Exhibit 99.1
SMART Technologies Inc.
NOTICE OF ANNUAL
MEETING TO BE HELD ON
AUGUST 10, 2011
AND
MANAGEMENT INFORMATION CIRCULAR
AND
PROXY STATEMENT
July 4, 2011
SMART Technologies Inc.
NOTICE OF ANNUAL GENERAL MEETING OF THE SHAREHOLDERS
TAKE NOTICE THAT an Annual General Meeting (the “Meeting”) of the shareholders (“Shareholders”) of SMART Technologies Inc. (the “Corporation”) will be held at the Sheraton Suites Eau Claire, 255 Barclay Parade SW, Calgary, Alberta T2P 5C2, at 9:00 A.M. (MDT) on Wednesday, August 10, 2011 for the following purposes:
| 1. | to receive and consider the financial statements of the Corporation as at and for the fiscal year ended March 31, 2011, together with the report of the auditors thereon; |
| 2. | to fix the number of directors to be elected at seven (7); |
| 3. | to elect David A. Martin, Nancy L. Knowlton, Salim Nathoo, Arvind Sodhani, Michael J. Mueller, Robert C. Hagerty and David B. Sutcliffe as the directors of the Corporation for the ensuing year; |
| 4. | to appoint KPMG LLP, Chartered Accountants as the auditors of the Corporation for the ensuing year and to authorize the directors of the Corporation to determine the remuneration to be paid to the auditors; and |
| 5. | to transact such other business as may properly come before the Meeting. Information relating to matters to be acted upon by the Shareholders at the Meeting is set forth in the accompanying Management Information Circular. |
A Shareholder may attend the Meeting in person or may be represented at the Meeting by proxy. Shareholders who are unable to attend the Meeting in person and wish to be represented by proxy are requested to date, sign and return the accompanying Instrument of Proxy, or other appropriate form of proxy, in accordance with the instructions set forth in the accompanying Management Information Circular and Instrument of Proxy. An Instrument of Proxy will not be valid unless it is deposited at the offices of Computershare Trust Company of Canada, 9th floor, 100 University Avenue, Toronto, Ontario M5J 2Y1 in the enclosed self-addressed envelope, or by fax to 1-866-249-7775/416-263-9524 to arrive not less than 48 hours (excluding Saturdays, Sundays and statutory holidays in the province of Alberta) before the time of the Meeting, or any adjournment thereof. A person appointed as proxy holder need not be a Shareholder of the Corporation.
Only Shareholders of record as at the close of business on June 30, 2011 (the “Record Date”) are entitled to receive notice of the Meeting.
SHAREHOLDERS ARE CAUTIONED THAT THE USE OF THE MAIL TO TRANSMIT PROXIES IS AT EACH SHAREHOLDER’S RISK.
DATED at Calgary, Alberta as of the 4th day of July, 2011.
BY ORDER OF THE BOARD OF DIRECTORS
(signed)“David A. Martin”
Executive Chairman
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SMART Technologies Inc.
Management Information Circular
TABLE OF CONTENTS
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SMART Technologies Inc.
Management Information Circular
Dated July 4, 2011
INFORMATION REGARDING PROXIES AND VOTING AT THE MEETING
Solicitation of Proxies
This management information circular (the “Information Circular”) is furnished in connection with the solicitation of proxiesby and on behalf of management of SMART Technologies Inc. (the “Corporation”) for use at the annual general meeting (the “Meeting”) of holders (“Shareholder(s)”) of Class A Subordinate Voting Shares and the Class B Shares (collectively “Shares”) of the Corporation to be held at the Sheraton Suites Eau Claire, 255 Barclay Parade SW, Calgary, Alberta T2P 5C2, at 9:00 A.M. (MDT) on Wednesday, August 10, 2011 for the purposes set forth in the notice of annual general meeting (the “Notice”) accompanying this Information Circular. Solicitation of proxies will be primarily by mail, but may also be undertaken by way of telephone, facsimile or oral communication by one or more members of the board of directors (the “Board”), officers or regular employees of the Corporation, at no additional compensation. Costs associated with the solicitation of proxies will be borne by the Corporation.
Appointment of Proxy Holders
Accompanying this Information Circular is an instrument of proxy (“Instrument of Proxy”) for use at the Meeting. Shareholders who are unable to attend the Meeting in person and wish to be represented by proxy are required to date and sign the enclosed Instrument of Proxy and return it in the enclosed return envelope.All properly executed Instruments of Proxy for Shareholders must be mailed so as to reach or be deposited at the offices of the Corporation’s registrar and transfer agent, Computershare Trust Company of Canada, 9th floor, 100 University Avenue, Toronto, Ontario M5J 2Y1 in the enclosed self-addressed envelope, or by fax to 1-866-249-7775/416-263-9524 to arrive not less than 48 hours (excluding Saturdays, Sundays and statutory holidays in the province of Alberta) prior to the time set for the Meeting or any adjournment thereof.
The persons designated in the Instrument of Proxy are officers and/or directors of the Corporation.A Shareholder has the right to appoint a person (who need not be a Shareholder) other than the persons designated in the accompanying Instrument of Proxy, to attend at and represent the Shareholder at the Meeting.To exercise this right, a Shareholder should insert the name of the designated representative in the blank space provided on the Instrument of Proxy and strike out the names of management’s nominees. Alternatively, a Shareholder may complete another appropriate Instrument of Proxy.
Signing of the Instrument of Proxy
The Instrument of Proxy must be signed by the Shareholder or the Shareholder’s duly appointed attorney authorized in writing or, if the Shareholder is a corporation, under its corporate seal or by a duly authorized officer or attorney of the Corporation. An Instrument of Proxy signed by a person acting as attorney or in some other representative capacity (including a representative of a corporate Shareholder) should indicate that person’s capacity (following his or her signature) and should be accompanied by the appropriate instrument evidencing qualification and authority to act (unless such instrument has previously been filed with the Corporation).
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Revocability of Proxies
A Shareholder who has submitted an Instrument of Proxy may revoke it at any time prior to the exercise thereof. In addition to any manner permitted by law, a proxy may be revoked by instrument in writing executed by the Shareholder or by his or her duly authorized attorney or, if the Shareholder is a corporation, under its corporate seal or executed by a duly authorized officer or attorney of the corporation and deposited either: (i) at the registered office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or any adjournments thereof, at which the Instrument of Proxy is to be used; or (ii) with the Chairman of the Meeting on the day of the Meeting, or any adjournment thereof. In addition, an Instrument of Proxy may be revoked: (i) by the Shareholder personally attending the Meeting and voting the securities represented thereby or, if the Shareholder is a corporation, by a duly authorized representative of the corporation attending at the Meeting and voting such securities; or (ii) in any other manner permitted by law.
Voting of Proxies and Exercise of Discretion by Proxy Holders
All Shares represented at the Meeting by properly executed proxies will be voted on any ballot that may be called for and, where a choice with respect to any matter to be acted upon has been specified in the Instrument of Proxy, the Shares represented by the Instrument of Proxy will be voted in accordance with such instructions. The management designees named in the accompanying Instrument of Proxy will vote or withhold from voting the Shares in respect of which they are appointed in accordance with the direction of the Shareholder appointing him or her on any ballot that may be called for at the Meeting.In the absence of such direction, such Shares will be voted “FOR” the proposed resolutions at the Meetings. The accompanying Instrument of Proxy confers discretionary authority upon the persons named therein with respect to amendments of or variations to the matters identified in the accompanying Notice and with respect to other matters that may properly be brought before the Meeting. In the event that amendments or variations to matters identified in the Notice are properly brought before the Meeting or any other business is properly brought before the Meeting, it is the intention of the management designees to vote in accordance with their best judgment on such matters or business. At the time of printing this Information Circular, the management of the Corporation knows of no such amendment, variation or other matter to come before the Meeting other than the matters referred to in the accompanying Notice.
INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED ON
Except as disclosed in this Information Circular, none of the directors or senior officers of the Corporation at any time since the beginning of the Corporation’s last fiscal year, nor any proposed nominee for election as a director of the Corporation, nor any associate or affiliate of any of the foregoing persons, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise in any matter to be acted on, other than the election of directors.
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VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
Voting Shares and Record Date
The authorized share capital of the Corporation consists of an unlimited number of Class A Subordinate Voting Shares, an unlimited number of Class B Shares and an unlimited number of Preferred Shares issuable in series. The record date for the determination of Shareholders entitled to receive notice of and to vote at the Meeting is June 30, 2011 (the “Record Date”). As at the Record Date, there were 44,308,596 Class A Subordinate Voting Shares and 79,464,195 Class B Shares and no Preferred Shares issued and outstanding as fully paid and non-assessable.
Class A Subordinate Voting Shares, Class B Shares and Preferred Shares
Except as otherwise described herein, the Class A Subordinate Voting Shares and Class B Shares are equal in all respects and will be treated as shares of a single class.
Each holder of Class B Shares and each holder of Class A Subordinate Voting Shares is entitled to receive notice of and attend all meetings of Shareholders, except meetings at which only holders of another particular class or series have the right to vote. At each such meeting, each Class B Share entitles its holder to 10 votes and each Class A Subordinate Voting Share entitles its holder to one vote, voting together as a single class.
More information regarding the Class A Subordinate Voting Shares, Class B Shares and Preferred Shares is disclosed in the Annual Information Form of the Corporation for the fiscal year ended March 31, 2011 (“AIF”), which is incorporated by reference into this Information Circular and forms an integral part thereof. The AIF is available on the System for Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. Upon request, the Corporation will promptly provide a copy of the AIF free of charge to any Shareholder of the Corporation.
Voting of Shares – General
Only Shareholders whose names are entered in the Corporation’s register of shareholders at the close of business on the Record Date and holders of Shares issued by the Corporation after the Record Date and prior to the Meeting will be entitled to receive notice of and to vote at the Meeting, provided that, to the extent that: (i) a registered Shareholder has transferred the ownership of any Shares subsequent to the Record Date; and (ii) the transferee of those Shares produces properly endorsed share certificates, or otherwise establishes that he or she owns the Shares and demands, not later than ten days before the Meeting, that his or her name be included on the Shareholder list before the Meeting, in which case the transferee shall be entitled to vote his or her Shares at the Meeting.
Voting of Shares – Advice to Non-Registered Holders
Only registered holders of Shares, or the persons they appoint as their proxies, are permitted to attend and vote at the Meeting. However, in many cases, Shares beneficially owned by a holder (a “Non-Registered Holder”) are registered either:
| | (a) | in the name of an intermediary (an “Intermediary”) that the Non-Registered Holder deals with in respect of the Shares. Intermediaries include banks, trust companies, securities dealers or brokers, and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans; or |
| | (b) | in the name of a clearing agency (such as The Canadian Depository for Securities Limited). |
In accordance with the requirements of National Instrument 54-101, the Corporation has distributed copies of the Notice, this Information Circular and the Instrument of Proxy (collectively, the “Meeting Materials”) to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders.
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Intermediaries are required to forward meeting materials to Non-Registered Holders unless 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 meeting materials to Non-Registered Holders.
Generally, Non-Registered Holders who have not waived the right to receive meeting materials will:
| | (a) | have received as part of the Meeting Materials a voting instruction form which must be completed, signed and delivered by the Non-Registered Holder in accordance with the directions on the voting instruction 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; or |
| | (b) | less typically, be given a proxy which 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. This form of proxy need not be signed by the Non-Registered Holder. In this case, the Non-Registered Holder who wishes to submit a proxy should otherwise properly complete the form of proxy and deposit it with Computershare Trust Company of Canada, 9th floor, 100 University Avenue, Toronto, Ontario M5J 2Y1 in the enclosed self-addressed envelope, or by fax to 1-866-249-7775/416-263-9524 to arrive not less than 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Alberta) prior to the time set for the Meeting or any adjournment thereof. |
The purpose of these procedures is to permit Non-Registered Holders to direct the voting of the Shares they beneficially own. Should a Non-Registered Holder wish to attend and vote at the Meeting in person (or have another person attend and vote on behalf of the Non-Registered Holder), the Non-Registered Holder should strike out the names of the persons named in the proxy and insert the Non-Registered Holder’s (or such other person’s) name in the blank space provided or, in the case of a voting instruction form, follow the corresponding instructions on the form. In either case, Non-Registered Holders should carefully follow the instructions of their intermediaries and their service companies.
Only registered Shareholders have the right to revoke a proxy. Non-Registered Holders who wish to change their vote must in sufficient time in advance of the Meeting, arrange for their respective Intermediaries to change their vote and if necessary revoke their proxy in accordance with the revocation procedures set out above.
Principal Holders of Shares
The following table sets forth, to the best of the knowledge of the directors and senior officers of the Corporation, as at the date hereof, the only persons, corporations or other entities (other than securities depositories) who beneficially own, directly or indirectly, or exercise control or discretion over voting securities carrying more than 10% of the voting rights attached to the Shares of the Corporation.
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Name and Address of Beneficial Owner | | Type of
Ownership | | Number of Class A
Subordinate
Voting Shares | | Number of Class B
Shares | | | Percentage of Share
Capital | | | Percentage of
Voting Power | |
Funds advised or managed by Apax Partners(1) | | Direct | | Nil | | | 34,795,491 | | | | 28.1 | % | | | 41.5 | % |
Intel Corporation(2) | | Direct | | Nil | | | 17,466,633 | | | | 14.1 | % | | | 20.8 | % |
David A. Martin(3) | | Direct and
Indirect | | 450,000 | | | 27,202,071 | | | | 22.3 | % | | | 32.5 | % |
Nancy L. Knowlton(3) | | Direct and
Indirect | | 450,000 | | | 27,202,071 | | | | 22.3 | % | | | 32.5 | % |
NOTES:
| (1) | Represents Shares beneficially owned by Apax US VII, L.P., which is advised by Apax Partners L.P., and Apax Europe V (a collective of 9 partnerships comprised of Apax Europe V—A, L.P., Apax Europe V—B, L.P., Apax Europe V C GmbH & Co. KG, Apax Europe V—D, L.P., Apax Europe V—E, L.P., Apax |
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| | Europe V—F, C.V., Apax Europe V—G, C.V., Apax Europe V—1, LP and Apax Europe V—2, LP), which is managed by Apax Partners Europe Managers Ltd., which is advised by Apax Partners LLP. Apax US VII, L.P. and Apax Europe V (collectively “Apax Partners”) each disclaim beneficial ownership of the Shares held by the other. The address of Apax Partners LLP and Apax Partners Europe Managers Ltd., is 33 Jermyn Street, London, UK, SW1Y 6DN and the address of Apax Partners L.P. is 601 Lexington Avenue, 53rd Floor, New York, NY 10022. |
| (2) | The address of Intel Corporation (“Intel”) is 2200 Mission College Boulevard, Santa Clara, California. |
| (3) | This represents the entire 27,202,071 Class B Shares owned by IFF Holdings Inc. (“IFF”), a corporation with respect to which David A. Martin and Nancy L. Knowlton own 100% of the securities directly or indirectly. Mr. Martin and Ms. Knowlton are married and as such Mr. Martin and Ms. Knowlton may each be deemed to be beneficial owners or to have control and direction over all of the Shares owned by IFF. All Class A Subordinate Voting Shares owned directly by Mr. Martin and Ms. Knowlton are subject to voting trust agreements whereby Mr. Martin and Ms. Knowlton have agreed that Ms. Knowlton, as voting trustee, shall be entitled to vote such Shares. The address for Mr. Martin, Ms. Knowlton and IFF is c/o SMART Technologies Inc., 3636 Research Road N.W., Calgary, AB T2L 1Y1 Canada. |
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PARTICULARS OF MATTERS TO BE ACTED UPON
Financial Statements
The audited financial statements for the Corporation for the fiscal year ended March 31, 2011, together with the report of the auditors thereon will be presented to the Shareholders at the Meeting.
Fixing the Number of Directors
The articles of the Corporation require a minimum of three and a maximum of fifteen directors for the Corporation. There are currently seven directors, the term of each such director will expire at the close of the Meeting. It is proposed that seven directors be elected, to hold office until the next annual meeting or until successors are elected or appointed.
Election of Directors
Management proposes to nominate at the Meeting the persons whose names are set forth in the table below to serve as directors of the Corporation until the next meeting of Shareholders at which the election of directors is considered, or until their successors are elected or appointed. The persons named in the accompanying Instrument of Proxy intend to vote for the election of such persons at the Meeting, unless otherwise directed. Management does not contemplate that any of the nominees will be unable to serve as a director of the Corporation.
The following table and the notes thereto state the names of all persons proposed by Management to be nominated for election as directors of the Corporation at the Meeting, their principal occupation or employment within the five preceding years, the period during which they have been directors of the Corporation, and their shareholdings, including the number of voting securities of the Corporation beneficially owned, directly or indirectly, or over which control or direction is exercised by each of them.
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In the event that a vacancy occurs because of death or for any reason prior to the Meeting, the proxy shall not be voted with respect to the filling of the vacancy.
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Name and Residence | | Voting
Shares | | Offices Held and Time as
Director | | Principal Occupation |
David A. Martin Alberta, Canada | | 450,000(6) | | Executive Chairman | | Co-founder of the Corporation and, since 2007 Executive Chairman. From 2002 until his appointment as Executive Chairman, Mr. Martin was the Chairman and Co-CEO. |
| | 27,202,071(7) | | Director
since 1987 | |
| | | |
Nancy L. Knowlton Alberta, Canada | | 450,000(6) | | President and CEO | | Co-founder of the Corporation and, since 2007 President and CEO. From 2002 until her appointment as President and CEO, Ms. Knowlton was the President and Co-CEO. |
| | 27,202,071(7) | | Director since
1987 | |
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Salim Nathoo London, England | | Nil(8) | | Director since
2007 | | Partner and global co-head of Apax Partners’ technology and telecom team. |
| | | |
Arvind Sodhani California, U.S.A. | | Nil(9) | | Director since
2007 | | Executive Vice President of Intel Corporation and President of Intel Capital. |
| | | |
Michael J. Mueller(1)(2)(3)(4) Ontario, Canada | | Nil(10) | | Director since
2010 | | Corporate director. Retired from the audit firm PricewaterhouseCoopers (PwC) in 2007 as the Global Leader of PwC’s Private Company Services/Middle Market Practice. |
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Robert C. Hagerty(1)(2)(3)(4)(5) California, U.S.A. | | Nil(10) | | Director since
2010 | | Corporate director. Advisor to Polycom, Inc. since May 2010. Served at Polycom in various executive capacities from 1997 through 2010 including Chairman, Director, President and CEO. |
| | | |
David B. Sutcliffe(1)(2)(3)(4) British Columbia, Canada | | Nil | | Director since
2011 | | Corporate director. Served as CEO of Sierra Wireless from May 1995 through October 2005. |
NOTES:
| (1) | Member of the Audit Committee |
| (2) | Member of the Compensation Committee |
| (3) | Member of the Corporate Governance and Nominating Committee |
| (5) | Lead director as of May 18, 2011 |
| (6) | Class A Subordinate Voting Shares are held directly by Mr. Martin and Ms. Knowlton |
| (7) | David A. Martin and Nancy L. Knowlton, being married to each other, together indirectly own 27,202,071 Class B Shares through IFF |
| (8) | 34,795,491 Class B Shares are beneficially owned by funds advised or managed by Apax Partners. Mr. Nathoo is a partner at Apax Partners LLP but disclaims beneficial ownership of these Shares |
| (9) | 17,466,633 Class B Shares are beneficially owned by Intel Corporation. Mr. Sodhani is the Executive Vice President of Intel Corporation and has shared voting and investment authority over these Shares. However, Mr. Sodhani disclaims beneficial ownership of these Shares except to the extent of his pecuniary interest arising therein |
| (10) | Mr. Mueller and Mr. Hagerty each have options to acquire 20,000 Class A Subordinate Voting Shares at an exercise price of $17.00 per Class A Subordinate Voting Share |
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The information as to voting securities beneficially owned, directly or indirectly, is based upon information furnished by the respective nominees.
No proposed director is, as at the date of the Information Circular, or has been, within the last 10 years, a director or executive officer of any company that while that person was acting in that capacity, (a) was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; (b) was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or (c) within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No proposed director has within the last 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
Appointment of Auditors
Management is nominating KPMG LLP, Chartered Accountants, Calgary, Alberta, as auditors, to hold office until the next annual meeting and is requesting authorization for the directors to fix their remuneration. KPMG LLP has been the Corporation’s auditors since 1993. The persons named in the accompanying Instrument of Proxy intend to vote for the appointment of KPMG LLP and the authorization for the directors to fix their remuneration at the Meeting, unless otherwise directed.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
The following discussion and analysis examines the compensation earned during the last financial year of the Corporation by the Corporation’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and the three most highly compensated executive officers (collectively, the “NEOs”) who served as executive officers of the Corporation for the fiscal year ended March 31, 2011. Unless otherwise indicated, all monetary sums set forth in this Information Circular are in Canadian Dollars.
The Corporation’s overall approach is to ensure fair and equitable total compensation for its senior executive team which includes the NEOs: the Executive Chairman; the President and Chief Executive Officer; the Vice President; the Vice President, Finance and Chief Financial Officer; and the Vice President, Legal and General Counsel.
Under the guidance of the Compensation Committee of the Board, the Corporation has taken a strategic approach in the design of its compensation program to ensure transparency and alignment with business objectives and performance. The Compensation Committee has adopted a philosophy of transparency in its compensation programs rewarding performance with competitive base salaries, annual performance and success-sharing bonuses, stock option awards and retirement plans.
Executive Compensation Guiding Principles
The Corporation recognizes that its success is in large part dependent on the Corporation’s ability to attract and retain skilled employees. The Corporation endeavors to create and maintain compensation programs based on performance, teamwork and rapid progress and to align the interests of the executives and Shareholders. The principles and objectives of the compensation and benefits programs for employees generally, and for the NEOs specifically, are to:
| | • | | attract, motivate and retain highly-skilled individuals who have incentives to achieve the Corporation’s strategic goals; |
| | • | | closely align compensation with the Corporation’s business and financial objectives and the long-term interests of Shareholders; and |
| | • | | offer total compensation that is competitive and fair. |
Elements of Executive Compensation
The compensation of the NEOs consists of the following principal components:
| | • | | performance-based cash bonuses; and |
| | • | | participation in the 2010 Equity Incentive Plan. |
Each compensation element has a role in meeting the above objectives. The mix of compensation components is designed both to reward short-term results and to motivate long-term performance. The compensation level of the NEOs reflects to a significant degree the varying roles and responsibilities of the NEOs.
The appropriate level for overall NEOs compensation is determined by the Compensation Committee for all of the NEOs based on: (i) a review of certain available market data including a review the compensation paid to other named executive officers by a comparison group of companies as set forth below; and (ii) internal equity, length of service, skill level and other factors deemed appropriate.
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Compensation-Setting Process
The Corporation has relied on market survey data for similar positions in other companies to assist in determining compensation levels that are competitive and fair. In addition, the Chief Executive Officer, and with respect to the Chief Executive Officer and Executive Chair, the Compensation Committee reviews the performance of each NEO on an annual basis. Based on this review and the factors described above, such parties made recommendations to the Board as to the executive compensation package for such NEO. This review occurred in the first quarter of the fiscal year.
Competitive Positioning and Compensation Advisors
Prior to the establishment of a formal Compensation Committee, market surveys were used to benchmark the salary and bonus compensation of the NEOs against other companies of a similar size and scale. The services of a compensation consultant were not engaged to assist in setting NEO compensation for the fiscal year ended March 31, 2011. However, the Compensation Committee is authorized to retain the services of external executive compensation specialists from time to time, as the committee sees fit, in connection with the establishment of cash and equity compensation and related policies. As a result, the Compensation Committee recently retained the services of an executive compensation consultant to assist in establishing and reviewing the comparator group. The consultant conducted a competitive analysis to assist in establishing competitive total direct compensation, and short-term and long-term incentive targets for the NEOs for the fiscal year ending March 31, 2012.
Comparator Group Analysis
The Compensation Committee annually reviews the total compensation of the Corporation’s NEOs and compensation practices of the Corporation. Although comparators were used informally in past years, the Corporation, with the assistance of an executive compensation consultant, compiled a group of 5 Canadian and 9 U.S. companies (“Comparator Group”) to be used to assist in the setting of compensation for the fiscal year ending March 31, 2012. The Compensation Committee selected the Comparator Group focusing on companies of a similar size and scale in the same or similar industry or geographic market and which compete for executives. The Compensation Committee collects data from the Comparator Group targeting total direct compensation between the 25th and 50th percentile. The Comparator Group is comprised of the following companies:
| | | | |
• Aastra Technologies Limited | | • Cts Corp. | | • Sierra Wireless, Inc. |
| | |
• Arris Group, Inc. | | • JDS Uniphase Corporation | | • Super Micro Computer, Inc. |
| | |
• Blackboard Inc. | | • Macdonald Dettwiler & Associates Ltd. | | • Teradata Corp. |
| | |
• Citrix Systems, Inc. | | • Open Text Corporation | | • Viasat Inc. |
| | |
• Constellation Software Inc. | | • Polycom, Inc. | | |
Note: U.S. companies are initalics.
Compensation Components
The compensation of the NEOs consists of the following principal components:
| | • | | performance-based cash bonuses; and |
| | • | | participation in the 2010 Equity Incentive Plan. |
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The NEO’s compensation packages provide a balanced set of elements consistent with the objectives of the Corporation’s compensation strategy. The fixed elements, assessed in their entirety, provide a competitive base of fixed compensation necessary to attract, retain and motivate executives. The variable elements, assessed in their entirety, are reviewed and approved by the Compensation Committee and are designed to balance short-term objectives with the long-term interests of the Corporation, motivate superior performance against both timeframes and to reward the attainment of individual and business objectives. The combination of the fixed elements and variable incentive opportunities delivers a competitive compensation package as compared to the peer group used by Corporation.
Below is a description of the total compensation elements, forms of compensation, performance periods and how the amount is determined for each element.
| | | | | | |
Type of compensation | | Form | | Performance period | | How it is determined |
Base salary | | Cash | | One year | | Reflects consideration of sector market conditions, the role of the executive, individual competency, and attraction and retention considerations. Base salary was benchmarked to the 50th percentile for the selected Comparator Group of companies and adjusted to reflect the NEO’s experience, responsibilities and performance. |
| | | |
Short-Term Incentive | | Performance-Based Cash Bonuses | | One year | | Focuses on specific annual objectives. Target award is based on market competitiveness. The actual award is based on Corporation performance in the case of the Executive Chairman and the CEO; and on Corporation, departmental and individual performance in the case of the other NEOs. |
| | | |
Long-Term Incentive | | Stock options | | Typically, four-year vesting and a five-year term | | Target award (using an option pricing model to estimate the value) is based on market competitiveness of the long-term incentive package. However, the final realized value is based on the appreciation of the Corporation’s Share price. |
| | | |
Benefits | | Medical and dental insurance | | Ongoing | | Based on historical practices of the Corporation |
| | | |
Retirement Plans | | RRSP Contribution | | Ongoing | | Based on historical practices of the Corporation |
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Base Salaries
In general, base salaries for the NEOs are initially established through arm’s-length negotiation at the time of hire, taking into account such NEO’s qualifications, experience and prior salary and prevailing market compensation for similar roles in comparable companies. The initial base salaries of the NEOs are then reviewed annually by the Compensation Committee for the Chief Executive Officer and Executive Chair and by the Chief Executive Officer and the Compensation Committee for all other NEOs, to determine whether any adjustment is warranted. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility.
In considering a base salary adjustment, the Compensation Committee considers the Corporation’s overall performance, the scope of the NEO’s functional responsibilities, individual contribution, responsibilities and prior experience. The Compensation Committee may also take into account the NEO’s current salary, equity position both vested and unvested, and the amounts paid to the NEO’s peers inside the Corporation.
Performance-Based Cash Bonuses
Annual performance-based cash bonuses are intended to reward the NEOs for achieving short-term goals while making progress towards the Corporation’s longer-term objectives. The 2011 Discretionary Management Bonus Plan (the “2011 Bonus Plan”) includes target bonus opportunities and target goals. The Compensation Committee determined the actual bonus awards for fiscal 2011 for each of the NEOs.
Each bonus under the 2011 Bonus Plan has three components as described in greater detail below: (i) a company performance bonus; (ii) a functional area performance bonus; and (iii) an individual performance bonus. These components are measured as follows:
| | • | | The company performance bonus is measured by reference to four key performance indicators based on internal management financial statements: revenue, gross margin, Adjusted EBITDA and product category share. There is no formal weighting of the four key performance indicators in determining company performance, but rather the Compensation Committee has made a subjective assessment of these indicators. |
| | • | | Functional area performance bonus is measured by reference to the following factors relating to an individual NEO’s functional area: achievement of goals and objectives, continuous improvement, building team capability and increasing capacity. |
| | • | | Individual performance bonus is measured by reference to the following factors relating to an individual NEO’s performance: contribution to the Corporation’s strategy, contribution to key issues for the Corporation, attention to values, principles and policies and delivery against objectives set out in an individual NEO’s annual work plan and as otherwise communicated to such individual. |
Each NEO’s target bonus opportunity under the 2011 Bonus Plan was expressed as a percentage of his or her base salary, with individual target award opportunities being a range of 50% to 100% of base salary, with discretionary additional bonus consideration for exceptional performance. In addition, once the company performance targets are achieved there is no additional bonus opportunity for the NEO if the Corporation exceeds those performance targets, subject to certain discretionary bonuses provided for exceptional performance. The weighting of the bonus for the NEO is a range of 65% to 100% for company performance, a range of 0 to 20% for functional area performance and a range of 0% to 20% for individual performance. The bonus is weighted towards company performance reflecting the NEO’s ability to impact overall company performance. The company performance targets for payout under the 2011 Bonus Plan were set at amounts the Board reasonably believed to be attainable. The functional area performance bonus and the individual performance bonus are paid only if the company performance threshold has been achieved.
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Long-Term Equity Incentives
The Corporation adopted a 2010 Equity Incentive Plan (“2010 Equity Incentive Plan”) in connection with its initial public offering of Class A Subordinate Voting Shares on July 20, 2010 (the “IPO”) and has granted equity incentive awards to the NEOs pursuant to the 2010 Equity Incentive Plan. Such grants were made with consideration given to the overall compensation of the NEO as well as the number of Shares already held.
Change in Control Benefits
The Corporation has entered into employment agreements with the NEOs that provide for the payment of certain severance benefits if the Corporation undergoes a change in control and the NEO is terminated in relation to such change in control, within a specified period preceding or following the change in control. The Corporation believes that these arrangements, which require both a change in control and termination of employment before payment is owed, effectively allow the NEOs to objectively assess and pursue aggressively any corporate transactions that are in the best interests of Shareholders without undue concern over the impact of such a transaction on their own personal financial and employment situation.
Perquisites and Other Personal Benefits
The Corporation does not utilize perquisites or other benefits as a significant element of the compensation program currently provided to NEOs. All future practices regarding perquisites will be approved and subject to periodic review by the Compensation Committee.
Summary Compensation Table
Executive Compensation is required to be disclosed for the Chief Executive Officer (or individual who served in a similar capacity during the most recently completed fiscal year), the Chief Financial Officer (or individual who served in a similar capacity during the most recently completed fiscal year) and each of the three most highly compensated executive officers (other than the Chief Executive Officer and the Chief Financial Officer) who were serving as executive officers at the end of the most recently completed fiscal year and whose total salary and bonus exceeded $150,000; being the NEOs. The following table sets forth information concerning the total compensation paid or earned during fiscal year ended March 31, 2011.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary ($) | | | Share-
based
awards
($) | | Option-
based
awards
($)(2) | | Non-equity incentive
plan compensation ($) | | Pension
Value
($) | | All other
Compensation
($)(1)(4) | | | Total
Compensation
($)(1) | |
| | | | | | Annual
incentive
plans(1)(3) | | | Long-term
incentive
plans | | | |
David A. Martin Executive Chairman | | | 2011 | | | | 400,000 | | | N/A | | Nil | | | 320,000 | | | N/A | | N/A | | | 2,943 | | | | 722,943 | |
| | | | | | | | | |
Nancy L. Knowlton President & CEO | | | 2011 | | | | 400,000 | | | N/A | | Nil | | | 320,000 | | | N/A | | N/A | | | 2,943 | | | | 722,943 | |
| | | | | | | | | |
Thomas F. Hodson Vice President | | | 2011 | | | | 357,692 | | | N/A | | Nil | | | 138,784 | | | N/A | | N/A | | | 3,887 | | | | 496,476 | |
| | | | | | | | | |
G.A. (Drew) Fitch Vice President, Finance & CFO | | | 2011 | | | | 346,153 | | | N/A | | Nil | | | 138,461 | | | N/A | | N/A | | | 3,887 | | | | 484,614 | |
| | | | | | | | | |
Jeffrey A. Losch Vice President, Legal & General Counsel | | | 2011 | | | | 268,846 | | | N/A | | Nil | | | 103,505 | | | N/A | | N/A | | | 3,887 | | | | 372,351 | |
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NOTES:
| (1) | All cash compensation is paid in Canadian currency. |
| (2) | All options are priced in U.S. Dollars. The value of unexercised in-the-money options at year end is based on the closing price of the Class A Subordinate Voting Shares on the NASDAQ on March 31, 2011, which was $10.21 per Class A Subordinate Voting Share. “In-the-money” means the amount by which the market value of the Shares underlying the options on that date exceeded the option exercise price. |
| (3) | Amounts earned pursuant to the 2011 Bonus Plan. |
| (4) | Represents the maximum allowable contribution pursuant the employee RRSP program (the “RRSP Program”) as well as medical and dental benefits paid by the Corporation. |
Incentive Plan Awards
2010 Equity Incentive Plan
Reservation and Issuance of Class A Subordinate Voting Shares. The 2010 Equity Incentive Plan provides for the grant of options, restricted share units and deferred share units to the directors, officers, employees, consultants and service providers and to directors, officers, employees, consultants and service providers of the Corporation’s subsidiaries and affiliates.
The Corporation has authorized for issuance Class A Subordinate Voting Shares representing 10% of the Corporation’s total outstanding Shares. All options granted will be in compliance with the requirements of the Toronto Stock Exchange (the “TSX”), the NASDAQ Global Select Market (the “NASDAQ”) and all other applicable securities laws of both Canada and the United States of America (“Applicable Securities Laws”). The purchase price and vesting provisions (if any) for any optioned Shares shall be fixed by the directors, subject to the limitations and restrictions of the TSX.
Class A Subordinate Voting Shares subject to award under the 2010 Equity Incentive Plan that lapse, expire, terminate or are forfeited or settled in cash will again become available for grants under the 2010 Equity Incentive Plan. Class A Subordinate Voting Shares used to satisfy awards under the 2010 Equity Incentive Plan will be authorized and unissued Shares from treasury.
No more than 2.5% of the Class A Subordinate Voting Shares may be subject to the total awards granted under the 2010 Equity Incentive Plan to any individual participant in a given calendar year.
The options granted pursuant to the 2010 Equity Incentive Plan generally vest in one of two ways. First those options granted to independent directors will vest equally on the first, second, third and fourth anniversaries of the date of grant. All other options granted will generally vest equally on the second, third and fourth anniversaries of the date of grant.
Administration of Awards. The Compensation Committee provides recommendations to the Board relative to the administration of the 2010 Equity Incentive Plan. The Compensation Committee provides recommendations to the Board with respect to the terms and conditions of the awards, including the individuals who will receive awards, the term of awards, the exercise price, the number of Shares subject to each award, the limitations or restrictions on vesting and exercisability of awards, the acceleration of vesting or the waiver of forfeiture or other restrictions on awards, the form of consideration payable on exercise, whether awards will entitle the holder to receive dividend equivalents and the timing of grants. The Compensation Committee, in compliance with the provisions of the TSX, the NASDAQ and Applicable Securities Laws, also recommends to the Board any modifications, amendments or adjustments to the terms and conditions of outstanding awards provided such modifications, amendments or adjustments do not impair the rights of a holder of a previously granted award, to arrange for financing by broker-dealers (including payment by the Corporation of commissions), to establish award exercise procedures (including “cashless exercise”) and to establish procedures for payment of withholding tax obligations with cash.
Stock Options. The Compensation Committee may recommend to the Board the exercise price of options granted under the 2010 Equity Incentive Plan, but the exercise price of an option may not be less than 100% of fair market value of the Class A Subordinate Voting Shares on the date of grant. No options may be
18
granted for a term longer than ten years. Options may be exercised as provided in the applicable award agreement. Generally, when a participant is terminated for cause, or a participant voluntarily resigns, outstanding unvested options granted under the 2010 Equity Incentive Plan will be forfeited immediately. For other terminations of employment, vested options generally remain exercisable for 90 days after termination, except in the event of death, where they generally remain exercisable for six months. Specific provisions of a written employment agreement may provide for different treatment. However, an option granted under the 2010 Equity Incentive Plan is never exercisable after its term expires.
Restricted Share Units. Restricted share unit (“RSU”) awards may consist of grants of rights to receive, at the Corporation’s option, Class A Subordinate Voting Shares (issued from treasury or acquired through market purchases), the cash value of Class A Subordinate Voting Shares or a combination of both, which may vest in installments in accordance with performance criteria specified by the Compensation Committee, or on a deferred basis. Although the Corporation as of the date of this Information Circular has not granted any RSUs during the fiscal year ended March 31, 2011, it is noted that RSUs are expected to be used as part of the compensation plan for the fiscal year ending March 31, 2012.
Deferred Share Units. Deferred share unit (“DSU”) awards are awards similar to awards of restricted share units except that such awards may not be redeemed for Class A Subordinate Voting Shares or for the value of Class A Subordinate Voting Shares until the participant has ceased to hold all offices, employment and directorships with the Corporation and its subsidiaries and affiliates. Although the Corporation as of the date of this Information Circular has not granted any DSUs during the fiscal year ended March 31, 2011, it is noted that DSUs will be used as part of the compensation plan for independent directors for the fiscal year ending March 31, 2012.
Effect of a Significant Event. In the event of a “significant event”, as defined in the 2010 Equity Incentive Plan, and unless otherwise provided in an award agreement or a written employment contract between the Corporation and a plan participant, the Board may provide that the successor company will assume each award or replace it with a substitute award, or the awards will become exercisable or vested in whole or in part upon written notice, or the awards will be surrendered for a cash payment, or any combination of the foregoing will occur.
Under the 2010 Equity Incentive Plan and unless otherwise defined in an award agreement or a written employment agreement between the Corporation and a plan participant (and subject to certain exceptions described in the 2010 Equity Incentive Plan), a significant event means:
| | • | | a person or group of persons becomes the beneficial owner of securities constituting 50% or more of the voting power; |
| | • | | individuals who were proposed as nominees (but not including nominees under a Shareholder proposal) to the Board immediately prior to a meeting of Shareholders involving a contest for, or an item of business relating to, the election of directors, not constituting a majority of the directors following such election; |
| | • | | a merger, consolidation, amalgamation or arrangement (or a similar transaction) involving the Corporation occurs, unless after the event, 50% or more of the voting power of the combined company is beneficially owned by Shareholders who owned all of the Class A Subordinate Voting Shares immediately before the event; or |
| | • | | the Corporation’s Shareholders approve a plan of complete liquidation or winding-up of the Corporation, or the sale or disposition of all or substantially all its assets (other than a transfer to an affiliate). |
Transferability.Awards under the 2010 Equity Incentive Plan generally are not transferable other than by will or by the laws of descent of distribution or as expressly permitted by the Board. Except as noted, only the participant may exercise an award.
Additional Provisions. The Board has the right to amend, suspend or terminate the 2010 Equity Incentive Plan at any time provided that such action does not impair any award previously granted under the 2010
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Equity Incentive Plan. Amendments to the 2010 Equity Incentive Plan will be submitted for Shareholder approval to the extent required by the 2010 Equity Incentive Plan or by applicable law, including the rules of applicable stock exchanges.
Outstanding Share-Based Awards and Option-Based Awards
Details of options awarded to NEOs that were outstanding as at March 31, 2011 are set forth in the following table:
| | | | | | | | | | | | | | | | | | | | | | |
| | | Option-based Awards | | | Share-based Awards | |
Name and
Principal Position | | Number of
securities
underlying
unexercised
options (#) | | | Option exercise
price ($) | | | Option
Expiration
Date | | Value of unexercised in-
the-money options ($)(1) | | | Number of shares
or units shares
that have not
vested (#) | | | Market or
payout value of
share-based
awards that have
not vested(1) | |
David A. Martin Executive Chairman | | | 62,500 | | | | 17.00 | | | July 14, 2015 | | | Nil | | | | N/A | | | | N/A | |
| | | | | | |
Nancy L. Knowlton President & CEO | | | 62,500 | | | | 17.00 | | | July 14, 2015 | | | Nil | | | | N/A | | | | N/A | |
| | | | | | |
Thomas F. Hodson Vice President | | | 28,000 | | | | 17.00 | | | July 14, 2015 | | | Nil | | | | N/A | | | | N/A | |
| | | | | | |
G.A. (Drew) Fitch Vice President, Finance & CFO | | | 28,000 | | | | 17.00 | | | July 14, 2015 | | | Nil | | | | N/A | | | | N/A | |
| | | | | | |
Jeffrey A. Losch Vice President, Legal & General Counsel | | | 14,000 | | | | 17.00 | | | July 14, 2015 | | | Nil | | | | N/A | | | | N/A | |
NOTES:
| (1) | All options are priced in U.S. Dollars. The value of unexercised in-the-money options at year end is based on the closing price of the Class A Subordinate Voting Shares on the NASDAQ on March 31, 2011, which was $10.21 per Class A Subordinate Voting Share. “In-the-money” means the amount by which the market value of the Shares underlying the options on that date exceeded the option exercise price. |
Incentive Awards – Value Vested or Earned During the Year
The following table provides information on the value of vested options and Share based awards as well as non-equity compensation paid to the NEOs during the fiscal year ended March 31, 2011.
| | | | | | | | | | | | |
Name and Principal Position | | Option-based awards – Value
vested during the year ($)(1) | | | Share based awards Value
vested during the year ($) | | | Non-equity incentive plan
compensation – Value earned
during the year ($)(2) | |
David A. Martin Executive Chairman | | | N/A | | | | N/A | | | | 320,000 | |
| | | |
Nancy L. Knowlton President & CEO | | | N/A | | | | N/A | | | | 320,000 | |
| | | |
Thomas F. Hodson Vice President | | | N/A | | | | N/A | | | | 138,784 | |
| | | |
G.A. (Drew) Fitch Vice President, Finance & CFO | | | N/A | | | | N/A | | | | 138,461 | |
| | | |
Jeffrey A. Losch Vice President, Legal & General Counsel | | | N/A | | | | N/A | | | | 103,505 | |
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NOTES:
| (1) | None of the options issued to the NEOs pursuant to the 2010 Equity Incentive Plan vested during the fiscal year ended March 31, 2011. |
| (2) | This represents amounts earned pursuant to the 2011 Bonus Plan. |
Pension Plan Benefits
The Corporation does not have any defined benefit or defined contribution pension plans in place which provide for payments or benefits at, following, or in connection with retirement. The Corporation does however, have a RRSP Program wherein 2% of the employee’s annual salary is contributed to an RRSP up to a maximum of $2,000 per fiscal year.
Termination and Change of Control Benefits
The employment agreements with the NEOs provide that if a NEO is terminated for any reason other than just cause, voluntary resignation, mutual written agreement of the NEO and the Corporation or upon the death of the NEO, the Corporation will pay to the NEO: (a) the NEO’s pro rata annual salary earned, but not yet paid, up to the termination date; (b) all vacation accrued and unused as of the termination date; (c) a retiring allowance calculated, subject to the limitations described below, as the sum of (i) an amount equal to one-quarter of the NEO’s annual base salary, plus an additional one-twelfth of the NEO’s annual salary for each year or part year employed with the Corporation; plus (ii) one-quarter of the executive’s prior bonus amount plus one-twelfth of the NEO’s prior bonus amount for each year or part year employed by the Corporation, and (d) additional payment equal to the product of $500 times the number of years that the NEO was employed with the Corporation. A NEO’s “prior bonus amount” is calculated as the average of all bonuses paid to the NEO in the three years (or an average of the prior years’ bonuses if employed for less than three years) prior to the termination date.
The retiring allowance is subject to the following limitations:
| | • | | the retiring allowance must be no less than the aggregate of three quarters of the NEO’s then annual base salary and three quarters of the prior bonus amount (in the case of Mr. Losch the retiring allowance must be no less than the aggregate of one half of his then annual base salary and one half of the prior bonus amount); and |
| | • | | the retiring allowance must be no greater than the aggregate of two times the NEO’s annual salary and two times the executive’s prior bonus amount. |
Estimated retiring allowance for each NEO as at March 31, 2011:
| | • | | David Martin $1,483,000, Nancy Knowlton $1,483,000, Thomas Hodson $395,315, G.A. (Drew) Fitch $399,702 and Jeffrey Losch $220,880. |
If the NEO’s employment is terminated in relation to a change of control, within twelve months following or within three months preceding a change of control, the Corporation will pay to the NEO a retiring allowance calculated as follows:
| | • | | If the NEO has been employed with the Corporation for less than five years, an amount equal to the NEO’s then annual salary plus the NEO’s prior bonus amount. However, if the NEO is in the first year of employment where no bonus has yet been paid and the company performance conditions are met as outlined in the 2011 Bonus Plan or such other plan as may then be applicable, the prior bonus amount will be deemed to be 100% of the available bonus and if the NEO is in the second year of employment, where the prior bonus amount was based on less than a full year of employment, the prior bonus amount will be annualized. |
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| | • | | If the NEO has been employed with the Corporation for five years and less than eight years, a payment equal to 1.5 times the NEO’s annual salary plus 1.5 times the NEO’s prior bonus amount. |
| | • | | If the NEO has been employed with the Corporation for eight or more years, a payment equal to two times the NEO’s annual salary plus two times the NEO’s prior bonus amount. |
Estimated termination payment in relation to a change of control for each NEO as at March 31, 2011:
| | • | | David Martin $1,483,000, Nancy Knowlton $1,483,000, Thomas Hodson $784,902, G.A. (Drew) Fitch $484,614 and Jeffrey Losch $372,351. |
The employment agreements with the NEOs (other than David A. Martin and Nancy L. Knowlton) provide that the NEO will not be entitled to any severance compensation or any bonus or pro-rated bonus payment upon a voluntary resignation. The employment agreements with David A. Martin and Nancy L. Knowlton provide for a payment equal to the NEO’s annual base salary plus the prior bonus amount upon any voluntary resignation by such NEO.
Compensation of Directors
On May 26, 2010, the Board adopted a policy regarding compensation for the independent directors. This policy was adopted through an analysis of certain comparator companies and creating certain benchmarks based on the data collected therein. Please see “Comparator Group Analysis” for a more detailed description of the Comparator Group and how such group was chosen. Under that policy, the independent directors will be entitled to receive an annual retainer of USD 40,000 plus annual payments, as follows, for serving in each of the following capacities:
| | | | |
Director Role | | Annual Payment | |
Lead director | | | USD 30,000 | (1) |
Chair, Audit Committee | | | USD 30,000 | |
Member, Audit Committee | | | USD 12,000 | |
Chair, Corporate Governance and Nominating Committee | | | USD 12,000 | |
Member, Corporate Governance and Nominating Committee | | | USD 6,000 | |
Chair, Compensation Committee | | | USD 10,000 | (1) |
Member, Compensation Committee | | | USD 5,000 | (1) |
NOTES:
| (1) | The annual compensation for serving as Chair of the Compensation Committee has increased to USD 12,000 and USD 6,000 for serving as a member of the Compensation Committee for the fiscal year ending March 31, 2012. |
In addition to cash compensation, the two independent directors who joined the Board on July 14, 2010, being Messrs. Mueller and Hagerty, were granted options to acquire 20,000 Class A Subordinate Voting Shares, at an exercises price of USD 17.00, upon joining the Board, which will vest equally on each of the first four anniversaries of the date of grant and expire five years from the date of grant. The policy also provides for annual grants of options to the independent directors in amounts to be determined by the Board. Upon the advice of an independent compensation consultant it is anticipated that independent directors will be provided DSUs in lieu of options to acquire Class A Subordinate Voting Shares for the fiscal year ending March 31, 2012.
All the directors are reimbursed for reasonable out-of-pocket expenses incurred in attending Board and committee meetings.
The Corporation does not have any service contracts with any of the non-executive directors that provide for benefits upon termination of their services.
22
Director Compensation Table
| | | | | | | | | | | | | | |
Name | | Fees
earned
($)(1) | | Share-based
awards ($) | | Option-based
awards ($)(3) | | Non-equity
incentive plan
compensation ($) | | Pension
value ($) | | All other
compensation ($) | | Total ($) |
David A. Martin | | Nil | | N/A | | N/A | | N/A | | N/A | | N/A | | Nil |
Nancy L. Knowlton | | Nil | | N/A | | N/A | | N/A | | N/A | | N/A | | Nil |
Salim Nathoo | | Nil | | N/A | | N/A | | N/A | | N/A | | N/A | | Nil |
Arvind Sodhani | | Nil | | N/A | | N/A | | N/A | | N/A | | N/A | | Nil |
Michael J. Mueller | | 53,365 | | N/A | | Nil | | N/A | | N/A | | N/A | | 53,365 |
Robert C. Hagerty | | 44,115 | | N/A | | Nil | | N/A | | N/A | | N/A | | 44,115 |
David B. Sutcliffe(2) | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A |
NOTES:
| (1) | All amounts paid were in USD |
| (2) | David B. Sutcliffe was appointed on June 22, 2011 and as such did not receive any compensation for the fiscal year ended March 31, 2011. |
| (3) | All options are priced in U.S. Dollars. The value of unexercised in-the-money options at year end is based on the closing price of the Class A Subordinate Voting Shares on the NASDAQ on March 31, 2011, which was $10.21 per Class A Subordinate Voting Share. “In-the-money” means the amount by which the market value of the Shares underlying the options on that date exceeded the option exercise price. |
23
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The 2010 Equity Incentive Plan is the only equity compensation plan where the Corporation has outstanding Shares authorized for issuance. The following table sets forth information with respect to the options outstanding under the 2010 Equity Incentive Plan as at March 31, 2011.
| | | | | | | | | | | | |
Plan Category | | Number of Class A
Subordinate Voting
Shares to be Issued Upon
Exercise of Outstanding
Options | | | Weighted-Average
Exercise Price of
Outstanding
Options ($) | | | Number of Securities Remaining Available
for Future Issuance Under Equity
Compensation Plans (excluding Securities
Reflected in Column (a)) | |
Equity compensation plans not approved by Securityholders | | | 1,416,000 | | | | 16.24 | (1) | | | 10,961,279 | |
Total | | | 1,416,000 | | | | | | | | 10,961,279 | |
NOTES:
| (1) | All options are priced in U.S. Dollars. |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Management is not aware of any indebtedness (other than routine indebtedness) outstanding by any of the directors, executive officers or any of their associates, or any guarantees, support agreements, letters of credit or similar arrangements provided by the Corporation or any subsidiaries, to these individuals, at any time since the commencement of the fiscal year ended March 31, 2011.
STATEMENT OF CORPORATE GOVERNANCE
Pursuant to National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”), the Corporation is required to disclose certain information relating to its corporate governance practices. This information is set forth below.
Board of Directors
The Board has determined that a minority, i.e. three of the seven directors proposed for election herein, are “independent”, within the meaning of NI 58-101 and the NASDAQ rules. The three independent directors of the Corporation are Michael J. Mueller, Robert C. Hagerty and David B. Sutcliffe. As a result of their employment with the Corporation, David A. Martin and Nancy L. Knowlton are not considered to be independent of the Corporation. Similarly, as a result of their employment with Apax Partners and Intel, respectively, Salim Nathoo and Arvind Sodhani are not considered to be independent of the Corporation.
The following directors of the Corporation currently serve on the board of directors of other issuers that are reporting issuers (or the equivalent) which are set out below:
| | |
Director | | Reporting Issuer |
Michael J. Mueller | | Hydro One Inc. |
| |
David B. Sutcliffe | | Sierra Wireless, Inc. Ballard Power Systems Inc. |
| |
Salim Nathoo | | iGATE Corporation |
The independent members of the Board had regular meetings without management and non-independent directors as standard practice.
24
In addition, the independent members of the Board are authorized to retain independent financial, legal and other experts or advisors as required whenever, in their opinion, matters come before the Board or any committee which require an independent analysis by the independent members of the Board or any committee. The Board has also established a Whistleblower Policy.
David A. Martin, the Executive Chairman, is not independent of the Corporation. The role of the chairman of the Board includes ensuring that the Board discharges its duties to the Corporation and its Shareholders, chairing all meetings of the Board, encouraging open and frank discussion among the directors of the Corporation and setting the agendas for the meetings of the Board and its committees in consultation with the Chief Executive Officer of the Corporation. See also the corporate governance practices of the Corporation described under “Position Descriptions” of this Information Circular, below, for further details of the role and responsibilities of the chairman of the Board.
Meetings of the Board and the Committees of the Board
The following tables summarize the meetings of the Board and its committees held for the twelve-month period ending March 31, 2011 and the attendance of individual directors of the Corporation at such meetings.
| | | | |
Type of Meeting Held | | Number of Meetings | |
Board | | | 18 | |
Audit Committee | | | 3 | |
Compensation Committee | | | 3 | |
Corporate Governance and Nominating Committee(1) | | | 0 | |
NOTES:
| (1) | Prior to the appointment of David B. Sutcliffe on June 22, 2011, the Corporation did not have a Corporate Governance and Nominating Committee and the responsibilities of such committee were carried out by the full Board during the fiscal year ended March 31, 2011. |
| | | | | | | | | | |
Director | | Committee Membership | | Committee
Meetings
Attended | | | Board
Meetings
Attended | |
David A. Martin | | None | | | N/A | | | | 18 of 18 | |
Nancy L. Knowlton | | None | | | N/A | | | | 18 of 18 | |
Salim Nathoo | | Audit Committee | | | 3 of 3 | (3) | | | 18 of 18 | |
Arvind Sodhani | | None | | | N/A | | | | 17 of 18 | |
Michael J. Mueller(2) | | Audit Committee (Chair) Compensation Committee | |
| 3 of 3
3 of 3 |
| | | 9 of 9 | |
| | | |
Robert C. Hagerty(2) | | Audit Committee Compensation Committee (Chair) | |
| 3 of 3
3 of 3 |
| | | 9 of 9 | |
| | | |
David B. Sutcliffe(1) | | None | | | N/A | | | | N/A | |
NOTES:
| (1) | David B. Sutcliffe was appointed on June 22, 2011 and as such did not attend any committee or director meetings during the fiscal year ended March 31, 2011. |
| (2) | Appointed a director on July 14, 2010. |
Mandate of the Board
The fundamental responsibility of the Board is to appoint a competent executive team and to oversee the management of the business, with a view to maximizing Shareholder value and ensuring corporate conduct in an ethical and legal manner through an appropriate system of corporate governance and internal control. The Board has adopted a charter to assist it in supervising the management of the Corporation’s business and affairs.
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The Board meets frequently and is comprised of individuals with considerable experience as directors of public companies and in respect of corporate governance. The agenda for each Board meeting is carefully planned and set by the Executive Chairman of the Board working in conjunction with the Board and the Chief Executive Officer of the Corporation. Each of the committees of the Board has specific responsibilities delineated in the terms of reference or charter established for each respective committee, such terms of reference or charter having been approved by the Board in each case.
Position Descriptions
The Board has developed and implemented a written position description for each of the Executive Chairman, the Lead Director, the Chief Executive Officer and charters for each of the Board committees.
The Executive Chairman is David A. Martin. As Executive Chairman, Mr. Martin has responsibility for effectively managing the affairs of the Board and ensuring it is properly constituted and organized. For purposes of the NASDAQ rules and Applicable Securities Laws, Mr. Martin is deemed not to be an independent director. Accordingly, Robert C. Hagerty, who is an independent director, has as of May 18, 2011, been designated as the Lead Director. The responsibility of the Lead Director is to facilitate the functioning of the Board independently of management. The specific responsibilities of the Lead Director include:
| | • | | ensuring that the responsibilities of the Board are well understood by both the directors and management and the boundaries between the directors and management are clearly understood and respected; |
| | • | | providing leadership to ensure that the Board works in an independent, cohesive fashion; |
| | • | | ensuring that a process is in place to regularly assess the effectiveness of the Board, its committees and individual directors; |
| | • | | ensuring Board leadership in times of crisis; |
| | • | | ensuring that functions delegated to Board committees are carried out as represented and results are reported to the Board; |
| | • | | ensuring that the Board has in place adequate processes for monitoring and evaluating the performance and accountability of the Executive Chairman and the Chief Executive Officer; and |
| | • | | chairing regular meetings of independent board members without management present and acting as the primary liaison between the independent directors and the Executive Chairman. |
The terms of reference or the charter of each of the Audit Committee, the Corporate Governance and Nominating Committee, as hereinafter defined, and the Compensation Committee describe certain of the responsibilities of the chairman of each of these committees. The primary role of the chairman of each such committee is managing the affairs of the committee, including ensuring the committee is organized properly, functions effectively and meets its obligations and responsibilities. The chairman of the Audit Committee also maintains ongoing communications with the Corporation’s external auditors in order to lead the committee in performing its oversight and other audit-related functions. For further information regarding the Audit Committee, including the relevant education and experience of the committee members, see the Corporation’s AIF for the fiscal year ended March 31, 2011 which is incorporated by reference into, and forms an integral part of, this Information Circular.
Orientation and Continuing Education
Director orientation and continuing education is conducted by the Corporate Governance and Nomination Committee and by the entire Board. All newly elected directors are provided with a comprehensive orientation on all aspects of the business and operations by executive management. This includes familiarization with the reporting structure, strategic plans, significant financial, accounting and risk issues, compliance programs, policies and management, and the external auditor. Existing directors are periodically updated in respect of these matters.
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For the purposes of orientation, new directors are given the opportunity to meet with members of the executive management team to discuss the Corporation’s business and activities. The orientation program is designed to assist the directors in fully understanding the nature and operation of the business, the role of the Board and its committees, and the contributions that individual directors are expected to make.
Ethical Business Conduct
The Board has adopted a code of conduct that applies to all the directors, officers and employees, as well as a code of ethics for the Chief Executive Officer and senior financial officers. Upon written request delivered to the Corporation’s offices at 3636 Research Road N.W., Calgary, Alberta, T2L 1Y1, Attention: Investor Relations, the Corporation will promptly provide a copy of the aforementioned codes free of charge to any Shareholder of the Corporation.
A copy of the relevant code has been provided to each of the directors, officers and employees, and each such person is required to acknowledge annually that he or she has read and will abide by the provisions of the relevant code and disclosed any transactions or matters of potential conflict. A copy of the relevant code will be provided to each new director, officer and employee, and each such person will be required to acknowledge that he or she has read the relevant code before commencing activities as a director, officer, or employee, as the case may be.
The Board is responsible for determining appropriate actions to be taken in the event of violations of either code. Such actions will be reasonably designed to deter wrongdoing and to promote accountability for adherence to each code.
The Corporation has also adopted a statement of policy regarding insider trading and confidentiality that prohibits personnel from trading in securities of the Corporation while in possession of non-public material information or of any other company while in possession of non-public material information regarding that company, which knowledge was obtained in the course of employment with the Corporation.
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, which was established concurrent with the appointment of David B. Sutcliffe on June 22, 2011, is composed of Messrs. Mueller, Hagerty and Sutcliffe, all of whom are independent within the meaning of NI 58-101.
The Corporate Governance and Nominating Committee will assist the Board in carrying out its responsibilities by reviewing corporate governance and nomination issues and making recommendations to the Board as appropriate. The Corporate Governance and Nominating Committee will be responsible for identifying individuals qualified to become directors, recommending to the Board proposed nominees for election to the Board and overseeing the Board’s overall approach to governance, Board processes and leadership. In identifying potential board members, the Corporate Governance and Nominating Committee will consider, among other things, the competencies and skills the Board as a whole should possess, criteria for candidates after considering the competencies and skills of existing directors, and the competencies and skills of each potential new nominee.
Specific responsibilities of the Corporate Governance and Nominating Committee include:
| | • | | acting in an advisory capacity to the Board on corporate governance and director succession issues; |
| | • | | recommending suitable candidates for nomination for election as directors; and |
| | • | | developing, maintaining, monitoring and updating as may be required by the Insider Trading and Disclosure Policies and comparable governance-related policies as may be determined by the Board or the committee to be appropriate. |
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Compensation Committee
The Compensation Committee is currently composed of Messrs. Mueller, Hagerty and Sutcliffe, all of whom are independent within the meaning of NI 58-101.
The Compensation Committee acts on behalf of the Board in all matters pertaining to the appointment, compensation, benefits and termination of members of the senior management team. The Compensation Committee reviews the goals and objectives relevant to the compensation of the senior management team, as well as the annual salary, bonus, pension, severance and termination arrangements and other benefits, direct and indirect, of the senior management team, and makes recommendations to the Board and/or management, as appropriate.
Specific responsibilities of the Compensation Committee include:
| | • | | reviewing management succession plans and processes of the Executive Chair, the Chief Executive Officer, the President, the Vice President, the Chief Financial Officer, the General Counsel and any other senior employees designated for this purpose by the committee from time to time, the senior management team, and making recommendations to the Board and/or management as appropriate; |
| | • | | reviewing the annual salary, bonus, pension, severance and termination arrangements and other benefits, direct and indirect, of the executive management team and making recommendations to the Board and/or management as appropriate; |
| | • | | reviewing and approving (or in the discretion of the Compensation Committee, making recommendation to the Board) recommendations concerning the operation of employee compensation plans, including the terms, eligible participants, vesting, price and incentive targets and the exercise of any discretion provided in these plans; |
| | • | | providing recommendation to the board relative to the administering and granting options, awards or rights pursuant to any stock option, purchase plan or incentive plan; and |
| | • | | reviewing any proposed disclosure relating to executive compensation. In particular, reviewing, commenting on and approving the statement of Executive Compensation (including the Compensation Discussion and Analysis and related tables) and recommending it to the Board for inclusion in this Information Circular prepared for the annual meeting of Shareholders. |
The Corporation did not retain the services of a compensation consultant to determine the compensation of the NEOs for the fiscal year ended March 31, 2011, please see “Executive Competitive Positioning and Compensation Advisors” for more detail on the Corporation’s position with respect to retaining compensation consultants.
Assessments
The Corporate Governance and Nominating Committee is responsible for making regular assessments of the overall performance, effectiveness and contribution of the Board and each committee, the Executive Chairman of the Board, each committee chairman and each director, and reporting on such assessments to the Board. The objective of the assessments is to ensure the continued effectiveness of the Board in the execution of its responsibilities and to contribute to a process of continuous improvement. In addition to any other matters the Corporate Governance and Nominating Committee deems relevant, the assessments will consider in the case of the Board or a committee, the applicable mandate or charter, and in the case of individual directors, the applicable position descriptions, as well as the competencies and skills each individual director is expected to bring to the Board.
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AUDIT COMMITTEE DISCLOSURE
Information regarding the Audit Committee is disclosed in AIF, which is incorporated by reference into, and forms an integral part of, this Information Circular. The AIF is available on SEDAR at www.sedar.com. Upon written request delivered to the Corporation’s offices at 3636 Research Road N.W., Calgary, Alberta, T2L 1Y1, Attention: Investor Relations, the Corporation will promptly provide a copy of the AIF free of charge to any Shareholder of the Corporation.
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
There were no material interests, direct or indirect, of any of the insiders, any proposed nominee for election as a director, or any associate or affiliate of such persons, in any transaction since the fiscal year ended March 31, 2010 or in any proposed transaction which has materially affected or would materially affect the Corporation or any of the subsidiaries, except as disclosed elsewhere in this management information circular.
OTHER MATTERS
Management knows of no amendment, variation or other matter to come before the Meeting other than the matters referred to in the notice of the annual general meeting. If any other matter properly comes before the Meeting, the proxy will be voted on those matters in accordance with the best judgment of the person voting the proxy.
ADDITIONAL INFORMATION
Additional financial information regarding the Corporation’s business is contained in the audited consolidated financial statements and management’s discussion and analysis for the fiscal year ended March 31, 2011. These statements and all the continuous disclosure documents submitted to the various regulatory bodies, including the TSX and NASDAQ, in compliance with Applicable Securities Laws can be found on SEDAR at www.sedar.com. Additional information may also be obtained by contacting the Corporation at its offices located at 3636 Research Road N.W., Calgary, Alberta, T2L 1Y1, Attention: Investor Relations.
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APPENDIX A
BOARD OF DIRECTORS’ CHARTER
GENERAL
The fundamental responsibility of the board of directors (the “Board”) of SMART Technologies Inc. (the “Company”) is to appoint a competent executive team and to oversee the management of the business, with a view to maximizing shareholder value and ensuring corporate conduct in an ethical and legal manner via an appropriate system of corporate governance and internal control.
The Board has adopted this Mandate, which reflects the Company’s commitment to high standards of corporate governance, to assist the Board in supervising the management of the business and affairs of the Company.
The Board collectively should possess a broad range of skills, expertise, industry and other knowledge, and business and other experience useful to the effective oversight of the Company’s business. The Board should be comprised of that number of individuals that will permit the Board’s effective functioning. The appointment and removal of directors shall occur in accordance with the Company’s by-laws.
SPECIFIC
Executive Team Responsibility
| | • | | Appoint the Chief Executive Officer (“CEO”) and senior officers, approve their compensation, and monitor the CEO’s performance against a set of mutually agreed corporate objectives directed at maximizing shareholder value. |
| | • | | Satisfy itself as to the integrity of the CEO and other executive officers and ensure that a culture of integrity is maintained throughout the Corporation. |
| | • | | In conjunction with the CEO, develop a clear mandate for the CEO, which includes a delineation of management’s responsibilities and a reservation of Board authority. |
| | • | | Ensure that a process is established that adequately provides for succession planning, including the appointing, training and monitoring of executive management. |
| | • | | Establish limits of authority delegated to management. |
Operational Effectiveness and Financial Reporting
| | • | | Annual review and adoption of a strategic planning process and approval of an annual corporate strategic plan that takes into account, among other things, the opportunities and risks of the business. |
| | • | | Ensure that a system is in place to identify the principal risks to the Company and that practical procedures are in place to monitor and mitigate the risks. |
| | • | | Ensure that processes are in place to address applicable regulatory, corporate, securities and other compliance matters. |
| | • | | Oversee the establishment and maintenance of an adequate system of internal controls over financial reporting. |
| | • | | Oversee the establishment and maintenance of adequate disclosure controls and procedures. |
| | • | | Ensure that due diligence processes and appropriate controls are in place with respect to applicable certification requirements regarding the Company’s financial and other disclosure. |
| | • | | Establish and maintain a process to determine if the Company has a material weakness that must be disclosed in its annual or interim MD&A as required under National Instrument 52-109Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”). |
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| | • | | Oversee the establishment of a procedure to ensure the accuracy of the matters certified by the Company’s certifying officers as required under NI 52-109 and make reasonable inquiries to ensure that interim and annual filings are true and accurate in all material respects, do not omit to state a material fact or contain any misrepresentations and ensure that all necessary information as required under NI 52-109 is disclosed in the Company’s interim and annual filings. |
| | • | | Review and approve the Company’s financial statements and oversee the Company’s compliance with applicable audit, accounting and reporting requirements. |
| | • | | Approve annual operating and capital budgets. |
| | • | | Review and consider for approval all material amendments or departures proposed by management from established strategy, capital and operating budgets or matters of policy that diverge from the ordinary course of business. |
| | • | | Review operating and financial performance results relative to established strategy, budgets and objectives. |
Integrity/Corporate Conduct
| | • | | Approve communications policies to ensure that a system for corporate communications to all stakeholders exists, including processes for consistent, transparent, regular and timely public disclosure, and to facilitate feedback from stakeholders. If practically feasible, as determined by the Board, publicly disseminated materials of the Company shall include a mechanism for feedback of securityholders. Persons designated to receive such information shall be required to provide a summary of the feedback to the directors on a semi-annual basis or at such other more frequent intervals as the Board sees fit. |
| | • | | Approve a Code of Conduct for directors, officers, employees, contractors and consultants and a Code of Ethics for CEO and Senior Financial Officers, monitor compliance with the Code of Conduct and the Code of Ethics and approve any waivers of the Code of Conduct and the Code of Ethics for executive officers and directors. |
| | • | | Meet without management and non-independent directors from time to time as appropriate. |
Board Process/Effectiveness
| | • | | Establish an appropriate system of corporate governance including practices to ensure the Board functions independently of management. |
| | • | | Ensure that Board materials are distributed to directors in advance of regularly scheduled meetings to allow for sufficient review of the materials prior to the meeting. Directors are expected to attend all meetings. |
| | • | | Approve the nomination of directors. |
| | • | | Determine Board member qualifications. |
| | • | | Provide a comprehensive orientation to each new director. |
| | • | | Establish committees and approve their respective mandates and the limits of authority delegated to each committee. Assess the suitability of their mandates at least annually. |
| | • | | Establish appropriate practices for the regular evaluation of the effectiveness of the Board, its committees and its members. Assess the effectiveness of the committees at least annually. |
| | • | | Develop and maintain a Board succession plan that is responsive to the needs of the Company and the interests of its shareholders. |
| | • | | Establish suitable arrangements for directors’ compensation to ensure that it properly reflects the contributions expected from directors and the responsibilities and risks involved in being a director. |
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Directors’ Responsibilities
| | • | | Directors must act honestly and in good faith with a view to the best interests of the Company. Directors must exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. In order to fulfill their responsibilities, each director is expected to: |
| | • | | participate, with management, in developing a multi-year strategic plan and annual business plans and approve such plans; |
| | • | | develop and maintain a thorough understanding of the Company’s operational and financial objectives, financial position and performance and the performance of the Company relative to its principal competitors; |
| | • | | ensure that the Company’s activities are at all times conducted in accordance with the purpose of the Company, its strategic plan and operating policies; |
| | • | | diligently prepare for each meeting, including reviewing all meeting materials distributed in advance; |
| | • | | actively and constructively participate in each meeting, including seeking clarification from management and outside advisors where necessary to fully understand the issues under consideration; |
| | • | | engage in continuing education programs for directors, as appropriate; and |
| | • | | diligently attend meetings of the Board and any committee of which he or she is a member. |
Other Directorships and Significant Activities
The Company values the experience directors bring from other boards on which they serve and other activities in which they participate, but recognizes that those boards and activities also may present demands on a director’s time and availability and may present conflicts or legal issues, including independence issues. No director should serve on the board of a competitor or of a regulatory body with oversight of the Company. Each director should, when considering membership on another board or committee, make every effort to ensure that such membership will not impair the director’s time and availability for his commitment to the Company. Directors should advise the Chair of the Board and the CEO before accepting membership on other public company boards of directors or any audit committee or other significant committee assignment on any other board of directors, or establishing other significant relationships with businesses, institutions, governmental units or regulatory entities, particularly those that may result in significant time commitments or a change in the director’s relationship to the Company.
Independent Advice
In discharging its mandate, the Board shall have the authority to retain (and authorize the payment by the Company of) and receive advice from special legal, accounting or other advisors as the Board determines to be necessary to permit it to carry out its duties.
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