of Directors is able to function independently of management. | Yes | five of six members of the Board of Directors are outside, unrelated Directors and all committees of the Board of Directors, except the technology committee, are composed entirely of outside Directors |
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TSX CORPORATE GOVERNANCE GUIDELINE | DOES THE COMPANY COMPLY? | COMMENTS | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
13. | Establish an Audit Committee, all the members of which are outside, unrelated Directors. | Yes | as noted above, all of the members of the Company’s Audit Committee are independent, unrelated Directors. The Audit Committee is mandated to: • monitor audit functions and the preparation of financial statements; • approve press releases on financial results; • review annual information circulars as well as any material change reports and prospectuses; • meet with outside auditors independent of management where appropriate; • appoint, evaluate and retain the Company’s independent auditors each fiscal year • maintain direct responsibility for the compensation, termination and oversight of the auditors’ performance and evaluate the auditors’ qualifications and performance; and • review and approve foreign currency risk strategies and the Company’s investment policy. | |||||||||||||
14. | Provide for the engagement of outside advisors by individual Directors at the Company’s expense. | Yes | individual Directors may engage the services of an outside advisor with the approval of the Board of Directors |
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